- Generated Q1 net revenue of $2.7
billion and Adjusted Revenue of $1.9
billion1
- Delivered Q1 net income of $1.0
billion and Adjusted Net Income of $293 million1
- Achieved best Q1 purchase and cash-out refinance
originations in Rocket Companies' history
DETROIT, May 10, 2022
/PRNewswire/ -- Rocket Companies, Inc. (NYSE: RKT) ("Rocket
Companies" or the "Company"), a Detroit-based FinTech platform company
consisting of tech-driven real estate, mortgage and financial
services businesses – including Rocket Mortgage, Rocket Homes,
Truebill and Rocket Auto – today announced results for the quarter
ended March 31, 2022.
"Rocket delivered a solid performance in the first quarter and
achieved our best Q1 volume in purchase and cash out refinances,
even as rates rose rapidly. Now, as we move further into the year,
we will successfully navigate the mortgage and real estate
headwinds by protecting our margin and profitability while
continuing to invest in strategic areas such as technology,
partnerships and performance marketing to grow share and expand our
business for the long term," said Jay
Farner, Vice Chairman and CEO of Rocket Companies.
First Quarter Financial Summary1
ROCKET
COMPANIES
(Units in '000s, $
amounts in millions, except per share)
|
|
Q1-22
|
|
Q1-21
|
|
(Unaudited)
|
Total revenue,
net
|
$
2,671
|
|
$
4,539
|
Total
expenses
|
$
1,608
|
|
$
1,696
|
Net income
|
$
1,037
|
|
$
2,777
|
|
|
|
|
Adjusted
Revenue
|
$
1,931
|
|
$
4,040
|
Adjusted Net
Income
|
$
293
|
|
$
1,805
|
Adjusted
EBITDA
|
$
450
|
|
$
2,452
|
|
|
|
|
GAAP Diluted
EPS
|
$
0.40
|
|
$
1.07
|
Adjusted Diluted
EPS
|
$
0.15
|
|
$
0.91
|
(Units in '000s, $
amounts in millions)
|
|
|
Q1-22
|
|
Q1-21
|
Select Metrics
|
|
(Unaudited)
|
Closed loan origination
volume
|
|
$
53,977
|
|
$
103,525
|
Gain on sale
margin
|
|
3.01%
|
|
3.74%
|
Net rate lock
volume
|
|
$
49,614
|
|
$ 95,116
|
Amrock closings
(units)
|
|
168.3
|
|
348.8
|
Rocket Auto car sales
(units)
|
|
13.1
|
|
13.6
|
First Quarter Financial Highlights
During the first quarter of 2022:
- Generated total revenue, net of $2.7
billion and Adjusted Revenue of $1.9
billion, which represents a 41% and a 52% decline compared
to Q1'21 levels, respectively.
- Rocket Mortgage generated $54.0
billion in mortgage origination closed loan volume. Gain on
sale margin was 3.01% and included one-time benefits due to the
rapid move in bond markets, which increased gain on sale margin by
15 basis points.
- Generated net income of $1.0
billion and Adjusted Net Income of $293 million. Our net income margin was 39% and
our Adjusted Net Income margin was 15%.
- Achieved Adjusted EBITDA of $450
million and Adjusted EBITDA margin was 23%.
- Grew servicing book unpaid principal balance to $546 billion at March 31,
2022, roughly flat from December 31,
2021 and up 17% from March 31,
2021. As of March 31, 2022,
our servicing portfolio includes 2.6 million clients and generates
over $1.4 billion of recurring
servicing fee income on an annualized basis.
Company Highlights
Rocket Platform
- Rocket Mortgage achieved its best Q1 purchase and cash-out
refinance closed loan volume in company history in Q1 '22. Our
purchase volume grew 43% over Q1'21 levels, driven by our focus on
a superior, technology-driven client experience, product innovation
and our integrated, end-to-end home buying ecosystem.
- Rocket Mortgage net client retention rate was 92% over the 12
months ended March 31, 2022. There is
a strong correlation between this metric and client lifetime value,
and we believe our net client retention rate is unmatched among
mortgage companies and on par with some of the best performing
subscription business models in the world.
