In the news release, Rocket Companies Announces Second Quarter
Results, issued 04-Aug-2022 by Rocket
Companies, Inc. over PR Newswire, in the first table titled "Second
Quarter Financial Summary," the amount for "Q2-22" in row "Adjusted
Revenue" should read "1,125" rather than "25" as incorrectly
transcribed by PR Newswire. The complete, corrected release
follows:
Rocket Companies Announces Second Quarter Results
- Generated Q2 net revenue of $1.4
billion and net income of $60
million
- Delivered strong gain on sale margin of 292 basis
points
- Over 2,000 Rocket team members deployed to accelerate
build-out of Rocket platform
- Unified Rocket brand, rebranding Truebill to Rocket Money,
and Edison Financial to Rocket Mortgage
- Signed new agreements with Santander and Q2 digital banking
platform
DETROIT, Aug. 4, 2022
/PRNewswire/ -- Rocket Companies, Inc. (NYSE: RKT) ("Rocket
Companies" or the "Company"), a Detroit-based FinTech platform company
consisting of tech-driven real estate, mortgage and financial
services businesses – including Rocket Mortgage, Rocket Homes,
Rocket Money (formerly known as Truebill) and Rocket Auto – today
announced results for the quarter ended June
30, 2022.
"As the mortgage market continues to transition, we are actively
investing in our business and transforming the Rocket services and
engagement platforms to better serve our clients," said
Jay Farner, Vice Chairman and CEO of
Rocket Companies. "In the second quarter alone, Rocket Companies
introduced new lending programs, forged new mortgage partnerships,
officially launched our solar business and expanded our brand
deeper into Canada. These moves
provide us immediate opportunities today, and a tremendous runway
for growth and expansion well into the future."
"During this time of change in the industry, we are focused on
operating our business with discipline. We reduced expenses by
approximately $300 million during the
second quarter and will continue to execute a prudent approach to
cost management," said Julie Booth,
CFO and Treasurer of Rocket Companies. "We are also investing our
capital into the Rocket engagement and services platforms to expand
our client base, drive higher conversion, and lower our client
acquisition cost, setting the foundation for our next stage of
growth. We will continue to deploy our capital in a strategic and
disciplined manner to generate long term shareholder value."
Second Quarter Financial Summary1
ROCKET
COMPANIES
(Units in '000s, $
amounts in millions, except per share)
|
|
|
Q2-22
|
|
Q2-21
|
|
YTD
22
|
|
YTD
21
|
|
(Unaudited)
|
|
(Unaudited)
|
Total revenue,
net
|
$ 1,392
|
|
$ 2,668
|
|
$
4,063
|
|
$
7,207
|
Total
expenses
|
$ 1,314
|
|
$ 1,607
|
|
$
2,922
|
|
$
3,303
|
Net income
|
$
60
|
|
$ 1,037
|
|
$
1,096
|
|
$
3,814
|
|
|
|
|
|
|
|
|
Adjusted
Revenue
|
$
1,125
|
|
$ 2,790
|
|
$
3,057
|
|
$
6,830
|
Adjusted Net (Loss)
Income
|
$
(67)
|
|
$
921
|
|
$ 226
|
|
$
2,726
|
Adjusted
EBITDA
|
$
(27)
|
|
$ 1,279
|
|
$ 423
|
|
$
3,731
|
|
|
|
|
|
|
|
|
GAAP Diluted Earnings
Per Share
|
$
0.02
|
|
$ 0.40
|
|
$
0.43
|
|
$
1.46
|
Adjusted Diluted (Loss)
Earnings Per Share
|
$
(0.03)
|
|
$ 0.46
|
|
$
0.11
|
|
$
1.37
|
(Units in '000s, $
amounts in millions)
|
|
|
|
Q2-22
|
|
Q2-21
|
|
YTD
22
|
|
YTD
21
|
Select
Metrics
|
|
(Unaudited)
|
|
(Unaudited)
|
Closed loan origination
volume
|
|
$ 34,544
|
|
$ 83,764
|
|
$ 88,521
|
|
$
187,289
|
Gain on sale
margin
|
|
2.92 %
|
|
2.78 %
|
|
2.98 %
|
|
3.29 %
|
Net rate lock
volume
|
|
$ 29,385
|
|
$ 83,586
|
|
$ 78,999
|
|
$
178,702
|
Amrock closings
(units)
|
|
82.6
|
|
260.3
|
|
250.9
|
|
609.1
|
Second Quarter Financial Highlights
During the
second quarter of 2022:
- Generated total revenue, net of $1.4
billion and delivered net income of $60 million, or 2
cents per diluted share.
