Guild Holdings Company

Guild Holdings Company first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session with instructions to follow at that time. As a reminder, this call will be recorded. I would now like to turn the conference over to Investor Relations. Please go ahead.

Thank you and good afternoon everyone. Before we begin, I'd like to remind everyone that comments on this conference call may contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods and industry trends. These statements are based on the company's current expectations. Preliminary results for any portion of a quarter may not be indicative of full quarter results and are subject to management and auditor customary review procedures. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors that are described in greater detail under the section titled Risk Factors in GILD's most recently filed annual report on Form 10-K and in other reports subsequently filed with the U.S. Securities and Exchange Commission. Additionally, today's remarks will refer to certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures to the corresponding gap measures can be found in our earnings release, furnished today with the SEC, and are also available on Guild's Investor Relations website. I'd now like to turn the call over to our Chief Executive Officer, Terri Schmidt. Terri?

Good afternoon, everyone, and thank you for joining us today for our first quarter 2025 earnings call. With me today is David Nalen, our President and Chief Operating Officer and Amber Kramer, our CFO. Our results once again demonstrate the success of our growth strategy, our positive momentum in market share gains, and our ability to execute in every market cycle. I'm pleased to report in the first quarter we achieved 35% growth in originations year over year to $5.2 billion, while delivering positive adjusted EBITDA of $36.4 million and adjusted net income of $21.6 million. These results showcase the benefits of our strategy to invest through market downturns, and we continue to grow at a faster rate than the broader industry. Our year-over-year growth in originations reflects not only the Academy acquisition we made in the first quarter of last year, but also the organic recruiting efforts we've completed throughout the past year. Since the end of 2020, we have more than doubled our loan officer headcount. Our servicing business also continues to expand, now with more than $94 billion in our portfolio, despite market volatility. This homegrown portfolio provides financial stability, fuels our customers for life strategy, and gives our loan officers more at-bats with their past clients. We have built a model designed to perform in every market cycle, and we have successfully navigated multiple cycles throughout our history. Our consistent productivity improvements showcase this strength and deep experience as we continue to thrive, even as the broader market is experiencing prolonged volatility. We do not expect the current conditions to change in the short term, but we are all well positioned for success, even in today's uncertain landscape. As we look ahead, we are particularly pleased with our ability to leverage our balanced business model. Core platform advantages and the strength of our brand continue to drive our growth. While we do not control the market environment, we built a durable, balanced business model that should perform in all cycles. This includes our continued focus on purchase and distributed retail, which has proven to be a significant advantage in this rate environment. a servicing book that provides stability with consistent cash flows, integrated servicing recapture platform to create customers for life and deliver additional origination volume when refi and life events occur, robust product offering to deliver specialty programs for unique situations, continued organic growth as we benefit from industry consolidation and the strength of our brand in times of uncertainty, and prudent financial management and flexibility that position us to selectively pursue opportunistic acquisitions and further invest in our platform. Looking ahead, we believe we have positioned Guild for outperformance relative to the industry, regardless of the current market. We anticipate continued volatility, but we remain confident that we already have the balanced model needed for this environment. as we have spent decades building this business model to adapt to a variety of markets. We believe those who can be flexible and adjust in these conditions will be the winners, which is exactly how we have built our platform. We continue to capitalize on opportunities while remaining disciplined in our approach. Our focus remains consistent. Market share gains, operational efficiencies, new product development, organic recruiting, and opportunistic M&A. With that, I'd like to turn it over to David to provide more details on our operational achievements and outlook. David?

Thank you. As Terry highlighted, Guild has delivered another strong quarter, driven by our growth and operational improvements across the company, particularly in the origination segments. I'd like to spend just a few moments discussing how our execution of acquisitions and organic growth has resulted in tremendous progress in our origination performance, positioning us for continued success in the current market environment. As a result of our growth efforts, we have delivered consistent improvement in our origination segment, improving quarterly profitability by 21 million compared to the first quarter a year ago. This has been accomplished in three ways. First, we have added scale as Terry mentioned by successfully retaining loan officers who joined via acquisitions while also welcoming additional new loan officers through organic recruiting at a time when top producers are making a flight to quality. Second, our experience playbook and expertise with onboarding resulted in quickly achieving operational leverage as we grew. This can be attributed to disciplined integration efforts from our seasoned teams across the country. Finally, Guild's investments in superior technology, products, and sales coaching have delivered enhanced productivity for our loan officers. We have been seeing this positive impact over the past several quarters, and according to MMI records, loan officers at Guild on average experience 30% more productivity than the industry average. We believe this strategy and durable, balanced business model has created a foundation from which we will continue to benefit, even in this challenging and volatile market. Our outlook for the peak spring and summer home purchase market is cautiously optimistic. We believe our national footprint, community-driven origination teams, and customer for life servicing strategy are well suited for serving the needs of our customers in every market cycle. We are seeing strong early results and growing momentum to serve more first-time homebuyers through our Promise of Home educational events in major markets across the U.S. We also continue to invest in product and technology innovation that will position Guild to serve the homebuyer of the future. To summarize, we're pleased with our first quarter performance and remain confident in our strategic direction despite market volatility. We intend to continue to grow through organic recruiting and strategic acquisitions with a discipline focused on increased productivity for our loan officers and economies of scale in our business. We appreciate your continued interest and support of Guild, and we look forward to updating you on our progress in the coming quarters. I'll now hand over to Amber, who will provide a more detailed financial overview. Amber?

