Rocket Companies—which recently acquired Redfin and is currently undergoing the acquisition of Mr. Cooper—continued to see high earnings results during its second quarter, as noted during its earning call July 31.
Rocket CEO Varun Krishna noted that he believes they are “building a foundation for infinite capacity at Rocket, where our growth is supercharged by AI, and human capacity is no longer a limiting factor.”
The company’s AI-powered capabilities is estimated to save its operations team over 20,000 hours annually. More than 80% of clients now choose to continue their application over AI chat, noted Krishna.
“What’s more is, clients who begin their journey in AI chat convert at three times higher rates for purchase applications and 2.5 times higher for refinance applications, compared to those who don’t use chat,” he added.
Touching on the Redfin acquisition, Krishna said that, despite being in the early days, things are moving at a rapid pace.
“Within our first month, we executed a comprehensive brand update designed to bring a unified look to our digital presence. Today, Redfin’s digital pages carry the unified Redfin, powered by Rocket co-brand,” he said. “We also made homebuying easier by introducing pre-qualification buttons on every home listing, allowing clients to take action seamlessly.”
He also touched on ‘Rocket Preferred Pricing,’ which gives qualified clients who finance with Rocket Mortgage and work with a Redfin agent a one point rate deduction in their first year, or up to $6,000 in closing credits.
Since the official acquisition on July 1, over 65 Redfin clients have closed on a home with Rocket Mortgage. Additionally, in the first three weeks following the acquisition, nearly 200,000 people have clicked on the pre-qualified button within Redfin.
The team remains on track to close on the Mr. Cooper deal within the fourth quarter, Krishna noted.
Strong performance despite market headwinds
The company reported a Q2 adjusted revenue of $1.34 billion, which beat the high end of the company’s guidance range and achieved 9% year-over-year growth, noted Rocket CFO Brian Brown.
Net rate lock volume exceeded $28 billion, up 13% from last year. On an adjusted EBIDTA basis, the company delivered $172 million, a 13% adjusted EBIDTA margin. Adjusted net income was reported at $75 million and adjusted, diluted EPS came in at four cents.
“We delivered these results despite ongoing market headwinds. As we noted last quarter, extreme volatility in April delayed the start of the spring home-buying season,” Brown added. “As a result, our purchase volume grew sequentially from April to June. Refinance volume was also a bright spot with home equity loans doubling year-over-year.”
Brown noted that the market is gradually rebalancing in favor of homebuyers, with 11 of the 50 largest metro areas experiencing softening home prices, with the income needed to buy a home declining.
In the second quarter, Rocket discontinued two business lines: Rocket Mortgage Canada and the Rocket VISA Signature Card, primarily to “double-down” on the homeownership platforms, added Brown.
Although Brown did not go into the details of layoffs, he did note a restructuring of G&A teams supporting the mortgage origination business.
“These changes were a result of our investments in AI and automation, which have allowed us to reduce redundant roles and retire legacy workflows,” he said. “We expect these actions to collectively deliver approximately $80 million in annualized savings, the majority of which will be recognized on a full-quarter run-rate basis starting in Q4.”
Looking ahead to the third quarter, inclusive of Redfin, Brown reports that Rocket is expecting adjusted revenue to be between $1.6 billion and $1.75 billion. On a Rocket-standalone basis, expected adjusted revenue is between $1.325 billion and $1.475 billion.
