- Generated Q3'23 net revenue of $1.203
billion and adjusted revenue of $1.002 billion. Adjusted revenue exceeded the
high end of guidance range
- Reported GAAP net income of $115
million, or $0.04 per GAAP
diluted earnings per share
- Delivered profitability across GAAP net income, adjusted net
income and adjusted EBITDA metrics
DETROIT, Nov. 2, 2023
/PRNewswire/ -- Rocket Companies, Inc. (NYSE: RKT) ("Rocket
Companies" or the "Company"), a Detroit-based fintech platform company
consisting of tech-driven mortgage, real estate and financial
services businesses – including Rocket Mortgage, Rocket Homes,
Rocket Loans and Rocket Money – today announced results for the
quarter ended September 30, 2023.
"I am very proud of our team for delivering strong results
against a challenging economic backdrop," said Varun Krishna, CEO of Rocket Companies. "In
today's climate, innovation is essential. With the incredible
amount of data in our ecosystem, paired with the transformative
power of AI, Rocket is uniquely positioned to disrupt the industry.
We're just getting started and can't wait to show you what we are
building to revolutionize homeownership."
Third Quarter 2023
Financial Summary1
|
|
ROCKET
COMPANIES
($ amounts in millions,
except per share)
|
|
|
Q3-23
|
|
Q3-22
|
|
YTD 23
|
|
YTD 22
|
|
(Unaudited)
|
|
(Unaudited)
|
Total Revenue,
net
|
$
1,203
|
|
$
1,295
|
|
$
3,105
|
|
$
5,358
|
Total
Expenses
|
$
1,086
|
|
$
1,188
|
|
$
3,265
|
|
$
4,110
|
GAAP Net Income
(Loss)
|
$
115
|
|
$
96
|
|
$
(157)
|
|
$
1,193
|
|
|
|
|
|
|
|
|
Adjusted
Revenue
|
$
1,002
|
|
$
888
|
|
$
2,886
|
|
$
3,945
|
Adjusted Net Income
(Loss)
|
$
7
|
|
$
(166)
|
|
$
(137)
|
|
$
60
|
Adjusted
EBITDA
|
$
73
|
|
$
(160)
|
|
$
12
|
|
$
263
|
|
|
|
|
|
|
|
|
GAAP Diluted Earnings
(Loss) Per Share
|
$
0.04
|
|
$
0.04
|
|
$
(0.06)
|
|
$
0.47
|
Adjusted Diluted
Earnings (Loss) Per Share
|
$
0.00
|
|
$
(0.08)
|
|
$
(0.07)
|
|
$
0.03
|
(Units in '000s, $
amounts in millions)
|
|
|
|
Q3-23
|
|
Q3-22
|
|
YTD
23
|
|
YTD
22
|
Select
Metrics
|
|
(Unaudited)
|
|
(Unaudited)
|
Closed loan origination
volume
|
|
$
22,191
|
|
$
25,578
|
|
$
61,451
|
|
$
114,099
|
Gain on sale
margin
|
|
2.76 %
|
|
2.69 %
|
|
2.61 %
|
|
2.91 %
|
Net rate lock
volume
|
|
$
20,815
|
|
$
23,746
|
|
$
62,594
|
|
$
102,745
|
____________________
|
1
"GAAP" stands for
Generally Accepted Accounting Principles in the U.S. Please see the
sections of this document titled "Non-GAAP Financial Measures" and
"GAAP to non-GAAP Reconciliations" for more information on the
Company's non-GAAP measures and its share count. Certain figures in
the tables throughout this document may not foot due to
rounding.
|
Third Quarter 2023 Financial Highlights
- Generated total revenue, net of $1.203
billion and GAAP net income of $115
million, or $0.04 per diluted
share. Generated total adjusted revenue of $1.002 billion and adjusted net income of
$7 million, or an adjusted income of
$0.00 per diluted share.
- Rocket Mortgage generated $22.2
billion in mortgage origination closed loan volume. Gain on
sale margin was 2.76%, the third consecutive quarter of gain on
sale margin increase.
- Rocket gained purchase market share in the quarter, both
year-over-year and quarter-over-quarter.
- Total liquidity was approximately $8.7
billion, as of September 30,
2023, which includes $1.0
billion of cash on-hand, $2.8
billion of corporate cash used to self-fund loan
originations, $3.3 billion of undrawn
lines of credit, and $1.7 billion of
undrawn MSR lines.
- Servicing book unpaid principal balance, which includes
subserviced loans, was $506 billion
at September 30, 2023. As of
September 30, 2023, our servicing
portfolio includes 2.4 million loans serviced. The portfolio
generates approximately $1.4 billion
of recurring servicing fee income on an annualized basis. During
the quarter, we acquired mortgage servicing rights on certain
agency loans for total consideration of $103
million. The MSR acquisition added $6.2 billion of unpaid principal balance for
loans with a weighted average coupon well above that of our current
portfolio, providing a compelling refinance opportunity when rates
decline.