Thank you, David. Given a return to more traditional seasonal patterns in the mortgage industry, I will provide commentary on both sequential quarter and year-over-year comparisons. For the first quarter of 2025, we generated $5.2 billion of total loan originations compared to $3.9 billion in the prior year first quarter and $6.7 billion in the fourth quarter. Net revenue totaled $198 million compared to $232 million in the prior year and $373 million in the fourth quarter. which generated a net loss attributable to GILD of $24 million compared to a net income of $28 million in the prior year and $98 million in the fourth quarter. Adjusted net income was $22 million, or $0.35 per diluted share, and adjusted EBITDA was $36 million. Now turning to our origination segment, our net loss was $3 million compared to a net loss of $24 million in the prior year first quarter. This demonstrates the growth we have made as a business both through acquisitions and organic recruiting, our ability to capture originations across market environments, as well as the timing of our acquisition of Academy Mortgage in February of last year. Our gain on sale margin in the first quarter came in at 376 basis points compared to 364 basis points in the prior year first quarter and 317 basis points in the fourth quarter on funded originations. Gain on sale margins on pull-through adjusted locked volume was 316 basis points, up from 290 basis points in the prior year first quarter and 360 basis points in the fourth quarter. The uptick in Q1 is consistent with our historical experience, primarily due to seasonality and timing. Total pull-through adjusted locked volume was $5.9 billion compared to $4.6 billion in the prior year first quarter and $5.7 billion in the fourth quarter. For our servicing segment, our portfolio grew to $94 billion. We reported a net loss of $5 million compared to a net income of $84 million in the prior year first quarter and $152 million in the fourth quarter. The loss in this year's first quarter was primarily due to the downward valuation adjustment of MSRs of $70 million due to the period and interest rate declines. Our servicing portfolio continues to be a valuable source for ongoing cash flow future opportunities for loan recapture, and it reinforces our customer for life strategy. Furthermore, our business model, which combines the originations and the servicing segments, provides for a natural hedge over time as rate declines should translate into higher originations, both purchase and refinances. Our balance sheet remains strong and provides us with the flexibility to continue to invest in our growth. Turning to liquidity, as of March 31st, cash and cash equivalents totaled $112 million. while unutilized loan funding capacity was $1.5 billion, and the unutilized mortgage servicing rights lines of credit was $195 million, based on total committed amounts and borrowing base limitations. Maintaining a well-positioned balance sheet continues to be a key priority for GILD. Our leverage ratio was 1.6 times at quarter end, a strong indicator of our financial stewardship. Tangible net book value per share was $15.77. We are confident in our ability to navigate any market environment while simultaneously making strategic investments to enhance our long-term value proposition. In addition, we continued our efforts to return capital to shareholders. Specifically, during the first quarter, we repurchased approximately 35,000 shares at an average stock price of $12.94 per share. As of March 31st, 2025, there was $9.5 million remaining under the original $20 million share repurchase authorization. Additionally, as discussed on our last call, during the first quarter, the company's board of directors declared and paid a special cash dividend of 50 cents per share on the company's Class A and Class B common stock. In April, we generated $2.3 billion of loan originations and $2.5 billion of pull-through adjusted locked volume. As we look ahead, we recognize that market conditions may continue to show fluctuations, yet we're encouraged by our sustained momentum and growing market share, particularly the strength we're seeing in our originations business. Our strategic investments and platform development, combined with successful organic growth initiatives and targeted acquisitions, position us well to deepen our lasting customer relationships. While the broader market recovery continues to progress gradually, we remain patient and focus on our long-term vision. We have full confidence that our enhanced platform and strategic positioning will drive accelerated growth as market conditions normalize. And with that, we'll open up the call for questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the SAR keys. First question, Rick Shane with JP Morgan. Please go ahead.

Hey, everybody. Thanks for taking my questions. Look, it looks to me like the amortization expense on the MSR was down fairly sharply when you net out the marks. Can you help us understand that and sort of think about how to model that going forward? Because there were some pretty significant variants versus our model, given where we thought speeds were.

Amber, do you want to take that?

Yep. Yeah, overall, prepayments were down quarter over quarter. And so the payoff did go down slightly from a payoff percentage. And the rate is running off at the same in terms of value, but the payoffs were down overall. The service release percentage was 40%, so slightly higher when you're looking in your roll forward on the portfolio overall. So keep that in mind as well.

Got it. Okay. Yeah, I have the amortization expense down. Hang on one second. About 35% quarter over quarter. And I just didn't think speeds had moved that much.

They did with the refis in Q4 being up from October that we had. And so that has impacted some of the actual runoff percentages on the payoff side.

