Rocket Companies, Inc. Q3 FY2024 earnings call

Optimism and Market Context

• Emphasized optimism despite market challenges, with 30-year fixed mortgage rate declining from nearly 8% a year ago and housing inventory improving.

Rocket Superstack Layers

• Ecosystem: Origination servicing flywheel with strategic sub servicing partnership with Annaly, 85% recapture rate, and innovative mortgage products like Welcome Home Rate Break.
• Experience: GenAI-powered chat integrated across digital platforms, handling 24/7 interactions, with chat interactions doubling quarter-over-quarter and 3x higher conversion for chat users.
• Technology: Navigator AI-driven knowledge platform automating complex queries, and Rocket Logic proprietary loan origination system saving 800,000 team member hours annually.
• Brand: Amplifying brand identity targeting growth audiences like female heads of households and Hispanics, with new brand identity to be unveiled in February 2025.

In the third quarter of 2024, Rocket Companies delivered $1.323 billion in adjusted revenue, surpassing the high end of guidance. Net rate lock volume surged 43% year-over-year, driven by refinance and purchase volume growth. Adjusted EBITDA margins were 22%, 3x higher than Q3 2023, and adjusted earnings per diluted share were $0.08. The company expanded both purchase and refinance market share year-over-year.

Fourth Quarter Outlook

• Anticipates adjusted revenue in Q4 to be in the range of $1.50 billion to $1.200 billion, mid-point representing 27% year-over-year growth.
• Expect gain on sale margin to expand in Q4 compared to Q3, considering market dynamics and competitor pricing.
• Focus on continuing market share gains in any market environment.

Risks

• Forward-looking statements are subject to risks and uncertainties outlined in Rocket Companies' SEC filings, which could cause actual results to differ materially from expectations.

Q: Jeff Adelson from Morgan Stanley asked about revenue outlook for Q4 and volume assumptions.

A: Varun Krishna and Brian Brown responded that Q4 is typically smaller due to seasonality and interest rate movements, but the guide reflects market share gains. Brian noted a slight expansion in gain on sale margin in Q4.

Q: Ryan Nash from Goldman Sachs inquired about 2025 market outlook and MSR bulk purchases.

A: Varun Krishna and Brian Brown discussed optimistic market outlook with improving housing market and volume growth, and excitement about continuing MSR bulk purchases and subservicing partnerships like with Annaly.

Q: Mark DeVries from Deutsche Bank asked about rate lock movement and gain on sale margins.

A: Brian Brown and Varun Krishna explained the two-week window of low mortgage rates and how Rocket's AI and technology capabilities helped scale up, with gain on sale margins impacted by market dynamics.

Q: Derek Sommers from Jefferies asked about Annaly partnership and home equity products.

A: Brian Brown and Varun Krishna discussed the win-win aspects of the Annaly partnership and the value of home equity products in attracting clients and providing additional services.

Q: Doug Harter from UBS asked about expenses and fixed costs.

A: Brian Brown and Varun Krishna stated focus on capturing share and growing into the market, with current capacity of $150 billion and emphasis on operating leverage and technology-driven efficiency.