- Rocket Mortgage net client retention rate was 97% for the 12
months ended September 30, 2023.
There is a strong correlation between this metric and client
lifetime value. We believe our net client retention rate is
unmatched among mortgage companies and on par with some of the best
performing subscription business models in the world.
Company Highlights
- Since launching in April, BUY+, our Rocket-exclusive
collaboration between Rocket Mortgage and Rocket Homes, our
50-state home search platform and real estate agent referral
network, has continued to exceed expectations, as we saw attachment
rate, defined as clients who use both Rocket Mortgage and Rocket
Homes, nearly double. BUY+ helps clients save thousands of dollars
in upfront costs if they work with a Rocket Homes Partner Real
Estate Agent and obtain financing with Rocket Mortgage.
- ONE+, our 1% down home loan program, has gained traction since
our launch in May, with closing volume and loan units more than
tripling from June to September. ONE+ increases access to home
ownership for low-to-moderate-income Americans facing home
affordability challenges.
- Our home equity loan product continued to resonate with
clients, as volume more than doubled in the third quarter, compared
to the beginning of this year. Our home equity loan product enables
homeowners to tap record levels of home equity without impacting
the lower rate on their first lien mortgage, a particularly
compelling value proposition in the current market
environment.
- In August of this year, we delivered 20% faster purchase turn
times and reduced manual touches by over 20%, compared to the same
time last year. Our vast scale of data assets provides a strong
foundation to automate routine and complex tasks, enhance
productivity and operational efficiency, and transform the client
experience through generative AI.
- In October, we unveiled enhancements to our Pathfinder tool, a
proprietary AI and machine learning-powered search engine that
helps loan officers easily obtain answers to complex underwriting
qualification or loan processing questions. Current testing of an
AI chat interface within Pathfinder has shown a 69% improvement in
speed to resolutions compared to the existing process. Building on
this success, we are enhancing the Pathfinder experience by
integrating large language models (LLM) to encompass over 3,300 new
loan scenarios. Pathfinder, trained on 400,000 pieces of content
and 75,000 daily data points, is utilized by over 40,000 mortgage
professionals, generating 1.5 million monthly page views and
automated actions. Launched in 2020, Pathfinder, an industry-first
tool, has continually evolved, incorporating a machine learning
framework, custom Google AI search, and now, generative AI.
- Lendesk Technologies, our Canadian technology services company
offering a suite of products to digitize the Canadian mortgage
experience, launched Lender Spotlight AI Assistant, a tool that
helps brokers easily and seamlessly obtain accurate answers from a
database of over 7,000 mortgage policies.
- We expect annualized cost savings of approximately $200 million, the high end of the original
$150 to $200
million range, as a result of company-wide prioritization
and cost reduction efforts across expense categories, including a
voluntary career transition program conducted in July. These cost
savings will take full quarter effect in Q4'23.
Rocket Environmental, Social, Governance:
For-More-Than-Profit
- Rocket Companies placed #2 on Fortune's 'Best Workplaces in
Financial Services & Insurance' list. This marks the third
straight year that the Company has finished in the top two for this
award.
- Rocket Companies ranked #2 in People's '100 Companies That Care
in 2023: Employers Putting Their Communities First' list,
highlighting the Company's longstanding efforts to support the
residents and communities of Detroit, particularly in the area of safe and
stable housing.
- In September, the Rocket Community Fund, our philanthropic
partner company, and MKE United, an initiative of the Greater
Milwaukee Committee, announced a $300,000 investment to support the
Anti-Displacement Fund program. The program aims to protect
homeowners in downtown-adjacent neighborhoods from displacement
caused by increasing property taxes. This investment expands the
Rocket Community Fund's national housing stability coverage to
Milwaukee, in addition to
Detroit, Atlanta and Cleveland.
- Since 2018, Rocket Companies has been the anchor employer for
the Urban Alliance program in Detroit. Urban Alliance connects high school
students to equitable, inclusive careers through paid work
experiences, mentorship, and professional development. To date, 300
Detroit high school students have graduated from the program, with
over half of the students taking internship roles at Rocket
Companies.
Fourth Quarter 2023 Outlook
In Q4 2023, we expect adjusted revenue of between $650 million to $800
million.
Direct to Consumer
In the Direct to Consumer segment, clients have the ability to
interact with Rocket Mortgage online and/or with the Company's
mortgage bankers. The Company markets to potential clients in this
segment through various brand campaigns and performance marketing
channels. The Direct to Consumer segment derives revenue from
originating, closing, selling and servicing predominantly
agency-conforming loans, which are pooled and sold to the secondary
market. The segment also includes title insurance, appraisals and
settlement services complementing the Company's end-to-end mortgage
origination experience. Servicing activities are fully allocated to
the Direct to Consumer segment and are viewed as an extension of
the client experience. Servicing enables Rocket Mortgage to
establish and maintain long term relationships with our clients,
through multiple touchpoints at regular engagement intervals.