- Rocket Mortgage generated $34.5
billion in mortgage origination closed loan volume. Gain on
sale margin was 2.92%.
- Exceeded target expense reduction by $100 million, reducing expenses $300 million quarter-over-quarter.
- Grew servicing book unpaid principal balance to $538 billion at June 30,
2022, up 6% from June 30,
2021. As of June 30, 2022, our
servicing portfolio includes 2.5 million clients and generates over
$1.4 billion of recurring servicing
fee income on an annualized basis.
Company Highlights
Rocket Platform
- Rocket Companies has deployed over 2,000 team members - across
technology, product strategy, data intelligence and marketing
functions - to expand and accelerate the build-out of Rocket's
engagement and services platforms.
- Rocket Companies unified more of our businesses under the
Rocket brand. In August, Truebill will rebrand to Rocket Money, and
Edison Financial - our Canadian digital mortgage broker - will
rebrand to Rocket Mortgage in Canada. These two rebranding initiatives
leverage our investments in the trusted Rocket brand and draw our
businesses closer together.
- Rocket Money, formerly known as Truebill, a leading personal
finance app that we acquired in December
2021, again showed impressive growth. Paying premium members
surpassed 2 million users in July, more than doubling
year-over-year. Rocket Money launched its first credit card in beta
in Q2 and has seen a very positive early response.
- In July, Rocket Mortgage signed a new agreement to originate
mortgages for global financial leader Santander. Through this
relationship, Santander will be offering Rocket Mortgage to their
nearly 2 million U.S. clients.
- In July, Rocket Mortgage signed a new partnership with Q2, a
banking platform leader who provides digital banking applications
to over 500 financial institutions. Through the Q2 banking platform
partnership, Rocket Mortgage will enable regional banks and credit
unions to offer mortgages - without the need to manage their own
mortgage operations. Consumers will enjoy a comprehensive, seamless
experience through one app to apply for mortgages and make mortgage
payments, deposit checks, and build their savings.
- Rocket Mortgage net client retention rate was 93% over the 12
months ended June 30, 2022. There is
a strong correlation between this metric and client lifetime value,
and 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.
- Rocket Homes grew overall real estate transactions by 25% from
Q2 2021 to Q2 2022, notching two record months in the quarter for
closed units. Rocket Homes' web traffic grew by nearly 60% in Q2
2022 from Q2 2021, reaching nearly 3 million unique visitors per
month, driven by the increased brand awareness from our
award-winning Super Bowl ad and our targeted performance marketing
efforts.
- Rocket Solar continued its national expansion in June and is
now available in 42 metropolitan areas, including Arizona, Florida and South
Carolina. Starting in August, Rocket Solar will be working
with Rocket Loans to provide solar financing options for our
clients.
- Rocket Companies ranked #6 on Fortune's '100 Best Large
Workplaces for Millennials' list. This marks the first time the
Company has ranked within the top 10.
Technology and Product
- Rocket Mortgage Net Promoter Scores improved by over 10% from
both purchase clients and real estate agents from Q4'21 to Q2'22,
driven by our focus on delivering a superior client experience
through our platform.
- Rocket Mortgage introduced mortgage products to provide
homebuyers with the confidence and certainty they need to transact
during a time of challenging market conditions. We placed renewed
emphasis on our RateShield program, which gives our clients
confidence to purchase a new home in a rising rate environment by
locking in rates for 90 days while they search for a new home. We
also launched Rate Drop Advantage at the end of July, which
provides homebuyers with a one-time credit on typical closing costs
to refinance their mortgage if rates drop within 3 years.
- Rocket Mortgage launched a new home equity loan product at the
end of the July, providing additional options for clients to access
the equity that they have in their homes. Recently, total U.S. home
equity increased to $27.8 trillion, a
record high, according to the Federal Reserve.