- Rocket Homes drove a first quarter record of 8,200 real estate
transactions and $2 billion of real
estate transaction value during Q1 '22, representing the value of
homes purchased and sold through our real estate agent
network.
- Rocket Auto, our automotive retail marketplace, generated a
first quarter record of $445 million
in gross merchandise value2 in Q1 '22, up $85 million, or 24% from Q1 '21.
- Truebill, the leading personal finance app that we acquired in
December 2021, and helps clients
manage their entire financial lives, increased its member base to
3.4 million in Q1'22, up 142% from Q1 '21. Of the 3.4 million
members, 1.7 million are premium paying members, up more than
double from Q1 '21.
- Rocket Solar currently facilitates transactions in 27 major
markets across 9 states, including Arizona, Florida and South
Carolina. A full public launch is slated for June 2022.
- Rocket Companies ranked #7 on Fortune's '100 Best Companies to
Work For' list. This marks the 19th consecutive year the Company
has ranked in the top 30 of this prestigious list.
Technology and Product
- As of March 31, 2022,
approximately 85,000 real estate agents have signed up for Rocket
Pro Insight (RPI), up from approximately 80,000 on December 31, 2021. RPI is our digital platform
for real estate agents to manage the entire mortgage process in
real-time, from application submission to closing.
- In April, Rocket Pro TPO launched the Fast 15 program, which
guarantees 15 business days to close for eligible purchase loans.
This commitment underscores the confidence we have in our ability
to close purchase loans and gives clients certainty in the home
buying experience.
Supporting Our Communities
- Rocket Mortgage announced its first partnership with a Major
League Baseball Team as the Exclusive Mortgage Partner of the
Detroit Tigers. Through this effort, Rocket Mortgage and the
Detroit Tigers are teaming up to support Connect 313 to help end
the digital divide in Detroit.
- Rocket Community Fund, a partner company, and the Gilbert
Family Foundation recently launched the Motor City Contractor Fund,
a $10 million pilot program that aims
to provide low-interest loans and technology and business advisory
services to ensure that Black, indigenous people and other people
of color who are contractors have equity in access to technical
support and capital.
Subsequent to March 31,
2022:
- As of May 6, 2022, Rocket
Companies repurchased 25.3 million shares cumulatively at an
average price of $14.16. In total, we
have returned $359 million to Class A
common stockholders under the $1
billion share repurchase program authorized in November 2020.
- Fitch recently placed our subsidiary, Rocket Mortgage, on
positive outlook with a BB+ rating. A positive outlook indicates an
upward trend with a view that the rating may be raised in the next
twelve to eighteen months to investment grade. Both Fitch and
Moody's now view Rocket Mortgage as a potential investment grade
company.
Second Quarter 2022 Outlook
We expect the following ranges in Q2 2022:
- Closed loan volume of between $35
billion and $40 billion.
- Net rate lock volume of between $31
billion and $38 billion.
- Gain on sale margins of 2.60% to 2.90%
Direct to Consumer
In the Direct to Consumer segment, clients have the ability to
interact with Rocket Mortgage online and/or with the Company's
mortgage bankers. The Company markets to potential clients in this
segment through various brand campaigns and performance marketing
channels. The Direct to Consumer segment derives revenue from
originating, closing, selling and servicing predominantly
agency-conforming loans, which are pooled and sold to the secondary
market. The segment also includes title insurance, appraisals and
settlement services complementing the Company's end-to-end mortgage
origination experience. Servicing activities are fully allocated to
the Direct to Consumer segment and are viewed as an extension of
the client experience. Servicing enables Rocket Mortgage to
establish and maintain long term relationships with our clients,
through multiple touchpoints at regular engagement intervals.