DIRECT TO
CONSUMER2
($ amounts in
millions)
|
|
|
Q3-23
|
|
Q3-22
|
|
YTD
23
|
|
YTD
22
|
|
(Unaudited)
|
|
(Unaudited)
|
Sold loan
volume
|
$
11,981
|
|
$
16,520
|
|
$
33,238
|
|
$
72,223
|
Sold loan gain on sale
margin
|
4.03 %
|
|
4.47 %
|
|
3.81 %
|
|
4.15 %
|
Revenue, net
|
$
979
|
|
$
1,114
|
|
$
2,491
|
|
$
4,455
|
Adjusted
Revenue
|
$
778
|
|
$
708
|
|
$
2,271
|
|
$
3,042
|
Contribution
margin
|
$
299
|
|
$
149
|
|
$
757
|
|
$
1,005
|
Partner Network
The Rocket Professional platform supports our Partner Network
segment, where we leverage our superior client service and widely
recognized brand to grow marketing and influencer relationships,
and our mortgage broker partnerships through Rocket Pro TPO ("third
party origination"). Our marketing partnerships consist of
well-known consumer-focused companies that find value in our
award-winning client experience and want to offer their clients
mortgage solutions with our trusted, widely recognized brand. These
organizations connect their clients directly to us through
marketing channels and a referral process. Our influencer
partnerships are typically with companies that employ licensed
mortgage professionals that find value in our client experience,
technology and efficient mortgage process, where mortgages may not
be their primary offering. We also enable clients to start the
mortgage process through the Rocket platform in the way that works
best for them, including through a local mortgage broker.
PARTNER
NETWORK2
($ amounts in
millions)
|
|
|
Q3-23
|
|
Q3-22
|
|
YTD
23
|
|
YTD
22
|
|
(Unaudited)
|
|
(Unaudited)
|
Sold loan
volume
|
$
10,278
|
|
$
11,754
|
|
$
26,433
|
|
$
51,367
|
Sold loan gain on sale
margin
|
1.22 %
|
|
1.17 %
|
|
1.02 %
|
|
1.07 %
|
Revenue, net
|
$
123
|
|
$
98
|
|
$
344
|
|
$
567
|
Adjusted
Revenue
|
$
123
|
|
$
98
|
|
$
344
|
|
$
567
|
Contribution
margin
|
$
64
|
|
$
11
|
|
$
152
|
|
$
265
|
|
2
We measure the performance of the Direct to Consumer
and Partner Network segments primarily on a contribution margin
basis. Contribution margin is intended to measure the direct
profitability of each segment and is calculated as Adjusted Revenue
less directly attributable expenses. Directly attributable expenses
include salaries, commissions and team member benefits, general and
administrative expenses, and other expenses, such as direct
servicing costs and origination costs. A loan is considered "sold"
when it is sold to investors on the secondary market. See "Summary
Segment Results" section later in this document and the footnote on
"Segments" in the "Notes to Consolidated Financial Statements" in
the Company's forthcoming filing on Form 10-Q for more
information.
|
Balance Sheet and Liquidity
We remain in a strong liquidity position, with total liquidity
of $8.7 billion, which includes
$1.0 billion of cash on-hand,
$2.8 billion of corporate cash used
to self-fund loan originations, a portion of which could be
transferred to funding facilities (warehouse lines) at our
discretion, $3.3 billion of
undrawn lines of credit from financing facilities, and $1.7 billion of undrawn MSR lines. As of
September 30, 2023 our available cash position was
$3.8 billion, which includes cash
on-hand and corporate cash used to self-fund loan originations,
combined with the $6.7 billion of
mortgage servicing rights, representing a total of $10.4 billion of asset value on our balance
sheet. As of September 30, 2023, our total equity was
$8.5 billion.
BALANCE SHEET
HIGHLIGHTS
($ amounts in
millions)
|
|
|
September 30,
2023
|
|
December 31,
2022
|
|
(Unaudited)
|
|
|
Cash and cash
equivalents
|
$
957
|
|
$
722
|
Mortgage servicing
rights ("MSRs"), at fair value
|
$
6,678
|
|
$
6,947
|
Funding
facilities
|
$
4,670
|
|
$
3,549
|
Other financing
facilities and debt
|
$
4,289
|
|
$
4,701
|
Total equity
|
$
8,506
|
|
$
8,476
|
Third Quarter Earnings Call
Rocket Companies will host a live conference call at
4:30 p.m. ET on November 2, 2023 to discuss its results for the
quarter ended September 30, 2023. A live webcast of the event
will be available online by clicking on the "Investor Info" section
of our website. The webcast will also be available via
rocketcompanies.com.
