Rocket Companies, Inc. Q4 FY2024 earnings call

Varun mentioned that the past year saw the company executing a strategic evolution, realigning resources and focusing on homeownership. The financial performance was strong, with 365,000 clients helped achieve homeownership or leverage home equity. The Rocket Superstack platform advantage, consisting of an end-to-end ecosystem, proprietary AI-driven technology, seamless multi-channel experience, and iconic brand, powered growth. The ecosystem's origination and servicing flywheel was key, with industry-leading recapture rates. In origination, volume grew nearly 30% year-over-year, driven by purchase and home equity loan growth, with innovative products like One+ and Welcome Home RateBreak. In technology, Navigator AI-driven workflow platform usage doubled quarter-over-quarter, and Rocket Logic loan origination system improved efficiency. Rocket.com and mobile apps offered a seamless digital experience, and the brand was reshaped with a Super Bowl ad to enhance awareness.

In the fourth quarter, adjusted revenue reached $1.2 billion, which was at the high-end of the guidance range, representing a 34% year-over-year growth. For the full-year 2024, adjusted revenue grew 30% to $4.9 billion. Adjusted EPS was $0.04 per share in the fourth quarter and $0.23 for the full year. The adjusted EBITDA margin was 18%, up from 2% the prior year. Purchase remained the focus for growth with no single player holding more than a single-digit market share, and the company grew purchase market share year-over-year by 8%. By the end of 2024, the servicing portfolio grew to $593 billion in unpaid principal balance, a 17% increase from 2023, and added 308,000 new servicing clients, bringing the total to 2.8 million clients.

The company expects adjusted revenue in the first quarter to be in the range of $1.175 billion to $1.325 billion, with the midpoint representing roughly 7% year-over-year growth and continued market share gains. Total expenses in the first quarter are expected to increase by $100 million year-over-year, driven by variable cost increase, marketing spend, and brand restage-related expenses. It is believed that the 2025 market size will be 10%-15% larger than 2024, and the company is confident in capturing a larger market share, with positive signs in the first quarter like purchase pipeline growth and VALs increase.

The call includes forward-looking statements subject to risks and uncertainties in SEC filings, where actual results may differ materially from expectations.

Q: Jeff Adelson asked about the first quarter revenue guide and 2025 growth outlook.

A: Varun and Brian responded that there are optimistic signs in the market, the first quarter guide is based on volume growth, gain on sale margins are consistent with the fourth quarter, and the 2025 market size is expected to expand, with the company confident in capturing market share.

Q: Ryan McKeveny asked about early indicators of brand restage and Rocket.com.

A: Varun and Brian responded that brand awareness has increased, early results of Rocket.com have exceeded expectations, such as positive Harris Poll results and good website usage metrics.

Q: Ryan McKeveny asked about the drivers of the fourth quarter outperformance and AI efficiency.

A: Brian responded that AI drives efficiency, with 47% volume growth in the fourth quarter 2024, staff reduction, and AI bringing operational leverage.

Q: Ryan Nash asked about operating costs and market share acquisition opportunities.

A: Brian and Varun responded on cost composition and brand restage-related expenses, and the company is acquiring market share in purchase business through expanding coverage, simplifying processes, and AI automation.

Q: Mark DeVries asked about the channels for market share acquisition in purchase business.

A: Brian responded that it comes from retail and partner channels, and the cross-channel strategy is an advantage.

Q: Mark DeVries asked about preparedness for transition from closed end second mortgages to cash-out first lien refis.

A: Brian responded that the closed end second mortgage business is still vibrant, and new clients bring future opportunities.

Q: Derek Sommers asked about the impact of AI investment.

A: Varun responded that AI investment affects both topline growth and bottomline efficiency, and has brought results like document processing automation and client re-engagement to increase lock volume.

Q: Derek Sommers asked about the bulk MSR market transaction situation and capital allocation priority.

A: Brian responded that the company is positive about bulk MSR market transactions and it is an important capital allocation priority.

Q: Doug Harter asked about the performance of acquired pools in the refinance wave and comparison with Rocket.com clients.

A: Brian responded that the acquired pools performed better than expected in the refinance wave, and the retention rate of inorganic acquisitions exceeded expectations.