DIRECT TO
CONSUMER3
($ amounts in
millions)
|
|
Q1-22
|
|
Q1-21
|
|
(Unaudited)
|
Sold loan
volume
|
$
36,165
|
|
$
65,028
|
Sold loan gain on sale
margin
|
4.00%
|
|
5.36%
|
Revenue, net
|
$ 2,235
|
|
$
3,677
|
Adjusted
Revenue
|
$ 1,496
|
|
$
3,178
|
Contribution
margin
|
$
626
|
|
$
2,205
|
Partner Network
The Rocket Professional platform supports our Partner Network
segment, where we leverage our superior client service and widely
recognized brand to grow marketing and influencer relationships,
and our mortgage broker partnerships through Rocket Pro TPO. Our
marketing partnerships consist of well-known consumer-focused
companies that find value in our award-winning client experience
and want to offer their clients mortgage solutions with our
trusted, widely recognized brand. These organizations connect their
clients directly to us through marketing channels and a referral
process. Our influencer partnerships are typically with companies
that employ licensed mortgage professionals that find value in our
client experience, technology and efficient mortgage process, where
mortgages may not be their primary offering. We also enable clients
to start the mortgage process through the Rocket platform in the
way that works best for them, including through a local mortgage
broker.
PARTNER
NETWORK
($ amounts in
millions)
|
|
Q1-22
|
|
Q1-21
|
|
(Unaudited)
|
Sold loan
volume
|
$
26,033
|
|
$
40,729
|
Sold loan gain on sale
margin
|
0.91%
|
|
1.93%
|
Revenue, net
|
$
292
|
|
$
722
|
Adjusted
Revenue
|
$
292
|
|
$
722
|
Contribution
margin
|
$
172
|
|
$
543
|
Balance Sheet and Liquidity
We remain in a strong liquidity position, with total liquidity
of $7.7 billion, which includes
$2.3 billion of cash on-hand,
$2.1 billion of corporate cash used
to self-fund loan originations, a portion of which could be
transferred to funding facilities (warehouse lines) at our
discretion, $3.1 billion of undrawn
lines of credit from non-funding facilities, and $0.2 billion of undrawn MSR lines. As of
March 31, 2022, our available cash
position was $4.4 billion, which
includes cash on-hand and corporate cash used to self-fund loan
originations, combined with the $6.4
billion of mortgage servicing rights, representing a total
of $10.8 billion dollars of asset
value on our balance sheet. As of March 31,
2022, our total equity was $8.7
billion and reflects the impact of the special dividend of
$1.01 that was paid during the
quarter to Class A shareholders and funded through a $2.0 billion distribution.
BALANCE SHEET
HIGHLIGHTS
($ amounts in
millions)
|
|
March 31, 2022
|
|
December 31, 2021
|
|
(Unaudited)
|
|
|
Cash and cash
equivalents
|
$
2,311
|
|
$
2,131
|
Mortgage servicing
rights ("MSRs"), at fair value
|
$
6,410
|
|
$
5,386
|
Funding
facilities
|
$
6,470
|
|
$
12,752
|
Other financing
facilities and debt
|
$
5,722
|
|
$
5,994
|
Total equity
|
$
8,701
|
|
$
9,760
|
First Quarter and Full Year Earnings Call
Rocket Companies will host a live conference call at
4:30 p.m. ET on May 10, 2022 to discuss its results for the
quarter ended March 31, 2022. A live
webcast of the event will be available online by clicking on the
"Investor Info" section of our website. The webcast will also be
available via rocketcompanies.com.
A replay of the webcast will be available on the Investor
Relations site following the conclusion of the event. If you are
having issues viewing the webcast, please see the event help guide
at the link here.