A replay of the webcast will be available on the Investor
Relations site following the conclusion of the event.
Condensed
Consolidated Statements of Income (Loss)
($ In Thousands,
Except Shares and Per Share Amounts)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenue
|
|
|
|
|
|
|
|
Gain on sale of
loans
|
|
|
|
|
|
|
|
Gain on sale of loans
excluding fair value of MSRs, net
|
$
241,496
|
|
$
139,733
|
|
$
786,128
|
|
$
1,174,268
|
Fair value of
originated MSRs
|
330,627
|
|
426,278
|
|
850,027
|
|
1,682,366
|
Gain on sale of loans,
net
|
572,123
|
|
566,011
|
|
1,636,155
|
|
2,856,634
|
Loan servicing
income
|
|
|
|
|
|
|
|
Servicing fee
income
|
344,061
|
|
364,211
|
|
1,054,037
|
|
1,088,004
|
Change in fair value
of MSRs
|
12,765
|
|
150,304
|
|
(343,137)
|
|
592,162
|
Loan servicing income,
net
|
356,826
|
|
514,515
|
|
710,900
|
|
1,680,166
|
Interest
income
|
|
|
|
|
|
|
|
Interest
income
|
93,868
|
|
95,753
|
|
241,369
|
|
265,490
|
Interest expense on
funding facilities
|
(55,924)
|
|
(46,173)
|
|
(129,056)
|
|
(130,576)
|
Interest income,
net
|
37,944
|
|
49,580
|
|
112,313
|
|
134,914
|
Other
income
|
236,275
|
|
164,580
|
|
646,095
|
|
685,987
|
Total revenue,
net
|
1,203,168
|
|
1,294,686
|
|
3,105,463
|
|
5,357,701
|
Expenses
|
|
|
|
|
|
|
|
Salaries, commissions
and team member benefits
|
589,584
|
|
670,804
|
|
1,772,498
|
|
2,278,844
|
General and
administrative expenses
|
199,399
|
|
204,290
|
|
595,214
|
|
709,853
|
Marketing and
advertising expenses
|
193,406
|
|
210,701
|
|
593,853
|
|
770,281
|
Depreciation and
amortization
|
27,636
|
|
24,211
|
|
83,678
|
|
70,033
|
Interest and
amortization expense on non-funding debt
|
38,354
|
|
38,317
|
|
115,021
|
|
115,263
|
Other
expenses
|
37,164
|
|
40,008
|
|
105,191
|
|
166,098
|
Total
expenses
|
1,085,543
|
|
1,188,331
|
|
3,265,455
|
|
4,110,372
|
Income (loss) before
income taxes
|
117,625
|
|
106,355
|
|
(159,992)
|
|
1,247,329
|
(Provision for)
benefit from income taxes
|
(2,680)
|
|
(10,131)
|
|
2,606
|
|
(54,741)
|
Net income
(loss)
|
114,945
|
|
96,224
|
|
(157,386)
|
|
1,192,588
|
Net (income) loss
attributable to non-controlling interest
|
(108,739)
|
|
(89,314)
|
|
152,507
|
|
(1,128,551)
|
Net income (loss)
attributable to Rocket Companies
|
$
6,206
|
|
$
6,910
|
|
$
(4,879)
|
|
$
64,037
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share of Class A common stock
|
|
|
|
|
|
|
|
Basic
|
$
0.05
|
|
$
0.06
|
|
$
(0.04)
|
|
$
0.53
|
Diluted
|
$
0.04
|
|
$
0.04
|
|
$
(0.06)
|
|
$
0.47
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
Basic
|
129,390,501
|
|
119,020,520
|
|
126,971,718
|
|
120,156,494
|
Diluted
|
1,983,992,350
|
|
1,970,665,767
|
|
1,979,203,982
|
|
1,972,263,268
|
Condensed
Consolidated Balance Sheets
($ In
Thousands)
|
|
|
September
30,
2023
|
|
December 31,
2022
|
Assets
|
(Unaudited)
|
|
|
Cash and cash
equivalents
|
$
957,254
|
|
$
722,293
|
Restricted
cash
|
34,668
|
|
66,806
|
Mortgage loans held
for sale, at fair value
|
8,012,552
|
|
7,343,475
|
Interest rate lock
commitments ("IRLCs"), at fair value
|
92,568
|
|
90,635
|
Mortgage servicing
rights ("MSRs"), at fair value
|
6,678,165
|
|
6,946,940
|
Notes receivable and
due from affiliates
|
10,759
|
|
10,796
|
Property and
equipment, net
|
256,411
|
|
274,192
|
Deferred tax asset,
net
|
531,509
|
|
537,963
|
Lease right of use
assets
|
355,412
|
|
366,189
|
Forward commitments,
at fair value
|
168,561
|
|
22,444
|
Loans subject to
repurchase right from Ginnie Mae
|
1,381,127
|
|
1,642,392
|
Goodwill and
intangible assets, net
|
1,242,218
|
|
1,258,928
|
Other
assets
|
927,535
|
|
799,159
|
Total
assets
|
$
20,648,739
|
|
$
20,082,212
|
Liabilities and
equity
|
|
|
|
Liabilities:
|
|
|
|
Funding
facilities
|
$
4,670,403
|
|
$
3,548,699
|
Other financing
facilities and debt:
|
|
|
|
Senior Notes,
net
|
4,032,078
|
|
4,027,970
|