- RocketLogic, our proprietary next generation loan origination
system, drove significant efficiencies in the loan origination
process by reducing the average number of underwriting tasks per
loan by over 40% from December 2021
to June 2022. These improvements were
made by leveraging loan data to automate certain aspects of the
process, further streamlining the underwriting process, and
resulting in a better client experience.
- Approximately 90,000 real estate agents have signed up for
Rocket Pro Insight (RPI), up from approximately 85,000 in Q1'22.
RPI is our digital platform for real estate agents to manage the
entire mortgage process in real-time, from application submission
to closing. RPI also added Pathfinder, our mortgage guideline
search engine, as a new feature.
Supporting Our Communities
- Rocket Companies released its inaugural ESG report, which
documents the Company's commitment to being a "For More Than
Profit" organization that invests in our team members and
communities. The ESG report can be found on the Social Impact tab
of our Investor Relations website.
- In July, Rocket Mortgage sponsored the Rocket Mortgage Classic,
our flagship PGA tournament held in Detroit. Through the collaborative partnership
efforts of its "Changing the Course" campaign, alongside other
digital inclusion efforts, the Rocket Mortgage Classic has helped
drive significant progress to help bridge Detroit's digital divide - with nearly 70% of
Detroit residents now considered
digitally included compared to 40% in 2019.
- The Rocket Community Fund, a partner company, launched the
Detroit Eviction Defense Fund, a $13
million program led by the Gilbert Family Foundation, that
will provide legal aid services to tenants at risk of
eviction.
Subsequent to June 30,
2022:
- As of July 27, 2022, Rocket
Companies repurchased 29.8 million shares cumulatively at an
average price of $13.20. In total, we
have returned $393.7 million to Class
A common stockholders under the $1
billion share repurchase program authorized in November 2020.
Third Quarter 2022 Outlook
We expect the following
ranges in Q3 2022:
- Closed loan volume of between $23
billion and $28 billion.
- Net rate lock volume of between $23
billion and $30 billion.
- Gain on sale margins of 2.50% to 2.80%.
Direct to Consumer
In the Direct to Consumer segment, clients have the ability to
interact with Rocket Mortgage online and/or with the Company's
mortgage bankers. The Company markets to potential clients in this
segment through various brand campaigns and performance marketing
channels. The Direct to Consumer segment derives revenue from
originating, closing, selling and servicing predominantly
agency-conforming loans, which are pooled and sold to the secondary
market. The segment also includes title insurance, appraisals and
settlement services complementing the Company's end-to-end mortgage
origination experience. Servicing activities are fully allocated to
the Direct to Consumer segment and are viewed as an extension of
the client experience. Servicing enables Rocket Mortgage to
establish and maintain long term relationships with our clients,
through multiple touchpoints at regular engagement intervals.
DIRECT TO
CONSUMER2
($ amounts in
millions)
|
|
|
Q2-22
|
|
Q2-21
|
|
YTD
22
|
|
YTD
21
|
|
(Unaudited)
|
|
(Unaudited)
|
Sold loan
volume
|
$
19,538
|
|
$
48,902
|
|
$
55,703
|
|
$
113,931
|
Sold loan gain on sale
margin
|
4.17 %
|
|
4.66 %
|
|
4.06 %
|
|
5.06 %
|
Revenue, net
|
$ 1,106
|
|
$
2,221
|
|
$
3,341
|
|
$
5,898
|
Adjusted
Revenue
|
$
839
|
|
$
2,343
|
|
$
2,335
|
|
$
5,521
|
Contribution
margin
|
$
229
|
|
$
1,436
|
|
$
856
|
|
$
3,641
|
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. 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
NETWORK ($ amounts in millions)
|
|
|
Q2-22
|
|
Q2-21
|
|
YTD
22
|
|
YTD
21
|
|
(Unaudited)
|
|
(Unaudited)
|
Sold loan
volume
|
$ 13,580
|
|
$ 30,120
|
|
$
39,613
|
|
$
70,849
|
Sold loan gain on sale
margin
|
1.29 %
|
|
1.16 %
|
|
1.04 %
|
|
1.60 %
|
Revenue, net
|
$
177
|
|
$
319
|
|
$ 469
|
|
$ 1,042
|
Adjusted
Revenue
|
$
177
|
|
$
319
|
|
$ 469
|
|
$ 1,042
|
Contribution
margin
|
$
82
|
|
$
143
|
|
$ 253
|
|
$
686
|
Balance Sheet and Liquidity
We remain in a strong liquidity position, with total liquidity
of $7.3 billion, which includes
$0.9 billion of cash on-hand,
$3.1 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, $3.1 billion of undrawn
lines of credit from non-funding facilities, and $0.2 billion of undrawn MSR lines. As of
June 30, 2022, our available cash
position was $4.0 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 $10.7 billion dollars of asset
value on our balance sheet. As of June 30,
2022, our total equity was $8.8
billion and reflects the impact of the special dividend of
$1.01 per share that was paid during
the quarter to Class A shareholders and funded through a
$2.0 billion distribution.