Condensed
Consolidated Statements of Income
($ In Thousands,
Except Shares and Per Share Amounts)
|
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
|
(Unaudited)
|
Revenue
|
|
|
|
Gain on sale of loans
|
|
|
|
Gain on sale of loans excluding fair value of
MSRs,net
|
$
687,170
|
|
$
2,379,278
|
Fair value of originated MSRs
|
796,616
|
|
1,173,164
|
Gain on sale of loans,
net
|
1,483,786
|
|
3,552,442
|
Loan servicing income
(loss)
|
|
|
|
Servicing fee income
|
366,214
|
|
292,361
|
Change in fair value of MSRs
|
454,380
|
|
200,555
|
Loan servicing income
(loss), net
|
820,594
|
|
492,916
|
Interest income
|
|
|
|
Interest income
|
90,540
|
|
95,245
|
Interest expense on funding facilities
|
(41,696)
|
|
(67,844)
|
Interest income,
net
|
48,844
|
|
27,401
|
Other income
|
317,372
|
|
466,112
|
Total revenue,
net
|
2,670,596
|
|
4,538,871
|
Expenses
|
|
|
|
Salaries, commissions
and team member benefits
|
853,915
|
|
842,199
|
General and
administrative expenses
|
275,857
|
|
291,419
|
Marketing and
advertising expenses
|
328,058
|
|
320,843
|
Depreciation and
amortization
|
21,042
|
|
15,304
|
Interest and
amortization expense on non-funding debt
|
38,664
|
|
35,571
|
Other
expenses
|
90,603
|
|
190,365
|
Total
expenses
|
1,608,139
|
|
1,695,701
|
Income before income
taxes
|
1,062,457
|
|
2,843,170
|
Provision for income
taxes
|
(25,849)
|
|
(65,832)
|
Net income
|
1,036,608
|
|
2,777,338
|
Net income attributable
to non-controlling interest
|
(982,896)
|
|
(2,653,636)
|
Net income attributable
to Rocket Companies
|
$
53,712
|
|
$
123,702
|
|
|
|
|
Earnings per share of
Class A common stock
|
|
|
|
Basic
|
$
0.44
|
|
$
1.07
|
Diluted
|
$
0.40
|
|
$
1.07
|
|
|
|
|
Weighted average shares
outstanding
|
|
|
|
Basic
|
122,691,728
|
|
115,673,524
|
Diluted
|
1,975,379,132
|
|
122,011,916
|
Condensed
Consolidated Balance Sheets
($ In Thousands,
Except Shares and Per Share Amounts)
|
|
|
March 31,
2022
|
|
December 31,
2021
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
2,310,661
|
|
$
2,131,174
|
Restricted cash
|
77,027
|
|
80,423
|
Mortgage loans held for sale, at fair
value
|
10,685,144
|
|
19,323,568
|
Interest rate lock commitments ("IRLCs"), at fair
value
|
213,210
|
|
538,861
|
Mortgage servicing rights ("MSRs"), at fair
value
|
6,410,288
|
|
5,385,613
|
Notes receivable and due from affiliates
|
10,796
|
|
9,753
|
Property and equipment, net
|
260,042
|
|
254,376
|
Deferred tax asset, net
|
555,663
|
|
572,049
|
Lease right of use assets
|
414,201
|
|
427,895
|
Forward commitments, at fair value
|
667,908
|
|
17,337
|
Loans subject to repurchase right from Ginnie
Mae
|
1,490,804
|
|
1,918,032
|
Other assets
|
2,152,276
|
|
2,115,814
|
Total assets
|
$
25,248,020
|
|
$ 32,774,895
|
Liabilities and equity
|
|
|
|
Liabilities:
|
|
|
|
Funding facilities
|
$
6,469,607
|
|
$ 12,751,592
|
Other financing facilities and
debt:
|
|
|
|
Lines of
credit
|
—
|
|
75,000
|
Senior Notes,
net
|
4,023,861
|
|
4,022,491
|
Early buy out
facility
|
1,698,167
|
|
1,896,784
|
Accounts payable
|
288,860
|
|
271,544
|
Lease liabilities
|
468,693
|
|
482,184
|
Forward commitments, at fair
value
|
34,126
|
|
19,911
|
Investor reserves
|
80,759
|
|
78,888
|
Notes payable and due to
affiliates
|
29,656
|
|
33,650
|
Tax receivable agreement
liability
|
647,852
|
|
688,573
|
Loans subject to repurchase
right from Ginnie Mae
|
1,490,804
|
|
1,918,032
|
Other liabilities
|
1,314,339
|
|
776,714
|
Total liabilities
|
16,546,724
|
|
23,015,363
|
Equity
|
|
|
|
Class A common stock
|
1
|
|
1
|
Class B common stock
|
—
|
|
—
|
Class C common stock