Early buy out
facility
|
256,749
|
|
672,882
|
Accounts
payable
|
199,917
|
|
116,331
|
Lease
liabilities
|
408,009
|
|
422,769
|
Forward commitments,
at fair value
|
16,287
|
|
25,117
|
Investor
reserves
|
95,567
|
|
110,147
|
Notes payable and due
to affiliates
|
30,749
|
|
33,463
|
Tax receivable
agreement liability
|
577,996
|
|
613,693
|
Loans subject to
repurchase right from Ginnie Mae
|
1,381,127
|
|
1,642,392
|
Other
liabilities
|
473,484
|
|
393,200
|
Total
liabilities
|
$
12,142,366
|
|
$
11,606,663
|
Equity
|
|
|
|
Class A common
stock
|
$
1
|
|
$
1
|
Class B common
stock
|
—
|
|
—
|
Class C common
stock
|
—
|
|
—
|
Class D common
stock
|
19
|
|
19
|
Additional paid-in
capital
|
317,004
|
|
276,221
|
Retained
earnings
|
294,770
|
|
300,394
|
Accumulated other
comprehensive income
|
68
|
|
69
|
Non-controlling
interest
|
7,894,511
|
|
7,898,845
|
Total
equity
|
8,506,373
|
|
8,475,549
|
Total liabilities and
equity
|
$
20,648,739
|
|
$
20,082,212
|
Summary Segment
Results for the Three and Nine Months Ended September 30, 2023 and
2022,
($ amounts in
millions)
(Unaudited)
|
|
Three Months Ended
September 30, 2023
|
Direct
to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All
Other
|
|
Total
|
Total U.S. GAAP
Revenue, net
|
$
979
|
|
$
123
|
|
$
1,103
|
|
$
101
|
|
$
1,203
|
Change in fair value of
MSRs due to valuation
assumptions, net of hedges
|
(201)
|
|
—
|
|
(201)
|
|
—
|
|
(201)
|
Adjusted
Revenue
|
$
778
|
|
$
123
|
|
$
901
|
|
$
101
|
|
$
1,002
|
Less: Directly
attributable expenses
|
479
|
|
60
|
|
539
|
|
96
|
|
635
|
Contribution margin
(1)
|
$
299
|
|
$
64
|
|
$
362
|
|
$
5
|
|
$
367
|
|
Three Months Ended
September 30, 2022
|
Direct to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All
Other
|
|
Total
|
Total U.S. GAAP
Revenue, net
|
$
1,114
|
|
$
98
|
|
$
1,213
|
|
$
82
|
|
$
1,295
|
Change in fair value of
MSRs due to valuation
assumptions, net of hedges
|
(406)
|
|
—
|
|
(406)
|
|
—
|
|
(406)
|
Adjusted
Revenue
|
$
708
|
|
$
98
|
|
$
806
|
|
$
82
|
|
$
888
|
Less: Directly
attributable expenses
|
559
|
|
87
|
|
646
|
|
82
|
|
728
|
Contribution margin
(1)
|
$
149
|
|
$
11
|
|
$
161
|
|
$
—
|
|
$
160
|
|
Nine Months Ended
September 30, 2023
|
Direct to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All
Other
|
|
Total
|
Total U.S. GAAP
Revenue, net
|
$
2,491
|
|
$
344
|
|
$
2,834
|
|
$
271
|
|
$
3,105
|
Change in fair value of
MSRs due to valuation
assumptions (net of hedges)
|
(220)
|
|
—
|
|
(220)
|
|
—
|
|
(220)
|
Adjusted
Revenue
|
$
2,271
|
|
$
344
|
|
$
2,615
|
|
$
271
|
|
$
2,886
|
Less: Directly
attributable expenses
|
1,514
|
|
191
|
|
1,706
|
|
242
|
|
1,948
|
Contribution
margin(1)
|
$
757
|
|
$
152
|
|
$
909
|
|
$
29
|
|
$
938
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2022
|
Direct to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All
Other
|
|
Total
|
Total U.S. GAAP
Revenue, net
|
$
4,455
|
|
$
567
|
|
$
5,022
|
|
$
335
|
|
$
5,358
|
Change in fair value of
MSRs due to valuation
assumptions, net of hedges
|
(1,413)
|
|
—
|
|
(1,413)
|
|
—
|
|
(1,413)
|
Adjusted
Revenue
|
$
3,042
|
|
$
567
|
|
$
3,610
|
|
$
335
|
|
$
3,945
|
Less: Directly
attributable expenses
|
2,037
|
|
302
|
|
2,340
|
|
305
|
|
2,645
|
Contribution
margin(1)
|
$
1,005
|
|
$
265
|
|
$
1,270
|
|
$
30
|
|
$
1,300
|
|
|
(1)
|
We measure the
performance of the segments primarily on a contribution margin
basis. Contribution margin is intended to measure the direct
profitability of each segment and is calculated as Adjusted Revenue
less directly attributable expenses. Adjusted Revenue is a non-GAAP
financial measure described below. Directly attributable expenses
include salaries, commissions and team member benefits, general and
administrative expenses, marketing and advertising expenses and
other expenses, such as direct servicing costs and origination
costs.
