Rocket Companies, Inc. (RKT) Earnings

Management highlights

• Overall Market Context - The 2026 spring home buying season was far weaker than industry expectations, as rising mortgage rates through May and June worsened affordability, reducing both purchase and refinance demand. This was one of the toughest spring housing markets in recent history. Against this backdrop, Rocket delivered its most profitable quarter in four years, gaining market share in both purchase and refinance origination, and meeting all integration milestones ahead of schedule. - Rocket's core strategy is profitable market share growth, built on a diversified, integrated ecosystem model that delivers a stronger earnings floor in difficult markets and greater upside when market conditions improve. Competitors do not have the fully integrated combination of origination, servicing, top-of-funnel lead generation, and adjacent product lines Rocket has built. • Integration Progress - Integrations of Redfin and Mr. Cooper are running well ahead of plan. Rocket completed the industry's largest ever servicing migration in Q2 2026, bringing all servicing clients onto a single unified platform. As of Q2, the company is more than halfway to the annualized Mr. Cooper revenue synergy target, and has realized $100 million in annualized expense synergies, remaining on track to hit the full $400 million target by the end of 2026. Management now expects an additional $100 million in annualized expense synergies above the original target, to be realized in H1 2027. • Technology and AI Impact - Artificial Intelligence is deployed across every segment of the platform to improve productivity, client experience, and conversion. AI has reduced administrative work for loan officers, allowing each loan officer to serve 40% more clients year-over-year while delivering double-digit conversion improvements. Voice AI for servicing calls has handled over 1 million calls, with more than half resolved without a human specialist, freeing servicing experts to focus on complex client issues. Redfin's proprietary AI product improvements have increased lead conversion by ~30% over the past year. • Balance Sheet and Capital Strength - Rocket ended Q2 with $11.2 billion in total liquidity, up $1.8 billion from Q1. A successful $1.5 billion senior note offering was completed in June 2026, and net corporate leverage fell to 0.9x, 20% lower than year-end 2025. Rocket is the only publicly traded mortgage company with an investment grade credit rating and net leverage below 1x, giving it the ability to invest through market cycles while weaker competitors are forced to pull back. • MSR Portfolio Management - Rocket sold a portion of low-coupon MSRs at attractive market prices in Q2, but retained subservicing rights and full recapture economics for the sold loans. This sale rebalanced the portfolio toward higher average note rates, increasing the pool of clients likely to refinance when rates eventually fall.

Guidance

- Management expects the housing market to remain challenging in Q3 2026, with 30-year fixed mortgage rates reaching 6.8% (50 basis points higher than H1 2026 averages), pressuring affordability and leading to a smaller overall mortgage market than Q2 2026, which would be the first sequential quarterly market decline since 2022. - Adjusted revenue guidance for Q3 2026 is set at $2.5 billion to $2.7 billion, which management expects will deliver another quarter of market share gains in both purchase and refinance origination. - At the guidance midpoint, total Q3 expenses are expected to be ~$2.35 billion, including $110 million in intangible amortization, $90 million in stock-based compensation, and $100 million in one-time acquisition-related costs. Excluding these items, core expenses are expected to decline by $100 million sequentially from Q2, driven largely by realized Mr. Cooper integration synergies. - Rocket's long-term North Star goal of profitable market share growth remains unchanged regardless of near-term rate conditions. Management expects industry consolidation will accelerate in a sustained high-rate environment, and Rocket will be a primary beneficiary.

