After seeing a revenue that was well down from 2022 and company projections in Q1, Rocket Companies ramped up business and reported much stronger earnings in Q2, putting them back on track for 2023. This win comes right after the company announced a shift in leadership, with CEO Bob Walters retiring and Varun Krishna taking over.
The company landed a total revenue of $1.236 billion, almost double the $666 million they saw last quarter. The adjusted revenue also grew, from $882 million last quarter to $1.002 billion in Q2. In keeping with the success, the net loss the company saw dropped dramatically, from $111 million last quarter to only $33 million in Q2.
“Rocket’s performance in the second quarter demonstrates the strength of our business and our commitment to delivering superior client service through innovation,” said Rocket Interim CEO Bill Emerson. “In Q2, against the backdrop of housing affordability and inventory challenges, we reported adjusted revenue that exceeded the high end of our guidance range, and profitability on a net income and Adjusted EBITDA basis. These results are reflective of our continued focus on operating a growing and efficient business.”
More success across the board, Rocket Mortgage reported that they generated $22 billion in mortgage origination closed loan volume, up from the $17 million seen last quarter. The gain on sale margin was up, from 2.39% last quarter to 2.67% in Q2. In addition, Rocket gained purchase marketshare in the quarter, both year-over-year and quarter-over-quarter.
“We’re encouraged by the improving trend in our results, and we’re excited to be back in a position of growth and profitability. We have been diligent in prioritizing our resources, focusing on operational efficiency and trimming our cost structure,” said Rocket Chief Financial Officer Brian Brown. “Our efforts to streamline our costs have been ongoing and span across expense categories, including our recently executed voluntary career transition plan in addition to other third-party-related cost-reduction efforts.”
The other numbers:
- Total liquidity was approximately $8.6 billion, up from $8.1 billion last quarter, which includes:
- $0.9 billion of cash on-hand (flat from last quarter)
- $2.9 billion of corporate cash used to self-fund loan originations (up from $2.4 billion last quarter)
- $3.1 billion of undrawn lines of credit (flat from last quarter)
- $1.7 billion of undrawn MSR lines (up from $1.5 billion last quarter)
- Servicing book unpaid principal balance was $504 billion, down from $524.8 billion last quarter.
- The servicing portfolio includes 2.4 million loans serviced, down from 2.5 million last quarter, and generates approximately $1.4 billion of recurring servicing fee income on an annualized basis, down from $1.5 billion last quarter.
- Net client retention rate was 97% over the 12 months ending June 30, 2023.
- The number of Rocket accounts grew to 29.3 million as of the end of June, up nearly 2 million compared to the end of March.
- Anticipated annualized cost savings of $150 million to $200 million.
Executives attribute the company’s success to their BUY+ and ONE+ initiatives, as well as “robust consumer demand for homes.”
“These unique products, along with our focus on delivering a great client experience, have driven the growth we’ve seen in purchase approval letters, which are up nearly 20% in the second quarter of 2023 compared to the first quarter, far outpacing historical trends,” said Emerson. “We believe the increases we’re seeing in this important metric are the result of the investments we’ve made in the purchase experience for both our clients and real estate agents that work with them.”
Additionally, Rocket executives stated that they feel being named No. 1 in the nation in J.D. Power’s 2023 study for client satisfaction and mortgage servicing for the ninth year in a row helps their business by attracting clients due to their “enduring commitment to the client experience.”
Looking forward, in Q3 2023, executives expect adjusted revenue between $850 million and $1 billion.