|
GAAP to
non-GAAP Reconciliations
Adjusted
Revenue Reconciliation
($ amounts in
millions)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited)
|
|
(Unaudited)
|
Total revenue,
net
|
$
1,203
|
|
$
1,295
|
|
$
3,105
|
|
$
5,358
|
Change in fair value of
MSRs due to
valuation assumptions (net of
hedges) (1)
|
(201)
|
|
(406)
|
|
(220)
|
|
(1,413)
|
Adjusted
Revenue
|
$
1,002
|
|
$
888
|
|
$
2,886
|
|
$
3,945
|
|
|
(1)
|
Reflects changes in
assumptions including discount rates and prepayment speed
assumptions, mostly due to changes in market interest rates, and
the effects of contractual prepayment protection associated with
sales or purchases of MSRs.
|
Adjusted Net Income
(Loss) Reconciliation
($ amounts in
millions)
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited)
|
(Unaudited)
|
Net income (loss)
attributable to Rocket Companies
|
$
6
|
|
$
7
|
|
$
(5)
|
|
$
64
|
Net income (loss)
impact from pro forma conversion of Class D
common shares to Class A common shares (1)
|
109
|
|
90
|
|
(151)
|
|
1,130
|
Adjustment to the
(provision for) benefit from income tax (2)
|
(26)
|
|
(16)
|
|
36
|
|
(259)
|
Tax-effected net
income (loss) (2)
|
89
|
|
81
|
|
(120)
|
|
936
|
Share-based
compensation expense (3)
|
39
|
|
58
|
|
142
|
|
186
|
Change in fair value
of MSRs due to valuation assumptions (net of
hedges) (4)
|
(201)
|
|
(406)
|
|
(220)
|
|
(1,413)
|
Career transition
program (5)
|
51
|
|
20
|
|
51
|
|
81
|
Change in Tax
receivable agreement liability (6)
|
—
|
|
—
|
|
—
|
|
(24)
|
Tax impact of
adjustments (7)
|
27
|
|
81
|
|
6
|
|
291
|
Other tax adjustments
(8)
|
1
|
|
1
|
|
3
|
|
3
|
Adjusted Net Income
(Loss)
|
$
7
|
|
$
(166)
|
|
$
(137)
|
|
$
60
|
|
|
(1)
|
Reflects net income
(loss) to Class A common stock from pro forma exchange and
conversion of corresponding shares of our Class D common shares
held by non-controlling interest holders as of September 30, 2023
and 2022.
|
|
|
(2)
|
Rocket Companies is
subject to U.S. Federal income taxes, in addition to state, local
and Canadian taxes with respect to its allocable share of any net
taxable income (loss) of Holdings. The Adjustment to the (provision
for) benefit from income tax reflects the difference between (a)
the income tax computed using the effective tax rates below applied
to the Income (loss) before income taxes assuming Rocket Companies,
Inc. owns 100% of the non-voting common interest units of Holdings
and (b) the Provision for (benefit from) income taxes. The
effective income tax rate was 24.29% for the three and nine months
ended September 30, 2023, 24.51% for three months ended
September 30, 2022, and 25.11% for the nine months ended
September 30, 2022.
|
|
|
(3)
|
The three and nine
months ended September 30, 2023, and the nine months ended
September 30, 2022 amounts exclude the impact of the career
transition program.
|
|
|
(4)
|
Reflects changes in
assumptions including discount rates and prepayment speed
assumptions, mostly due to changes in market interest rates, and
the effects of contractual prepayment protection associated with
sales or purchases of MSRs.
|
|
|
(5)
|
Reflects net expenses
associated with compensation packages, healthcare coverage, career
transition services, and accelerated vesting of certain equity
awards.