|
—
|
|
—
|
Class D common stock
|
19
|
|
19
|
Additional paid-in
capital
|
241,458
|
|
287,558
|
Retained earnings
|
305,794
|
|
378,005
|
Accumulated other comprehensive
income
|
22
|
|
81
|
Non-controlling
interest
|
8,154,002
|
|
9,093,868
|
Total equity
|
8,701,296
|
|
9,759,532
|
Total liabilities and
equity
|
$
25,248,020
|
|
$ 32,774,895
|
Summary
Segment Results for the Three Months Ended March 31,
2022 and 2021,
($ amounts in
millions)
(Unaudited)
|
Three Months Ended March 31,
2022
|
Direct to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All Other
|
|
Total
|
Total U.S. GAAP
Revenue, net
|
$
2,235
|
|
$
292
|
|
$
2,527
|
|
$
144
|
|
$
2,671
|
Less: Increase in MSRs
due to valuation
assumptions (net of hedges)
|
(739)
|
|
—
|
|
(739)
|
|
—
|
|
(739)
|
Adjusted
Revenue
|
$
1,496
|
|
$
292
|
|
$
1,787
|
|
$
144
|
|
$
1,931
|
Directly attributable
expenses
|
869
|
|
120
|
|
989
|
|
119
|
|
1,108
|
Contribution
margin(1)
|
$
626
|
|
$
172
|
|
$
798
|
|
$
25
|
|
$
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
2021
|
Direct to
Consumer
|
|
Partner
Network
|
|
Segments
Total
|
|
All Other
|
|
Total
|
Total U.S. GAAP
revenue, net
|
$
3,677
|
|
$
722
|
|
$
4,400
|
|
$
139
|
|
$
4,539
|
Less: Increase in MSRs
due to valuation
assumptions (net of hedges)
|
(499)
|
|
—
|
|
(499)
|
|
—
|
|
(499)
|
Adjusted
Revenue
|
$
3,178
|
|
$
722
|
|
$
3,901
|
|
$
139
|
|
$
4,040
|
Directly attributable
expenses
|
973
|
|
180
|
|
1,153
|
|
65
|
|
1,218
|
Contribution
margin(1)
|
$
2,205
|
|
$
543
|
|
$
2,748
|
|
$
74
|
|
$
2,822
|
|
(1) We measure the
performance of the segments primarily on a contribution margin
basis. Contribution margin is intended to measure the direct
profitability of each segment and is calculated as Adjusted Revenue
less directly attributable expenses. Adjusted Revenue is a non-GAAP
financial measure described above. Directly attributable expenses
include salaries, commissions and team member benefits, general and
administrative expenses, and other expenses, such as direct
servicing costs and origination costs.
|
GAAP to non-GAAP
Reconciliations
Adjusted
Revenue Reconciliation ($ amounts in millions)
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
|
(Unaudited)
|
Total revenue,
net
|
$
2,671
|
|
$
4,539
|
Change in fair value of
MSRs due to valuation assumptions (net of hedges) (1)
|
(739)
|
|
(499)
|
Adjusted
Revenue
|
$
1,931
|
|
$
4,040
|
|
(1) Reflects changes in
assumptions including discount rates and prepayment speed
assumptions, mostly due to changes in market interest rates, and
the effects of contractual prepayment protection associated with
sales of MSRs.
|
Adjusted Net Income
Reconciliation ($ amounts in millions)
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
|
(Unaudited)
|
Net income attributable to Rocket
Companies
|
$
54
|
|
$
124
|
Net
income impact from pro forma conversion of Class D common shares to
Class A common shares (1)
|
984
|
|
2,654
|
Adjustment to the provision for income tax (2)
|
(242)
|
|
(641)
|
Tax-effected net income (2)
|
795
|
|
2,136
|
Share-based compensation expense
|
67
|
|
42
|
Change in fair value of MSRs due to
valuation assumptions (net of hedges) (3)
|
(739)
|
|
(499)
|
Litigation accrual (4)
|
—
|
|
15
|
Tax
impact of adjustments (5)
|
169
|
|
110
|
Other tax adjustments (6)
|
1
|
|
1
|
Adjusted Net Income
|
$
293
|
|
$
1,805
|
|
(1) Reflects net income
to Class A common stock from pro forma exchange and conversion of
corresponding shares of our Class D common shares held by
non-controlling interest holders as of March 31, 2022 and
2021.