Subsequent to June 30, 2022, our
total liquidity has increased with the addition of our new
$1 billion MSR facility. On a pro
forma basis including this new MSR facility, total liquidity at
June 30, 2022 would have been
$8.3 billion, including cash on hand,
corporate cash used to self-fund loan originations and undrawn
lines of credit and undrawn MSR lines.
BALANCE SHEET
HIGHLIGHTS
($ amounts in
millions)
|
|
|
June 30,
2022
|
|
December 31,
2021
|
|
(Unaudited)
|
|
|
Cash and cash
equivalents
|
$
915
|
|
$
2,131
|
Mortgage servicing
rights ("MSRs"), at fair value
|
$
6,658
|
|
$
5,386
|
Funding
facilities
|
$
7,647
|
|
$
12,752
|
Other financing
facilities and debt
|
$
5,179
|
|
$
5,994
|
Total equity
|
$
8,772
|
|
$
9,760
|
Second Quarter Earnings Call
Rocket Companies will host a live conference call at
4:30 p.m. ET on August 4, 2022 to discuss its results for the
quarter ended June 30, 2022. 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. If you are
having issues viewing the webcast, please see the event help guide
at the link here.
Condensed
Consolidated Statements of Income
($ In Thousands,
Except Shares and Per Share Amounts)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenue
|
|
|
|
|
|
|
|
Gain on sale of
loans
|
|
|
|
|
|
|
|
Gain on sale of loans
excluding fair value of MSRs, net
|
$
347,365
|
|
$
1,484,378
|
|
$
1,034,535
|
|
$
3,863,656
|
Fair value of
originated MSRs
|
459,473
|
|
857,111
|
|
1,256,088
|
|
2,030,275
|
Gain on sale of loans,
net
|
806,838
|
|
2,341,489
|
|
2,290,623
|
|
5,893,931
|
Loan servicing
income (loss)
|
|
|
|
|
|
|
|
Servicing fee
income
|
357,578
|
|
343,349
|
|
723,793
|
|
635,710
|
Change in fair value
of MSRs
|
(12,522)
|
|
(415,394)
|
|
441,858
|
|
(214,839)
|
Loan servicing income
(loss), net
|
345,056
|
|
(72,045)
|
|
1,165,651
|
|
420,871
|
Interest
income
|
|
|
|
|
|
|
|
Interest
income
|
79,196
|
|
86,645
|
|
169,737
|
|
181,890
|
Interest expense on
funding facilities
|
(42,706)
|
|
(64,378)
|
|
(84,403)
|
|
(132,222)
|
Interest income,
net
|
36,490
|
|
22,267
|
|
85,334
|
|
49,668
|
Other
income
|
204,035
|
|
376,388
|
|
521,407
|
|
842,500
|
Total revenue,
net
|
1,392,419
|
|
2,668,099
|
|
4,063,015
|
|
7,206,970
|
Expenses
|
|
|
|
|
|
|
|
Salaries, commissions
and team member benefits
|
754,125
|
|
840,470
|
|
1,608,040
|
|
1,682,669
|
General and
administrative expenses
|
229,706
|
|
262,815
|
|
505,563
|
|
554,234
|
Marketing and
advertising expenses
|
231,522
|
|
306,685
|
|
559,580
|
|
627,528
|
Depreciation and
amortization
|
24,780
|
|
20,589
|
|
45,822
|
|
35,893
|
Interest and
amortization expense on non-funding debt
|
38,282
|
|
35,038
|
|
76,946
|
|
70,609
|
Other
expenses
|
35,487
|
|
141,805
|
|
126,090
|
|
332,170
|
Total
expenses
|
1,313,902
|
|
1,607,402
|
|
2,922,041
|
|
3,303,103
|
Income before income
taxes
|
78,517