|
|
|
(6)
|
Reflects changes in
estimates of tax rates and other variables of the Tax receivable
agreement liability.
|
|
|
(7)
|
Tax impact of
adjustments gives effect to the income tax related to share-based
compensation expense, the change in fair value of MSRs due to
valuation assumptions, career transition program, and the change in
Tax receivable agreement liability, at the effective tax rates for
each quarter.
|
|
|
(8)
|
Represents tax benefits
due to the amortization of intangible assets and other tax
attributes resulting from the purchase of Holdings units, net of
payment obligations under Tax Receivable Agreement.
|
Adjusted Diluted
Weighted Average Shares Outstanding Reconciliation
($ in millions,
except shares and per share)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited)
|
|
(Unaudited)
|
Diluted weighted
average Class A Common shares outstanding
|
1,983,992,350
|
|
1,970,665,767
|
|
1,979,203,982
|
|
1,972,263,268
|
Assumed pro forma
conversion of Class D shares (1)
|
—
|
|
—
|
|
—
|
|
—
|
Adjusted diluted
weighted average shares outstanding
|
1,983,992,350
|
|
1,970,665,767
|
|
1,979,203,982
|
|
1,972,263,268
|
|
|
|
|
|
|
|
|
Adjusted Net Income
(Loss)
|
$
7
|
|
$
(166)
|
|
$
(137)
|
|
$
60
|
Adjusted Diluted
Earnings (Loss) Per Share
|
$
0.00
|
|
$
(0.08)
|
|
$
(0.07)
|
|
$
0.03
|
|
|
(1)
|
Reflects the proforma
exchange and conversion of non-dilutive Class D common stock to
Class A common stock. For the three and nine months ended
September 30, 2023 and 2022, Class D common shares were
dilutive and are included in the diluted weighted average Class A
common shares outstanding in the table above.
|
Adjusted EBITDA
Reconciliation
($ amounts in
millions)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited)
|
|
(Unaudited)
|
Net income
(loss)
|
$
115
|
|
$
96
|
|
$
(157)
|
|
$
1,193
|
Interest and
amortization expense on non-funding debt
|
38
|
|
38
|
|
115
|
|
115
|
Provision for (benefit
from) income taxes
|
3
|
|
10
|
|
(3)
|
|
55
|
Depreciation and
amortization
|
28
|
|
24
|
|
84
|
|
70
|
Share-based
compensation expense (1)
|
39
|
|
58
|
|
142
|
|
186
|
Change in fair value
of MSRs due to valuation assumptions (net of
hedges) (2)
|
(201)
|
|
(406)
|
|
(220)
|
|
(1,413)
|
Career transition
program (3)
|
51
|
|
20
|
|
51
|
|
81
|
Change in Tax
receivable agreement liability (4)
|
—
|
|
—
|
|
—
|
|
(24)
|
Adjusted
EBITDA
|
$
73
|
|
$
(160)
|
|
$
12
|
|
$
263
|
|
|
(1)
|
The three and nine
months ended September 30, 2023 and the nine months ended September
30, 2022, amounts exclude the impact of the career transition
program.
|
(2)
|
Reflects changes in
assumptions including discount rates and prepayment speed
assumptions, mostly due to changes in market interest rates, and
the effects of contractual prepayment protection associated with
sales or purchases of MSRs.
|
(3)
|
Reflects net expenses
associated with compensation packages, healthcare coverage, career
transition services, and accelerated vesting of certain equity
awards.
|
(4)
|
Reflects changes in
estimates of tax rates and other variables of the Tax receivable
agreement liability.
|
Non-GAAP Financial Measures
To provide investors with information in addition to our results
as determined by GAAP, we disclose Adjusted Revenue, Adjusted Net
Income (Loss), Adjusted Diluted Earnings (Loss) Per Share and
Adjusted EBITDA (collectively "our non-GAAP financial measures") as
non-GAAP measures. We believe that the presentation of our non-GAAP
financial measures provides useful information to investors
regarding our results of operations because each measure assists
both investors and management in analyzing and benchmarking the
performance and value of our business. Our non-GAAP financial
measures are not calculated in accordance with GAAP and should not
be considered as a substitute for Total revenue, net, Net income
(loss), or any other operating performance measure calculated in
accordance with GAAP. Other companies may define non-GAAP financial
measures differently, and as a result, our measures of our non-GAAP
financial measures may not be directly comparable to those of other
companies. Our non-GAAP financial measures provide indicators of
performance that are not affected by fluctuations in certain costs
or other items. Accordingly, management believes that these
measurements are useful for comparing general operating performance
from period to period, and management relies on these measures for
planning and forecasting of future periods. Additionally, these
measures allow management to compare our results with those of
other companies that have different financing and capital
structures.