Got it. And so it's really a timing issue of when rates moved in the first quarter.

Right.

at the end. Okay, that actually makes sense to me. And then, look, I know you guys don't provide specific guidance, but curious as we sort of move, you know, we're pretty deep into second quarter now, what you guys are seeing in terms of margins and how we should be thinking about the dynamics currently.

Yeah, overall, we're not really, yeah, we're not really seeing any changes that are any different than what we've, you know, seen in the past. So we've talked about this 330 to 340. So although we don't provide guidance, if you look historically, we're still running around that. We had our gain on sale margins. We have the typical seasonality that we had in Q1 that was a pickup over Q4, which when you look back is the same as it's always been. It was exasperated by the market volatility in Q4 versus Q1. But overall, on average, we're still running around that same 330 to 340, and we don't see any changes that would affect that number.

Terrific. Thank you so much.

Next question, Don Fandetti with Wells Fargo. Please go ahead.

Hi. I was just curious if you're thinking of any impact to your business with the rocket acquisition of Redfin and Mr. Cooper. Obviously, you already have an origination and a pretty substantial servicing business, but is there anything that you are thinking about differently strategically?

You know, I think we've been focused on trying to engage the customer earlier in the process, which is exactly, you know, what we're trying to focus on with the Redfin transaction and as well as Cooper. So, you know, that I think we're continuing to look at and try to figure out ways that we can get to the top of the funnel faster. But, you know, we've been focused on, as you know, local presence, local fulfillment and sales, and specific to purchase business. And, you know, we still have such a big gap in the purchase business. And our studies that we've looked at still imply that a customer at the local level still has a good need for that local presence and expertise. And we've continued to build any type of surveys that we have The trust factor is huge for us, and we continue to rank very high in trust. So we feel like we're still in a really good position. And kudos to Rocket for the transaction. But I think we all have the type of customers that we're suited for. And for us, it's that first-time homebuyer that really needs you know, more handholding along the way. And our brand at the local areas that we serve, our brand is stronger than it's ever been. So we feel good about where we're at.

Thank you. Mm-hmm. Mikhail Goberman with Citizens JMP.

Please proceed.

Hi, good afternoon, and thanks for taking the question. I'm really kind of wondering what your thoughts are on growth going forward, organic versus acquisition in the latter case. What are your thoughts on sort of the landscape for potential acquisitions at the moment as you see it?

Thanks. Yeah, on the acquisition front, you know, we're always talking to a lot of suitors, I should say. but we're pretty selective to make sure that we get the right people once we make a decision to acquire, so it's a long process. Sometimes we're talking to people for six months, sometimes it's two years, so we're constantly out there looking and vetting and getting to know people and making sure that we make the right decision along the way. I would say that this first almost half of the year, the organic side of the equation for us has been stronger than the M&A, but we're constantly doing both. And like I said in the prior question, our brand is extremely strong. There's still a lot across the country that we can conquer. And so we're going to continue to work on growing the share.

Yeah, and this is David here. I would just add to Terry's comments that on the organic recruiting side, we're definitely seeing a little bit of a flight to quality, particularly as our percentage of purchase businesses continue to increase. Last year, we were at 88% versus the MBA average at 72%. And as I mentioned in some of my comments earlier, according to MMI records, the value proposition here at Guild Mortgage, whether it's via acquisition or through the organic recruitment, is very attractive and it's been proven out to show that loan officers at Guild on average experience 30% more productivity than the industry average. So we're having great success in both and heavily focused in both areas.

Great. Thank you all. Appreciate it.

Next question, Eric Hagan with BTIG. Please go ahead.

Hey, this is actually Jake on for Eric Hagan. Thanks for taking my questions. I wanted to see if you guys had any color on loan officer compensation rules, which might change with new rulemaking, and just how that could impact margins.

We haven't changed anything as far as, you know, our loan officer compensation. I think what you're going to see is with the change in the administration, you may see some originators taking different positions on comp. We're going to follow the regulations. I think some of those memorandums that the CFPB came out with prior, that those You know, there's interpretations there that I think maybe some will be a little bit more aggressive going forward with the changes. But, you know, we're pretty much status quo and don't see that that's going to be impactful for us or our competition.

Got you. Okay, thank you. And then, do you have any perspectives on home prices and the effect of tariffs on housing values And just kind of whether you see it driving a longer-term impact on asset valuations?

Yeah, the tariffs, I mean, I think we're still, the jury's out a little bit, and I think we'll know a lot more in the next 90 days. You know, obviously, I think the cost of construction is, you know, that's always a concern with new construction. And I think even today, this last 90 days, that the inventory of home building and homes that have been finaled, it's growing a little bit. So, I mean, we're seeing that the values have been pretty stable in a few markets. They're kind of declining a little bit. But we're not seeing that much change, and we don't see that that's going to impact our volume.

much either way, either up or down.

Great. Thank you.

I would like to turn the floor over to Terry Schmidt for closing remarks.

Thank you, everybody, for being on the call and listening to our performance. We're happy with what we accomplished in the first quarter, and we're looking forward to telling our story next quarter. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.