|
|
1,060,697
|
|
1,140,974
|
|
3,903,867
|
Provision for income
taxes
|
(18,761)
|
|
(24,047)
|
|
(44,610)
|
|
(89,879)
|
Net income
|
59,756
|
|
1,036,650
|
|
1,096,364
|
|
3,813,988
|
Net income
attributable to non-controlling interest
|
(56,341)
|
|
(975,530)
|
|
(1,039,237)
|
|
(3,629,166)
|
Net income
attributable to Rocket Companies
|
$
3,415
|
|
$
61,120
|
|
$
57,127
|
|
$ 184,822
|
|
|
|
|
|
|
|
|
Earnings per share of
Class A common stock
|
|
|
|
|
|
|
|
Basic
|
$
0.03
|
|
$
0.45
|
|
$
0.47
|
|
$
1.47
|
Diluted
|
$
0.02
|
|
$
0.40
|
|
$
0.43
|
|
$
1.46
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
Basic
|
118,801,530
|
|
136,139,400
|
|
120,735,056
|
|
125,961,094
|
Diluted
|
1,971,741,764
|
|
1,991,267,972
|
|
1,973,624,016
|
|
132,100,103
|
Condensed
Consolidated Balance Sheets
($ In Thousands,
Except Shares and Per Share Amounts)
|
|
|
June 30,
2022
|
|
December 31,
2021
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
915,363
|
|
$ 2,131,174
|
Restricted
cash
|
68,721
|
|
80,423
|
Mortgage loans held
for sale, at fair value
|
12,402,869
|
|
19,323,568
|
Interest rate lock
commitments ("IRLCs"), at fair value
|
309,497
|
|
538,861
|
Mortgage servicing
rights ("MSRs"), at fair value
|
6,657,758
|
|
5,385,613
|
Notes receivable and
due from affiliates
|
9,799
|
|
9,753
|
Property and
equipment, net
|
271,312
|
|
254,376
|
Deferred tax asset,
net
|
520,553
|
|
572,049
|
Lease right of use
assets
|
400,974
|
|
427,895
|
Forward commitments,
at fair value
|
76,847
|
|
17,337
|
Loans subject to
repurchase right from Ginnie Mae
|
1,376,747
|
|
1,918,032
|
Other
assets
|
2,066,436
|
|
2,115,814
|
Total
assets
|
$
25,076,876
|
|
$ 32,774,895
|
Liabilities and
equity
|
|
|
|
Liabilities:
|
|
|
|
Funding
facilities
|
$
7,647,154
|
|
$ 12,751,592
|
Other financing
facilities and debt:
|
|
|
|
Lines of
credit
|
—
|
|
75,000
|
Senior Notes,
net
|
4,025,230
|
|
4,022,491
|
Early buy out
facility
|
1,153,902
|
|
1,896,784
|
Accounts
payable
|
233,720
|
|
271,544
|
Lease
liabilities
|
458,064
|
|
482,184
|
Forward commitments,
at fair value
|
23,935
|
|
19,911
|
Investor
reserves
|
90,230
|
|
78,888
|
Notes payable and due
to affiliates
|
37,970
|
|
33,650
|
Tax receivable
agreement liability
|
623,498
|
|
688,573
|
Loans subject to
repurchase right from Ginnie Mae
|
1,376,747
|
|
1,918,032
|
Other
liabilities
|
634,223
|
|
776,714
|
Total
liabilities
|
$
16,304,673
|
|
$ 23,015,363
|
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
|
225,702
|
|
287,558
|
Retained
earnings
|
308,904
|
|
378,005
|
Accumulated other
comprehensive (loss) income
|
(26)
|
|
81
|
Non-controlling
interest
|
8,237,603
|
|
9,093,868
|
Total
equity
|
8,772,203
|
|
9,759,532
|
Total liabilities and
equity
|
$
25,076,876
|
|
$ 32,774,895
|
Summary Segment
Results for the Three and Six Months Ended June 30, 2022 and
