Rocket Companies Inc., the parent of Rocket Mortgage and several other mortgage and finance companies, is reporting a $1 billion profit for Q1, an increase from $865 million from the previous quarter, but saw year-over-year losses from $2.77 billion in Q1 2021—admittedly not an ideal report for the lending giant but one they say they’re prepared to navigate.
The company reports revenue of $2.61 billion last quarter, down from $4.54 billion in Q1 2021, as well as a decrease in loan origination volume—a sign of the times for an industry hit hard by interest rates shooting up this quarter, and inventory shortages that have bled over or even become more acute in 2022. Rocket also announced it would attempt to buy out around 1,000 employees.
In an earnings call Tuesday, CEO Jay Farner emphasized that Rocket was built to “navigate tough market conditions” and had plenty of cash on hand, but admitted that the company was tightening its belt going forward.
“We will be disciplined with expenses during this changing market. And in the second quarter…includ[ing] implementing a voluntary career transition program to certain team members, reducing our production costs, including renegotiating large vendor contracts and shifting our marketing spend. We continue to review every aspect of our cost structure and are committed to running an efficient and effective business,” he promised.
Gain on sale fell to 3.01% from 3.74% last year—something Farner said was at least partially due to “a few onetime benefits due to the rapid move in bond markets”—though Rocket still expects that number to fall more to around 2.75% next quarter.
In the release, Rocket emphasized positive cash-out refi numbers, with volume growing 43% year-over-year for those transactions, and a 92% client retention rate. The Rocket Pro Insight platform for real estate agents gained 5,000 sign ups this quarter, the company said.
“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,” the release stated.
A big emphasis for Farner in the conference call was profitability. Rocket’s net income fell from $2.77 billion in Q1 2021 to $1.04 billion last quarter, and an investor asked if the company could “stay profitable in the near term” amid cost-cutting measures.
“The first step in the process is that you’ve got to see that capacity that was built up to handle $4.5 trillion come out to more of a $2 trillion, $2.5 trillion market, which is I think where we think we’re going to be at,” Farner answered.
Another investor asked if Rocket might use some of its cash for acquisitions and try to fight back against a slump in purchase volume. Farmer seemed less inclined to this path, saying the company “continue[srbrack; to see traction in purchase.”
“So I feel very confident about our ability to organically grow purchases,” he said.
The company projected close loan volume to fall again next quarter, to between $35 and $40 billion from $54 billion this quarter.
The company’s stock fell almost 10% in early trading Wednesday following the release, but rebounded amid a broader market rally.