|
|
(2) Rocket Companies
will be subject to U.S. Federal income taxes, in addition to state,
local and Canadian taxes with respect to its allocable share of any
net taxable income of Holdings. The adjustment to the provision for
income tax reflects the effective tax rates below, assuming the
Issuer owns 100% of the non-voting common interest units of
Holdings. The effective income tax rate for Adjusted Net Income was
25.21% for the three months ended March 31, 2022 and 24.87%
for the three months ended March 31, 2021.
|
|
(3) Reflects changes in
assumptions including discount rates and prepayment speed
assumptions, mostly due to changes in market interest rates, and
the effects of contractual prepayment protection associated with
sales of MSRs.
|
|
(4) Reflects legal
accrual related to a specific legal matter.
|
|
(5) Tax impact of
adjustments gives effect to the income tax related to share-based
compensation expense, change in fair value of MSRs due to valuation
assumptions and litigation accrual at the above described effective
tax rates for each period.
|
|
(6) Represents tax
benefits due to the amortization of intangible assets and other tax
attributes resulting from the purchase of Holdings units, net of
payment obligations under Tax Receivable Agreement.
|
Adjusted Diluted
Weighted Average Shares Outstanding Reconciliation ($ in millions,
except per share)
|
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
|
(Unaudited)
|
Diluted weighted
average Class A Common shares outstanding
|
1,975,379,132
|
|
122,011,916
|
Assumed pro forma
conversion of Class D shares (1)
|
—
|
|
1,868,855,039
|
Adjusted diluted
weighted average shares outstanding
|
1,975,379,132
|
|
1,990,866,955
|
|
|
|
|
Adjusted Net
Income
|
$
293
|
|
$
1,805
|
Adjusted Diluted
EPS
|
$
0.15
|
|
$
0.91
|
(1) Reflects the pro
forma exchange and conversion of non-dilutive Class D common stock
to Class A common stock. For the three months ended March 31, 2022,
class D common shares were dilutive and therefore are included in
the diluted weighted average Class A common shares outstanding in
the table above. For the three-months ended March 31, 2021, class D
common shares were non-dilutive and therefore included in the
assumed pro forma conversion of Class D shares in the table
above.
|
Adjusted EBITDA
Reconciliation ($ amounts in millions)
|
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
|
(Unaudited)
|
Net income
|
$
1,037
|
|
$
2,777
|
Interest and amortization expense on
non-funding debt
|
39
|
|
36
|
Income tax provision
|
26
|
|
66
|
Depreciation and amortization
|
21
|
|
15
|
Share-based compensation expense
|
67
|
|
42
|
Change in fair value of MSRs due to valuation assumptions
(net of hedges) (1)
|
(739)
|
|
(499)
|
Litigation accrual (2)
|
—
|
|
15
|
Adjusted EBITDA
|
$
450
|
|
$
2,452
|
(1) Reflects changes in
assumptions including discount rates and prepayment speed
assumptions, mostly due to changes in market interest rates, and
the effects of contractual prepayment protection associated with
sales of MSRs.
|
|
(2) Reflects legal
accrual related to a specific legal matter.
|
Non-GAAP Financial Measures
To provide investors with information in addition to our results
as determined by GAAP, we disclose Adjusted Revenue, Adjusted Net
Income, Adjusted Diluted EPS and Adjusted EBITDA as non-GAAP
measures which management believes provide useful information to
investors. These measures are not financial measures calculated in
accordance with GAAP and should not be considered as a substitute
for revenue, net income, or any other operating performance measure
calculated in accordance with GAAP, and may not be comparable to a
similarly titled measure reported by other companies.