2021,
($ amounts in
millions)
(Unaudited)
|
|
Three Months Ended
June 30, 2022
|
Direct
to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All
Other
|
|
Total
|
Total U.S. GAAP
Revenue, net
|
$
1,106
|
|
$
177
|
|
$
1,283
|
|
$
109
|
|
$
1,392
|
Less: Increase in MSRs
due to valuation
assumptions (net of hedges)
|
(267)
|
|
—
|
|
(267)
|
|
—
|
|
(267)
|
Adjusted
Revenue
|
$
839
|
|
$
177
|
|
$
1,016
|
|
$
109
|
|
$
1,125
|
Directly attributable
expenses
|
609
|
|
96
|
|
705
|
|
104
|
|
809
|
Contribution
margin(1)
|
$
229
|
|
$
82
|
|
$
311
|
|
$
5
|
|
$
316
|
Three Months Ended
June 30, 2021
|
Direct to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All
Other
|
|
Total
|
Total U.S. GAAP
revenue, net
|
$
2,221
|
|
$
319
|
|
$
2,540
|
|
$
128
|
|
$
2,668
|
Plus: Decrease in MSRs
due to valuation
assumptions (net of hedges)
|
122
|
|
—
|
|
122
|
|
—
|
|
122
|
Adjusted
Revenue
|
$
2,343
|
|
$
319
|
|
$
2,662
|
|
$
128
|
|
$
2,790
|
Directly attributable
expenses
|
907
|
|
176
|
|
1,083
|
|
58
|
|
1,142
|
Contribution
margin(1)
|
$
1,436
|
|
$
143
|
|
$
1,579
|
|
$
70
|
|
$
1,649
|
Six Months Ended
June 30, 2022
|
|
Direct to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All
Other
|
|
Total
|
Total U.S. GAAP
revenue, net
|
|
$
3,341
|
|
$
469
|
|
$
3,810
|
|
$
253
|
|
$
4,063
|
Less: Increase in MSRs
due to valuation
assumptions (net of hedges)
|
|
(1,006)
|
|
—
|
|
(1,006)
|
|
—
|
|
(1,006)
|
Adjusted
Revenue
|
|
$
2,335
|
|
$
469
|
|
$
2,804
|
|
$
253
|
|
$
3,057
|
Directly attributable
expenses
|
|
1,479
|
|
216
|
|
1,694
|
|
223
|
|
1,918
|
Contribution
margin(1)
|
|
$
856
|
|
$
253
|
|
$
1,109
|
|
$
30
|
|
$
1,139
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2021
|
|
Direct to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All
Other
|
|
Total
|
Total U.S. GAAP
revenue, net
|
|
$
5,898
|
|
$
1,042
|
|
$
6,940
|
|
$
267
|
|
$
7,207
|
Less: Increase in MSRs
due to valuation
assumptions (net of hedges)
|
|
(377)
|
|
—
|
|
(377)
|
|
—
|
|
(377)
|
Adjusted
Revenue
|
|
$
5,521
|
|
$
1,042
|
|
$
6,563
|
|
$
267
|
|
$
6,830
|
Directly attributable
expenses
|
|
1,880
|
|
356
|
|
2,236
|
|
129
|
|
2,365
|
Contribution
margin(1)
|
|
$
3,641
|
|
$
686
|
|
$
4,326
|
|
$
138
|
|
$
4,465
|
(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 above. 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.
|
GAAP to non-GAAP
Reconciliations
|
|
Adjusted Revenue
Reconciliation ($ amounts in millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
(Unaudited)
|
|
(Unaudited)
|
Total revenue,
net
|
$
1,392
|
|
$
2,668
|
|
$
4,063
|
|
$
7,207
|
Change in fair value of
MSRs due to valuation assumptions
(net of hedges) (1)
|
(267)
|
|
122
|
|
(1,006)
|
|
(377)
|
Adjusted
Revenue
|
$
1,125
|
|
$
2,790
|
|
$
3,057
|
|
$
6,830
|
(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 of
MSRs.
