loanDepot, Inc. Q4 FY2024 earnings call

• Frank Martell discussed the completion of Vision 2025, return to profitability in Q3, announcement of Project North Star, and his upcoming transition as CEO.
• Dave Hayes detailed Q4 financial results, including rate lock volume, origination volume, gain on sale margin, servicing fee income, and expense drivers.
• Jeff Walsh mentioned onboarding new JVs with Smith Douglas and Onx Homes, expected to be fully ramped in 2026, and ongoing technology investments for operating efficiency.

In the fourth quarter of 2024, pull-through weighted rate lock volume was $5.6 billion, a 27% increase from the prior year's $4.4 billion, contributing to adjusted total revenue of $267 million compared to $251 million in Q4 2023. Loan origination volume was $7.2 billion, a 34% increase from the prior year's $5.4 billion. Servicing fee income decreased from $132 million in Q4 2023 to $108 million in Q4 2024 due to portfolio size reduction from bulk sales. Total expenses for Q4 2024 increased by $39 million or 13% from the prior year, driven by higher volume-related commission, direct origination, and marketing expenses.

• Q1 2025 pull-through weighted lock volume expected between $4.8 billion and $5.8 billion, origination volume between $4.5 billion and $5.5 billion.
• Pull-through weighted gain on sale margin expected between 320 basis points and 340 basis points.
• Total expenses expected to decline in Q1 primarily from lower volume-related and G&A expenses.

• Actual results may differ from forward-looking statements due to risks in SEC filings, including market conditions, interest rate changes, and operational risks.

Q: Can you talk about how you're viewing your current cash liquidity situation and kind of as part of that, what you would expect for servicing balances over the course of 2025?

A: Yes. Hey Doug, it's David Hayes. As you guys know, we've talked about this over past quarters that we have maintained heightened levels of liquidity considering the challenging mortgage market. And we expect to maintain, heightened levels of liquidity over that period. We think we're running at excess liquidity levels. And so we've talked before about maintaining at least a 5% or around a 5% of assets of liquidity is sort of a target in this challenging market. And I think that's something we'll aim to do over the course of 2025.

Q: Could you speak to what the drivers of the sequential increase in the G&A expense and servicing expense were?

A: Yes. The biggest is that G&A was a bit kind of subsidized last quarter. We had a big insurance recovery related to – in the third quarter related to the cyber event. We took a large reserve in the second quarter and got the insurance recovery in the third quarter. So that was kind of understating expenses. So that's kind of a return to normalization in the fourth quarter, and then generally just in expense profile, we talked about investing in our LOs [ph] and operations and carrying excess capacity. So that's also impacted a little bit of the fourth quarter, that's largely the explanation for the sequential change on that front. From a servicing perspective, I think it's just the normal seasonality of the portfolio. We have seen a little bit of a tick up in our delinquency rate, which is attracting a little more expenses from a servicing perspective. But they're still well below historical norms. They're kind of coming off a historical norm perspective. So no concerns from that perspective on our end.

Q: Just in terms of the volume guidance for 1Q, kind of – what kind of backdrop are you embedding in that guidance? And how does that compare to third-party estimates?

A: Yes. So we're obviously setting our guidance off our expectations of sort of our LO counts and a lot of the investments we've made into the business. So we are expecting, locks to come down sequentially, kind of in line with normal seasonality in the business. That being said, I think if you look at some of the third-party estimates, they're showing a more significant decline sequentially. And so we are hopeful that we can pick up some share gain in that period.

Q: Maybe just to start on your hiring expense plans in 2025 with the expected rebound in mortgage originations, just how should we think about the operating leverage of the business going into next year, assuming the increase in mortgage originations does, in fact, play out?

A: Yes. Like I said, we’re – we’ve been investing strategically over the course of the third and fourth quarter into our kind of revenue generating expense side or LOs in our operations team. And if we play that against, let’s say, the MBA or the mortgage growth expectations in some of the third party, we would naturally expect the operating leverage to increase we find LO productivity to get more productive as refinance markets start to materialize. So we should see better pull-through on revenue to profitability perspective in that regard. And then just generally speaking expense perspective, that’s where the hiring will be for the course of 2025. We’re not expecting any significant back office or G&A expenses, in fact, modest reductions on that front.

Q: On Project North Star, just obviously early days here, but just curious if you – if there’s any updates with any of the initiatives, whether that be traction in expanding geographies, JVs, cost saves or anything else.

A: Yes. I’ll handle that. Look I think Project North Star, as you know, was unveiled last quarter. So it’s in formative stages. But we’re already investing in the technology platforms that will enable a lot of our operating efficiency and reduced cycle times and improved customer experience. So a number of those are in flight, and we expect those to be progressively more impactful as we get into this year and certainly next year. So I think that’s all in good order. I think we’ve also announced two new JVs. And maybe, Jeff can talk a little bit about those because we expect those to come online over the course of next year as well. But Jeff, why don’t you. Jeff Walsh: Yes. We’re – this is Jeff Walsh. We’re actively onboarding now our partnership with Smith Douglas and with Onx Homes, and we fully anticipate having those onboarded in 2025 fully and fully ramped in 2026 and also looking for additional opportunities in that space aggressively.