Rocket Companies posted second-quarter net income of $229 million on net revenue of $2.78 billion, up from net income of $34 million on revenue of $1.45 billion during the same period a year ago, the parent company of mortgage lending giant Rocket Mortgage reported Thursday.
The Detroit-based fintech platform company reported adjusted revenue of $2.76 billion for the quarter, compared with $1.43 billion a year earlier.
“The industry expected a normal spring home buying season,” Varun Krishna, CEO and director of Rocket Companies, said during an earnings call Thursday. “Instead, affordability deteriorated as mortgage rates moved higher through May and June. Purchase and refinance demand, as a result, weakened during what is typically the strongest quarter of the year. And industry forecasts moved lower as the quarter progressed. Simply said, it was one of the toughest spring housing markets in years. Now, against that backdrop, Rocket delivered one of its strongest quarters in recent memory; we gained market share in both purchase and refinance. We delivered our most profitable quarter in four years.”
Krishna said the company expanded its adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margin to 28% from 26% in the first quarter, while integration efforts for Redfin and Mr. Cooper — both acquired last year — are ahead of schedule. Adjusted revenue came in at $2.8 billion, he said, near the midpoint of Rocket’s guidance, while adjusted diluted earnings per share rose to 16 cents.
He said the company’s focus remains on growing market share profitably, with purchase market share reaching a record 6.2%, up from 5.5% in the fourth quarter of last year. Refinance market share also rose to 14.3% from 12.2%.
“This performance was not a coincidence,” Krishna said. “It was the result of years of deliberate investment, focused execution, and a business model that has fundamentally evolved. Today, more than 70% of our revenue comes from recurring or less rate-sensitive businesses. Servicing provides a durable recurring revenue foundation. Purchase mortgages, home equity, personal loans and Redfin diversify us across broader parts of the housing market.”
Krishna said Rocket’s businesses are increasingly working together as an integrated ecosystem, with Redfin bringing customers in earlier, the mortgage department financing their purchases, the servicing department maintaining those relationships and other products meeting customers’ evolving needs. He said artificial intelligence is improving productivity, personalization and conversion across the platform.
“This is the business we’ve been building — one with a stronger floor in difficult markets and significantly more upside when housing activity returns,” he said. “That’s what gives us confidence that Rocket’s long-term earnings power is fundamentally stronger than it was just a few years ago.”
Rocket reported $49.1 billion in closed mortgage loan origination volume for the second quarter, compared with $29.1 billion during the same period a year ago.
The company’s gain-on-sale margin for the quarter was 2.48%, compared with 2.80% a year earlier.
Brian Brown, chief financial officer at Rocket Companies, said the Redfin integration is already helping drive mortgage growth, with mortgage leads from Redfin doubling year over year in June. The share of Redfin buy-side clients financing with Rocket Mortgage reached 47%, close to the company’s 50% target, while direct-to-consumer purchase volume rose 45% from a year earlier.
Brown said one example is Rocket’s preferred pricing, which can provide servicing clients who buy or sell through Redfin and finance through Rocket Mortgage with up to $20,000 in combined savings.
“We can offer an incentive of this size for one simple reason: we own the search portal, the real estate brokerage, the mortgage financing, the title and closing and the servicing,” he said. “Historically, these are four or five separate companies, all with different experiences and different client acquisition models.”
On the refinance side, Brown said the servicing portfolio drove share gains across rate and term, cash-out and home equity loans.
“Existing service clients accounted for 57% of refinance close volume up from 54% in Q1, and those closings come with near zero client acquisition costs,” he said. “Recapture rates on the Mr. Cooper portfolio reached another record, and we are more than halfway to realizing our Mr. Cooper revenue synergy target on an annualized run rate basis.”
The latest results come a day after Pontiac-based United Wholesale Mortgage reported a second-quarter net loss of $451.9 million on total revenue of $888 million and announced a $2.05 billion capital partnership with Oaktree Capital Management and the Ishbia family.
cwilliams@detroitnews.com
This article originally appeared on The Detroit News: Rocket touts market share gains in purchase, refinance as profit rises
Reporting by Candice Williams, The Detroit News / The Detroit News
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By Candice Williams, The Detroit News | USA TODAY Network