We define "Adjusted Revenue" as total revenues net of the change
in fair value of mortgage servicing rights ("MSRs") due to
valuation assumptions (net of hedges). We define "Adjusted Net
Income (Loss)" as tax-effected earnings (losses) before share-based
compensation expense, the change in fair value of MSRs due to
valuation assumptions (net of hedges), career transition program,
change in Tax receivable agreement liability, and the tax effects
of those adjustments as applicable. We define "Adjusted Diluted
Earnings (Loss) Per Share" as Adjusted Net Income (Loss) divided by
the diluted weighted average number of Class A common stock
outstanding for the applicable period, which assumes the pro forma
exchange and conversion of all outstanding Class D common stock for
Class A common stock. We define "Adjusted EBITDA" as earnings
(losses) before interest and amortization expense on non-funding
debt, income tax, depreciation and amortization, share-based
compensation expense, change in fair value of MSRs due to valuation
assumptions (net of hedges), career transition program, and change
in Tax receivable agreement liability.
We exclude from each of our non-GAAP financial measures the
change in fair value of MSRs due to valuation assumptions (net of
hedges) as this represents a non-cash non-realized adjustment to
our total revenues, reflecting changes in assumptions including
discount rates and prepayment speed assumptions, mostly due to
changes in market interest rates, which is not indicative of our
performance or results of operation. We also exclude effects of
contractual prepayment protection associated with sales of MSRs.
Adjusted EBITDA includes Interest expense on funding facilities,
which are recorded as a component of Interest income, net, as these
expenses are a direct cost driven by loan origination volume. By
contrast, interest and amortization expense on non-funding debt is
a function of our capital structure and is therefore excluded from
Adjusted EBITDA.
Our definitions of each of our non-GAAP financial measures allow
us to add back certain cash and non-cash charges, and deduct
certain gains that are included in calculating Total revenue, net,
Net income (loss) attributable to Rocket Companies or Net income
(loss). However, these expenses and gains vary greatly, and are
difficult to predict. From time to time in the future, we may
include or exclude other items if we believe that doing so is
consistent with the goal of providing useful information to
investors.
Although we use our non-GAAP financial measures to assess the
performance of our business, such use is limited because they do
not include certain material costs necessary to operate our
business. Our non-GAAP financial measures can represent the effect
of long-term strategies as opposed to short-term results. Our
presentation of our non-GAAP financial measures should not be
construed as an indication that our future results will be
unaffected by unusual or nonrecurring items. Our non-GAAP financial
measures have limitations as analytical tools, and you should not
consider them in isolation or as a substitute for analysis of our
results as reported under U.S. GAAP. Because of these limitations,
our non-GAAP financial measures should not be considered as
measures of discretionary cash available to us to invest in the
growth of our business or as measures of cash that will be
available to us to meet our obligations.
Forward Looking Statements
Some of the statements contained in this document are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements are generally identified by the use of words such as
"anticipate," "believe," "could," "estimate," "expect," "intend,"
"may," "plan," "potential," "predict," "project," "should,"
"target," "will," "would" and, in each case, their negative or
other various or comparable terminology. These forward-looking
statements reflect our views with respect to future events as of
the date of this document and are based on our management's current
expectations, estimates, forecasts, projections, assumptions,
beliefs and information. Although management believes that the
expectations reflected in these forward-looking statements are
reasonable, it can give no assurance that these expectations will
prove to have been correct. All such forward-looking statements are
subject to risks and uncertainties, many of which are outside of
our control, and could cause future events or results to be
materially different from those stated or implied in this document.
It is not possible to predict or identify all such risks. These
risks include, but are not limited to, the risk factors that are
described under the section titled "Risk Factors" in our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and other filings with the Securities and
Exchange Commission. These factors should not be construed as
exhaustive and should be read in conjunction with the other
cautionary statements that are included in this document and in our
SEC filings. We expressly disclaim any obligation to publicly
update or review any forward-looking statements, whether as a
result of new information, future developments or otherwise, except
as required by applicable law.
About Rocket Companies
Founded in 1985, Rocket Companies is a Detroit-based fintech platform company
consisting of personal finance and consumer technology brands
including Rocket Mortgage, Rocket Homes, Amrock, Rocket Money,
Rocket Loans, Rocket Mortgage Canada, Lendesk, Core Digital Media,
Rocket Central and Rocket Connections.
Rocket Companies' mission is to be the best at creating
certainty in life's most complex moments so its clients can pursue
their financial dreams. The Company helps clients achieve the goal
of home ownership and financial freedom through industry-leading
client experiences powered by its simple, fast and trusted digital
solutions. J.D. Power has ranked Rocket Mortgage, part of Rocket
Companies, #1 in client satisfaction for both primary mortgage
origination and servicing 21 times – the most of any mortgage
lender.
For more information, please visit our Corporate Website or
Investor Relations Website.
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SOURCE Rocket Companies, Inc.