|
Adjusted Net Income
(Loss) Reconciliation ($ amounts in millions)
|
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
(Unaudited)
|
(Unaudited)
|
Net income
attributable to Rocket Companies
|
$
3
|
|
$
61
|
|
$
57
|
|
$
185
|
Net income impact from
pro forma conversion of Class D
common shares to Class A common shares (1)
|
57
|
|
976
|
|
1,040
|
|
3,630
|
Adjustment to the
provision for income tax (2)
|
(1)
|
|
(240)
|
|
(243)
|
|
(881)
|
Tax-effected net
income (2)
|
60
|
|
797
|
|
855
|
|
2,934
|
Share-based
compensation expense (3)
|
61
|
|
41
|
|
128
|
|
83
|
Change in fair value
of MSRs due to valuation assumptions (net
of hedges) (4)
|
(267)
|
|
122
|
|
(1,006)
|
|
(377)
|
Litigation accrual
(5)
|
—
|
|
—
|
|
—
|
|
15
|
Career transition
program (6)
|
61
|
|
—
|
|
61
|
|
—
|
Change in Tax
receivable agreement liability(7)
|
(24)
|
|
—
|
|
(24)
|
|
—
|
Tax impact of
adjustments (8)
|
41
|
|
(41)
|
|
211
|
|
69
|
Other tax adjustments
(9)
|
1
|
|
1
|
|
2
|
|
2
|
Adjusted Net (Loss)
Income
|
$
(67)
|
|
$
921
|
|
$
226
|
|
$
2,726
|
(1)
|
Reflects net income 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 June 30, 2022 and
2021.
|
|
|
(2)
|
Rocket Companies will
be 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 of Holdings. The adjustment to the provision for income tax
reflects the effective tax rates below, assuming the Issuer owns
100% of the non-voting common
interest units of Holdings. The effective income tax rate for
Adjusted Net Income (Loss) was 24.51% for June 30, 2022 and 24.87%
for June 30, 2021.
|
|
|
(3)
|
The three and six
months ended June 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 of
MSRs.
|
|
|
(5)
|
Reflects legal accrual
related to a specific legal matter.
|
|
|
(6)
|
Reflects net expenses
associated with compensation package, healthcare coverage, career
transition services, and accelerated vesting of certain equity
awards.
|
|
|
(7)
|
Reflects changes in
estimates of tax rates and other variables of the Tax receivable
agreement liability.
|
|
|
(8)
|
Tax impact of
adjustments gives effect to the income tax related to share-based
compensation expense, change in fair value of MSRs due to valuation
assumptions,
litigation accrual, career transition program and the change in Tax
receivable agreement liability at the above described effective tax
rates for each quarter.
|
|
|
(9)
|
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 per share)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
(Unaudited)
|
|
(Unaudited)
|
Diluted weighted
average Class A Common shares outstanding
|
1,971,741,764
|
|
1,991,267,972
|
|
1,973,624,016
|
|
132,100,103
|
Assumed pro forma
conversion of Class D shares (1)
|
—
|
|
—
|
|
—
|
|
1,858,812,080
|
Adjusted diluted
weighted average shares outstanding
|
1,971,741,764
|
|
1,991,267,972
|
|
1,973,624,016
|
|
1,990,912,183
|
|
|
|
|
|
|
|
|
Adjusted Net (Loss)
Income
|
$
(67)
|
|
$
921
|
|
$
226
|
|
$
2,726
|
Adjusted Diluted (Loss)
Earnings Per Share
|
$
(0.03)
|
|
$
0.46
|
|
$
0.11
|
|
$
1.37
|
(1)
|
Reflects the proforma
exchange and conversion of non-dilutive Class D common stock to
Class A common stock. For the six months ended June 30, 2021, Class
D
common shares were anti-dilutive and therefore included in the
proforma conversion of Class D shares in the table above. For the
three and six months ended June
30, 2022 and the three months ended June 30, 2021, Class D common
shares were dilutive and are included in the dilutive weighted
average Class A common shares
outstanding in the table above.
