Rocket Companies’ revenue exceeded all Q2 predictions, overcoming the mortgage and housing market challenges, as reported in their Q3 2023 earnings report released on Thurs., Nov. 2.
After announcing a shift in CEOs in Q2—CEO Bob Walters retiring and Varun Krishna taking over—the company’s revenue turned course and saw large growth. Now, the trend is continuing in Q3 with another quarter of high revenue.
“I am very proud of our team for delivering strong results against a challenging economic backdrop,” said Krishna. “In today’s climate, innovation is essential. With the incredible amount of data in our ecosystem, paired with the transformative power of AI, Rocket is uniquely positioned to disrupt the industry. We’re just getting started and can’t wait to show you what we are building to revolutionize homeownership.”
Despite mortgage rates currently sitting only a fraction below 8%, and inventory still in significant crisis, Rocket Companies managed to thrive in Q3, reporting a total revenue of $1.203 billion and net income of $115 million. Adjusted numbers come in at $1.002 billion and $7 million, respectively.
“Our performance in the quarter was driven by marketshare gains as well as increases in both direct-to-consumer and partner network gain-on-sale margins,” said Rocket Chief Financial Officer Brian Brown. “This achievement is a result of a concerted effort that has spanned the winding down of underperforming businesses to a rigorous reprioritization of company initiatives to the implementation of a career transition program.”
The Q3 numbers:
- Generated $22.2 billion in mortgage origination closed loan volume. Gain on sale margin was 2.76%, the third consecutive quarter of gain on sale margin increase.
- Total liquidity was approximately $8.7 billion, as of Sept. 30, 2023, which includes $1 billion of cash on-hand, $2.8 billion of corporate cash used to self-fund loan originations, $3.3 billion of undrawn lines of credit and $1.7 billion of undrawn MSR lines.
- Servicing book unpaid principal balance was $506 billion. Servicing portfolio includes 2.4 million loans serviced and generates approximately $1.4 billion of recurring servicing fee income on an annualized basis.
- Acquired mortgage servicing rights on certain agency loans for total consideration of $103 million. The MSR acquisition added $6.2 billion of unpaid principal balance for loans with a weighted average coupon well above that of the current portfolio.
- Net client retention rate was 97%.
BUY+ and ONE+ continue to be a celebrated point of success for the company, both exceeding expectations. BUY+ has nearly doubled client loyalty by making them customers of both Rocket Mortgage and Rocket Homes, and ONE+ has nearly tripled mortgage closing volume.
Looking forward, in Q4 2023, Rocket executives expect an adjusted revenue of between $650 million and $800 million.
“The guidance takes into consideration difficult market conditions marked by record-low affordability and inventory levels, further magnifying the traditional low seasonality in the fourth quarter,” explained Brown.
In addition, executives also stated that a turn toward AI to help improve technology and processes within the company is coming in the future.
“I think really almost every aspect of the home-buying experience can, should and will be transformed with AI. We have made some progress in this space, and I’m really excited about the foundation, but I think we’re just scratching the surface,” said Krishna. “We’ve already begun expanding our AI capabilities. In a single year, we used AI to generate approximately 3.7 billion customer interactions and decisions. This is just the start.”
