On trend with complications in the mortgage industry throughout 2022, Rocket Companies, the parent of Rocket Mortgage, saw losses year-over-year and quarter-over-quarter, but still reported a positive net income for 2022 overall.
“Last year marked a period of transformation for Rocket. We right-sized our business to respond to a challenging market; we also made key investments to serve our clients better on every step of their homeownership journey,” said Jay Farner, CEO of Rocket Companies. “With foundational pieces of our client engagement program in place, we are focused on expanding our top of funnel, lifting conversion and lowering our client acquisition cost, with the ultimate goal of growing our purchase marketshare and extending client lifetime value.”
Rocket reported a total revenue of $481 million for Q4, and saw a net loss of $493 million, according to the company’s latest earnings report. This is a steep drop from their reported revenue of $1.3 billion in Q3, and well below the $2.6 billion from Q4 2021. Total adjusted revenue registered at $683 million, and adjusted net loss was $197 million.
Mortgage origination was also down from Q3, slightly dropping from $25.6 billion to $19 billion. However, despite this and other negatives, Rocket reduced total expenses by $202 million from Q3 to Q4, higher than their initial expectations of $50 to $100 million.
Along with expense reductions, Q4 also saw Rocket’s servicing book unpaid principal balance grow to $535 billion. Their servicing portfolio was at 2.5 million clients and generated approximately $1.5 billion of recurring servicing fee income.
As for 2022 as a whole, while Rocket saw a positive net income of $700 million and a positive adjusted EBITDA of $59 million, the company saw a significant loss of revenue compared to 2021, dropping more than half from $13 billion in 2021 to $5.8 billion in 2022. Mortgage origination was also down year-over-year, from $351.2 billion in 2021 to $133.1 billion. Total adjusted revenue was $4.6 billion, and the adjusted net loss came to $137 million.
“2022 was a challenging year for the housing and mortgage industry, and one defined by rapid change. Over the past 12 months, eight increases in the Fed funds rate intended to reign in high inflation led to a sharp rise in mortgage rates,” said Farner. “With the volatility and increased cost of financing, demand for rate and term refinance transactions shrink significantly while housing affordability and consumer concerns about looming recession weighed heavily on the home purchase market. Despite this backdrop, we continue to invest in innovative technology and programs to serve our clients better and to capture the immense opportunity.”
More positively, Rocket executives reported that they “Executed a disciplined and prudent approach to cost management and reduced overall cost structure by nearly $3 billion on an annualized basis, comparing Q4 2021 to Q4 2022, or more than 40% of total cost base.”
Additionally, the company reported total liquidity of about $8.1 billion, which includes $3.3 billion of available cash, $3.1 billion of undrawn lines of credit and $1.7 billion of undrawn MSR lines.
While 2022 was challenging financially, there were wins in many other facets of business that give executives a positive outlook on the future.
Rocket Accounts reached 25.4 million total accounts as of the end of December, the loyalty program Rocket Rewards has shown strong adoption and engagement since its launch in October 2022, and net client retention rate was 95%.
“Despite a challenging environment in 2022, we are proud of what we achieved as an organization, and advanced our ability to serve our clients better in 2023 with key pieces of our platform in place to gain share in the purchase market and extend client lifetime value,” said Chief Financial Officer and Treasurer Brian Brown.
2023 also started out strong, with Rocket Money taking the top Finance spot in the iOS app store and reaching Top 10 in the overall, as well as having a record month of premium member growth in January 2023, the highest in its eight-year operating history. Rocket expects an adjusted revenue of between $700 million to $850 million for Q1 2023.
“As we entered 2023 with key pieces of our client engagement program now in place, we can tap our sizable and growing Rocket account space to succeed in a purchase heavy market,” concluded Farner. “Most importantly, I’m grateful to our leadership team and our team member’s dedication to always putting our clients first. We are executing on our strategy, and we remain focused on fulfilling our mission to be the best at creating certainty in life’s most complex moments so that our clients can live their dreams.”