Segment performance

Rocket Company reports a diversified business model with over 70% of total revenue coming from recurring or less rate-sensitive segments, and 30% from rate-sensitive rate-and-term refinance. 1. Mortgage Servicing: Generated $1 billion in steady cash flow in Q2 2026. Ended the quarter with a $2 trillion unpaid principal balance (UPB) servicing portfolio, with 26% ($320 billion UPB) of owned MSRs carrying a note rate above 6%. It is the largest mortgage servicing portfolio in the U.S., providing durable recurring revenue and feeding the company's origination recapture engine. 2. Mortgage Origination: Total net rate lock volume was $47 billion, total closed loan volume was $49 billion. Gain-on-sale margin (excluding correspondent) was 311 basis points. Purchase origination held a 6.2% market share (up from 5.5% Q4 2025), and refinance origination held a 14.3% market share (up from 12.2% Q4 2025). Direct-to-consumer purchase volume grew 45% year-over-year. Existing servicing clients accounted for 57% of refinance close volume, up from 54% Q1 2026. 3. Redfin: Contributes high-intent purchase leads to Rocket's origination business. In June 2026, mortgage leads from Redfin doubled year-over-year, and the mortgage attach rate reached 47%, approaching the 50% synergy target. Redfin currently offers ~25,000 exclusive national listings, driving growing lead volume in key markets like Chicago. 4. Home Equity: Rocket is now the largest home equity lender in the U.S., with over $24 billion in total originations since launch four years ago, serving more than 250,000 homeowners. It is a core less rate-sensitive growth segment, drawing most volume from existing Rocket clients. 5. Rocket Loans: Personal loan volume nearly doubled year-over-year in the first half of 2026, with a record volume month in June 2026. Over half of loans originate from existing Rocket servicing clients. 6. RocketPro (Partner Ecosystem): Through the Compass partnership, RocketPro brokers originated over $2 billion in net rate lock volume as of Q2 2026.

Risks & headwinds

- Near-term industry risk is centered on high and rising mortgage rates worsening affordability, suppressing both purchase and refinance demand below earlier 2026 forecast levels. The 2026 expected housing recovery has not materialized as of Q2. - Competitors with narrow, undiversified business models (e.g., originations-only, no recapture capabilities, weak balance sheets) face greater pressure in the current high-rate environment, but any broad industry stress could create indirect market headwinds for Rocket. - All forward-looking statements about future performance, market share gains, and synergy realization are subject to inherent uncertainties that could cause actual results to differ materially from expectations, detailed in Rocket's existing SEC filings. Rocket undertakes no obligation to update forward-looking statements unless required by law.

Analyst Q&A

• Q: What macro backdrop is embedded in Q3 guidance, and is the $100 million sequential expense step-down a sustainable run rate going forward? /

  A: Q2 was weaker than industry forecasts, as we expected, and the soft market has continued into Q3, with higher rates pressuring volume. More than 70% of Rocket's revenue is less rate-sensitive, allowing us to keep investing while competitors react, which is a structural advantage. The $100 million sequential expense reduction is driven primarily by realized Mr. Cooper integration synergies, with a small portion from variable volume-related costs. Half of the original $400 million total synergy target has been realized as of Q2, with the remaining $200 million coming in H2 2026. Q3 guidance still points to another quarter of strong market share gains, with gain-on-sale margins holding steady or improving at the channel level.

• Q: Is Rocket's recent market share gain driven by competitor stress or its own strategic execution, and how is the RocketPro business performing? /

  A: The tough market is exposing weaknesses in competitors' narrow business models—originators-only are exposed to volume drops, servicers without recapture miss out on repeat transactions, and players without strong capital or technology face distress. This separation is accelerating, and Rocket's fully integrated model positions it to capture share. RocketPro's Compass partnership is performing well, with over $2 billion in net locks to date, and growing broker sign-up momentum. The network effect of the partnership brings more Compass agents and more brokers to RocketPro, driving further growth. Rocket's capital position (investment grade rating, $11 billion liquidity, <1x leverage) is a major competitive differentiator in the current environment.

• Q: What is the customer acquisition cost (CAC) for purchase loans from Redfin/Compass, how are incentives reflected in the P&L, and can correspondent continue contributing to share growth? /

  A: Refinance recapture loans have near-zero CAC, which is far lower than new client CAC. Purchase CAC varies by channel, but we target a consistent unit return across all channels. Preferred pricing incentives for clients come out of gain-on-sale margin, which functions as an acquisition cost, and we adjust to hit our target return. Correspondent had a strong quarter, and it is primarily used to grow the MSR portfolio. Rocket's industry-leading recapture rates for correspondent-acquired loans deliver better returns than competitors, allowing us to be more aggressive in this channel, so correspondent will continue supporting share growth going forward.

• Q: How is Rocket hedging its MSR portfolio, and do current peer hedging challenges change Rocket's strategy? /

  A: Rocket's hedge strategy is simple, consistent, and unchanged: it only aims to hedge interest rate volatility in the MSR asset, with no bets on future rate movements. Rocket uses only low-cost instruments like mortgage TBAs and treasury futures. Rocket's large recapture business provides a natural hedge that reduces the need for high derivative coverage ratios, lowering overall hedging costs. The strategy has performed well in both high and low rate environments.