10-QPeriod: Q3 FY2021

Rocket Companies, Inc. Quarterly Report for Q3 Ended Sep 30, 2021

Filed November 9, 2021For Securities:RKT

Summary

Rocket Companies, Inc. reported its third-quarter 2021 financial results, showing a decrease in net income to $1.4 billion from $3.0 billion in the prior year's quarter. This decline was primarily attributed to a significant reduction in the gain on sale of loans, driven by lower gain on sale margins and a slight decrease in origination volume. While total expenses increased by 8.3%, largely due to investments in technology, talent, and marketing, the company maintained a strong balance sheet with total assets of $35.8 billion and total equity of $9.2 billion. Despite the year-over-year decrease in profitability, Rocket Companies demonstrated resilience. The company originated $88.0 billion in residential mortgage loans during the quarter, indicating sustained activity in the mortgage market. The servicing portfolio remained substantial at $521.3 billion in UPB. Rocket Companies also continued its share repurchase program, returning capital to shareholders, and highlighted its ongoing strategic investments in technology and diversified business lines beyond mortgage lending, positioning for future growth.

Financial Highlights

34 data points
Beta

Net Income

$75.34M

EPS (Diluted)

$0.54

Total Assets

$35.81B

Cash & Equivalents

$2.23B

Free Cash Flow

$748.60M

Financial Statements
Beta
Gross Profit$1.94B
Operating Expenses$1.69B
Net Income$75.34M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)137.66M
Shares Outstanding (Diluted)1.99B

Key Highlights

  • 1Net income for the quarter decreased to $1.4 billion from $3.0 billion in Q3 2020, primarily due to a 38.0% decrease in the gain on sale of loans.
  • 2Total revenue, net for the quarter was $3.1 billion, down from $4.6 billion in the prior year's quarter.
  • 3Residential mortgage loan originations were $88.0 billion for the quarter, a slight 1.1% decrease year-over-year.
  • 4Total expenses increased by 8.3% to $1.7 billion, driven by increased spending on salaries, marketing, and general administrative costs.
  • 5The company maintained a robust balance sheet with total assets of $35.8 billion and total equity of $9.2 billion as of September 30, 2021.
  • 6Rocket Companies continued its share repurchase program, buying back approximately 2.1 million shares for $35.6 million during the quarter.
  • 7The servicing portfolio remained significant, with $521.3 billion in UPB as of September 30, 2021.

Frequently Asked Questions

The primary driver for the decrease in net income was a significant reduction in the gain on sale of loans, net, which decreased by 38.0%. This was due to a tighter spread between primary and secondary mortgage rates, leading to lower gain on sale margins, and a slight decrease in origination volume.

Marketing and advertising expenses increased by 26.3% for the three-month period and 40.7% for the nine-month period compared to the prior year. This increase was attributed to investments in new national brand marketing campaigns, particularly with the reintroduction of live events, and increased performance marketing spend to support loan origination volume.

As of September 30, 2021, Rocket Companies had repurchased approximately 2.1 million shares for $35.6 million during the quarter. Approximately $956.1 million remained available under the $1.0 billion Share Repurchase Program authorized in November 2020.

The company monitors its MSR portfolio to optimize risk and return. During the third quarter of 2021, they sold the servicing on approximately 152,000 loans with $58 billion in UPB, but these sales were more than offset by new loans added to the MSR portfolio organically.