|
Adjusted EBITDA
Reconciliation ($ amounts in millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
(Unaudited)
|
|
(Unaudited)
|
Net
income
|
$
60
|
|
$
1,037
|
|
$
1,096
|
|
$
3,814
|
Interest and
amortization expense on non-funding debt
|
38
|
|
35
|
|
77
|
|
71
|
Income tax
provision
|
19
|
|
24
|
|
45
|
|
90
|
Depreciation and
amortization
|
25
|
|
21
|
|
46
|
|
36
|
Share-based
compensation expense (1)
|
61
|
|
41
|
|
128
|
|
83
|
Change in fair value
of MSRs due to valuation assumptions (net of
hedges) (2)
|
(267)
|
|
122
|
|
(1,006)
|
|
(377)
|
Litigation accrual
(3)
|
—
|
|
—
|
|
—
|
|
15
|
Career transition
program (4)
|
61
|
|
—
|
|
61
|
|
$
—
|
Change in Tax
receivable agreement liability (5)
|
(24)
|
|
—
|
|
(24)
|
|
—
|
Adjusted
EBITDA
|
$
(27)
|
|
$
1,279
|
|
$
423
|
|
$
3,731
|
(1)
|
The three and six
months ended June 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 of
MSRs.
|
|
|
(3)
|
Reflects legal accrual
related to a specific legal matter.
|
|
|
(4)
|
Reflects net expenses
associated with compensation package, healthcare coverage, career
transition services, and accelerated vesting of certain equity
awards.
|
|
|
(5)
|
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 which management believes provide useful
information to investors. 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 revenue, net income, or any other
operating performance measure calculated in accordance with GAAP.
Other companies may define our 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 before share-based
compensation expense, the change in fair value of MSRs due to
valuation assumptions (net of hedges), a litigation accrual, 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 before interest and amortization expense on non-funding
debt, income tax, and depreciation and amortization, net of the
change in fair value of MSRs due to valuation assumptions (net of
hedges), share-based compensation expense, a litigation accrual,
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
allows us to add back certain cash and non-cash charges, and deduct
certain gains that are included in calculating Total revenues, net,
Net income attributable to Rocket Companies or Net income. 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. In the first and
second quarter of 2022, we revised our definition of Adjusted Net
Income (Loss) and Adjusted EBITDA to also exclude the cash portion
of share-based compensation expenses and the career transition
program, respectively, as these expenses do not directly affect
what we consider to be our core operating performance. Comparative
periods presented to the extent impacted were updated.
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. Some of these limitations
are: (a) they do not reflect every cash expenditure, future
requirements for capital expenditures or contractual commitments;
(b) Adjusted EBITDA does not reflect the significant interest
expense or the cash requirements necessary to service interest or
principal payment on our debt; (c) although depreciation and
amortization are non-cash charges, the assets being depreciated and
amortized will often have to be replaced or require improvements in
the future, and Adjusted Revenue, Adjusted Net (Loss) Income and
Adjusted EBITDA do not reflect any cash requirement for such
replacements or improvements; and (d) they are not adjusted for all
non-cash income or expense items that are reflected in our
Condensed Consolidated Statements of Cash Flows. We compensate for
these limitations by using our non-GAAP financial measures along
with other comparative tools, together with U.S. GAAP measurements,
to assist in the evaluation of operating performance. See below for
reconciliation of our non-GAAP financial measures to their most
comparable U.S. GAAP measures.
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 Auto,
Rocket Loans, Rocket Money (formerly known as Truebill), Rocket
Solar, Rocket Mortgage Canada (formerly known as Edison Financial),
Lendesk, Core Digital Media, Rocket Central and Rock
Connections.
Rocket Companies' mission is to be the best at creating
certainty in life's most complex moments so that its clients can
live their dreams. The Company helps clients achieve the dream of
home ownership and financial freedom through industry-leading
client experiences powered by its simple, fast and trusted digital
solutions. Rocket Companies ranked #7 on Fortune's list of the "100
Best Companies to Work For" in 2022 and has placed in the top third
of the list for 19 consecutive years. For more information, please
visit our Corporate Website or Investor Relations Website.
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.
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. We previously
referred to "sold" loans as "funded" loans. 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.
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SOURCE Rocket Companies, Inc.