We define "Adjusted Revenue" as total revenues net of the change
in fair value of mortgage servicing rights ("MSRs") due to
valuation assumptions (net of hedges). We define "Adjusted Net
Income" as tax-effected earnings before share-based compensation
expense, the change in fair value of MSRs due to valuation
assumptions (net of hedges), loss on extinguishment of Senior
Notes, a litigation accrual, Change in Tax receivable agreement
liability, and the tax effects of those adjustments. We define
"Adjusted Diluted EPS" as Adjusted Net Income divided by the
diluted weighted average number of Class A common stock outstanding
for the applicable period, which assumes the pro forma exchange and
conversion of all outstanding Class D common stock for Class A
common stock. We define "Adjusted EBITDA" as earnings before
interest and amortization expense on non-funding debt, income tax,
and depreciation and amortization, net of the change in fair value
of MSRs due to valuation assumptions (net of hedges), share-based
compensation expense, and a litigation accrual. We exclude from
each of these non-GAAP measures the change in fair value of MSRs
due to valuation assumptions (net of hedges) as this represents a
non-cash non-realized adjustment to our total revenues, reflecting
changes in assumptions including discount rates and prepayment
speed assumptions, mostly due to changes in market interest rates,
which is not indicative of our performance or results of operation.
We also exclude effects of contractual prepayment protection
associated with sales of MSRs. Adjusted EBITDA includes Interest
expense on funding facilities, which are recorded as a component of
Interest income, net, as these expenses are a direct cost driven by
loan origination volume. By contrast, interest and amortization
expense on non-funding debt is a function of our capital structure
and is therefore excluded from Adjusted EBITDA.
In the first quarter of 2022, we revised our definition of
Adjusted Net income and Adjusted EBITDA to also exclude the cash
portion of share-based compensation expenses, as these expenses do
not directly affect what we consider to be our core operating
performance. Comparative periods presented to the extent impacted
were updated. From time to time in the future, we may exclude other
items if we believe that doing so is consistent with the goal of
providing useful information to investors.
We believe that the presentation of Adjusted Revenue, Adjusted
Net Income, Adjusted Diluted EPS and Adjusted EBITDA provides
useful information to investors regarding our results of operations
because each measure assists both investors and management in
analyzing and benchmarking the performance and value of our
business. Adjusted Revenue, Adjusted Net Income, Adjusted Diluted
EPS and Adjusted EBITDA provide indicators of performance that are
not affected by fluctuations in certain costs or other items.
Accordingly, management believes that these measurements are useful
for comparing general operating performance from period to period,
and management relies on these measures for planning and
forecasting of future periods. Additionally, these measures allow
management to compare our results with those of other companies
that have different financing and capital structures. However,
other companies may define Adjusted Revenue, Adjusted Net Income,
Adjusted Diluted EPS and Adjusted EBITDA differently, and as a
result, our measures of Adjusted Revenue, Adjusted Net Income,
Adjusted Diluted EPS and Adjusted EBITDA may not be directly
comparable to those of other companies.
Although we use Adjusted Revenue, Adjusted Net Income, Adjusted
Diluted EPS and Adjusted EBITDA as financial measures to assess the
performance of our business, such use is limited because they do
not include certain material costs necessary to operate our
business. Additionally, our definitions of each of Adjusted
Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted
EBITDA allows us to add back certain non-cash charges and deduct
certain gains that are included in calculating Total revenues, net,
Net income attributable to Rocket Companies or Net income. However,
these expenses and gains vary greatly, and are difficult to
predict. They can represent the effect of long-term strategies as
opposed to short-term results. Adjusted Revenue, Adjusted Net
Income, Adjusted Diluted EPS and Adjusted EBITDA should be
considered in addition to, and not as a substitute for, Total
revenues, net, Net income attributable to Rocket Companies and Net
income in accordance with U.S. GAAP as measures of performance. Our
presentation of Adjusted Revenue, Adjusted Net Income, Adjusted
Diluted EPS and Adjusted EBITDA should not be construed as an
indication that our future results will be unaffected by unusual or
nonrecurring items.
Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and
Adjusted EBITDA have limitations as analytical tools, and you
should not consider them in isolation or as a substitute for
analysis of our results as reported under U.S. GAAP. Some of
these limitations are: (a) they do not reflect every cash
expenditure, future requirements for capital expenditures or
contractual commitments; (b) Adjusted EBITDA does not reflect the
significant interest expense or the cash requirements necessary to
service interest or principal payment on our debt; (c) although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will often have to be replaced or
require improvements in the future, and Adjusted Revenue, Adjusted
Net Income and Adjusted EBITDA do not reflect any cash requirement
for such replacements or improvements; and (d) they are not
adjusted for all non-cash income or expense items that are
reflected in our Condensed Consolidated Statements of Cash
Flows.
Because of these limitations, Adjusted Revenue, Adjusted Net
Income, Adjusted Diluted EPS and Adjusted EBITDA are not intended
as alternatives to Total revenue, net, Net income attributable to
Rocket Companies or Net income as an indicator of our operating
performance and should not be considered as measures of
discretionary cash available to us to invest in the growth of our
business or as measures of cash that will be available to us to
meet our obligations. We compensate for these limitations by using
Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and
Adjusted EBITDA along with other comparative tools, together with
U.S. GAAP measurements, to assist in the evaluation of operating
performance.
Forward Looking Statements
Some of the statements contained in this document are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements are generally identified by the use of words such as
"anticipate," "believe," "could," "estimate," "expect," "intend,"
"may," "plan," "potential," "predict," "project," "should,"
"target," "will," "would" and, in each case, their negative or
other various or comparable terminology. These forward-looking
statements reflect our views with respect to future events as of
the date of this document and are based on our management's current
expectations, estimates, forecasts, projections, assumptions,
beliefs and information. Although management believes that the
expectations reflected in these forward-looking statements are
reasonable, it can give no assurance that these expectations will
prove to have been correct. All such forward-looking statements are
subject to risks and uncertainties, many of which are outside of
our control, and could cause future events or results to be
materially different from those stated or implied in this document.
It is not possible to predict or identify all such risks. These
risks include, but are not limited to, the risk factors that are
described under the section titled "Risk Factors" in our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and other filings with the Securities and
Exchange Commission. These factors should not be construed as
exhaustive and should be read in conjunction with the other
cautionary statements that are included in this document and in our
SEC filings. We expressly disclaim any obligation to publicly
update or review any forward-looking statements, whether as a
result of new information, future developments or otherwise, except
as required by applicable law.
About Rocket Companies
Rocket Companies is a Detroit-based FinTech platform company
consisting of personal finance and consumer technology brands
including Rocket Mortgage, Rocket Homes, Amrock, Rocket Auto,
Rocket Loans, Truebill, Lendesk, Edison Financial, Core Digital
Media, Rocket Central and Rock Connections.
Since 1985, Rocket Companies has been obsessed with helping its
clients achieve the American dream of home ownership and financial
freedom. The Company offers industry-leading client experiences
powered by its simple, fast and trusted digital solutions. Rocket
Companies ranked #7 on Fortune's list of the "100 Best Companies to
Work For" in 2022 and has placed in the top third of the list for
19 consecutive years. For more information, please visit our
Corporate Website or Investor Relations Website.
1 "GAAP" stands for Generally Accepted Accounting
Principles in the U.S. Please see the sections of this document
titled "Non-GAAP Financial Measures" and "GAAP to non-GAAP
Reconciliations" for more information on the Company's non-GAAP
measures and its share count. Certain figures in the tables
throughout this document may not foot due to rounding.
2 Gross merchandise value includes the sales price of
vehicles sold plus vehicle-related product sales that were
generated during the period.
3 We measure the performance of the Direct to
Consumer and Partner Network segments primarily on a contribution
margin basis. Contribution margin is intended to measure the direct
profitability of each segment and is calculated as Adjusted Revenue
less directly attributable expenses. Directly attributable expenses
include salaries, commissions and team member benefits, general and
administrative expenses, and other expenses, such as direct
servicing costs and origination costs. A loan is considered "sold"
when it is sold to investors on the secondary market. We previously
referred to "sold" loans as "funded" loans. See "Summary Segment
Results" section later in this document and the footnote on
"Segments" in the "Notes to Consolidated Financial Statements" in
the Company's forthcoming filing on Form 10-Q for more
information.
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SOURCE Rocket Companies, Inc.