Rocket Companies, Inc.

Good afternoon. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Rocket Company's third quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. Sharon Ng, Vice President of Investor Relations. You may begin.

Good afternoon, everyone, and thank you for joining us for Rocket Company's earnings call covering the third quarter of 2022. With us this afternoon are Rocket Company CEO Jay Farner, our President and COO Bob Walters, and our Chief Accounting Officer Brian Brown. Before I turn things over to Jay, let me quickly go over our disclaimers. On today's call, we provide you with information regarding our third quarter 2022 performance, as well as our financial outlook. This conference call includes forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and the assumptions we mentioned today. We encourage you to consider the risk factors contained in our SEC filings for a detailed discussion of these risks and uncertainties. We undertake no obligation to update these statements as a result of new information or further events, except as required by law. This call is being broadcast online and is accessible on our IR website. A recording of the call will be posted later today. Our commentary today will also include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics or reported results can also be found in our earnings release issued earlier today, as well as in our filings with the SEC. And with that, I'll turn things over to Jay Farner to get us started. Jay?

Thank you, Sharon. And good afternoon. Welcome to the Rocket Company's earnings call for the third quarter of 2022. On today's call, I'll share how Rocket is executing on our strategy as we navigate these challenging market conditions and how we continue to invest in our future. We'll discuss how we're innovating to better serve our clients and partners, and I'll provide an update on the progress of the Rocket platform. Before we begin, I'd like to discuss the executive leadership changes that we announced last month. I want to thank our CFO, Julie Booth, who has been a tremendous leader during her 19 years with our organization, helping to guide the company through significant growth and expansion. I'm happy to say that Julie will continue to be with us as a strategic advisor. I'd also like to recognize Angela Vitale, who has recently transitioned from his role as general counsel and secretary. Angelo has worn many hats during his 25-year tenure at the company. In addition to being our general counsel, Angelo has also served as CEO, launching Rocket Central, and as longtime executive vice president. Despite all of that, Angelo is best known as someone our leadership team can go to for trusted advice and sound counsel. On today's call, I'm also introducing Brian Brown, our current chief accounting officer and incoming CFO and treasurer starting November 15th. Brian joined Rocket in 2014 and currently leads the accounting, finance, treasury, and procurement teams. Brian is deeply knowledgeable about our business and has worked as a member of our leadership team for many years. Brian led our operational efficiency efforts this year, helping to reduce our expenses by more than $2 billion on an annualized basis. Brian also played an instrumental role in our IPO and has done an excellent job with our ongoing engagement with the investment community. I'm looking forward to working with Brian in his new role as Chief Financial Officer to execute on our strategy and help lead Rocket into the future. I'm also excited to welcome Tina John to her new role as General Counsel. Tina joined us in 2020 following our IPO and brings extensive legal experience in securities, capital markets, corporate governance, and public company guidance to the leadership team. With that, I'd like to start by having a direct talk about the current state of the market. the mortgage industry continues to face challenging times. 30-year fixed mortgage rates have eclipsed 7%, the highest in decades. The 300-plus basis point increase this year has been the largest and fastest since 1982. Housing affordability is at a 30-year low, and weakening consumer sentiment is leading to a rapidly deteriorating home purchase market. While we typically see lower demand for purchase transactions in the fourth quarter, The sequential decline the industry is experiencing has been even more pronounced due to overall market weakness. According to the Mortgage Bankers Association, total mortgage applications are at the lowest levels since the mid-1990s, even lower than the 2008 financial crisis. Over the next several quarters, we expect to see significant separation between the well-capitalized players in the mortgage space, those who have clearly defined long-term strategic plans from those who don't. As we are seeing, significant capacity will continue to come out of the system. Further industry consolidation will take place, and those who aren't well capitalized will struggle with liquidity. In the end, only the strong will be left standing. These cycles are nothing new for Rocket. The company has experienced and successfully navigated through several significantly challenging time periods throughout a 37-year history. Each time, we've been nimble, pivoting and operating with flexibility and thoughtfulness that allow us to capitalize with every market shift. And each time, we've also invested heavily in strategies that provide us with a deep competitive advantage when the market corrects. As we continue through the current challenging cycle and when we ultimately emerge, we expect our robust capitalization and superior positions in brand, technology, data insights, client experience, and client engagement paired with the sheer scale of our existing client interactions to allow Rocket to further expand its market leadership. Housing will always be critical to the American economy. It's nearly 20% of U.S. GDP, and we believe there's a huge long-term opportunity for the winner in this industry. The investments we're making today will fundamentally disrupt and transform the way mortgages are done. from client acquisition to conversion to loan production. We will continue to lead and innovate and further widen the gap between Rocket and other mortgage lenders. In just 2022 alone, more than 2.4 million Americans have transacted with us on the Rocket platform, representing unique clients across homes, loans, Rocket money, and other businesses, showing the true depth and breadth of our reach. The home purchase market, which remains highly fragmented and inefficient, represents a significant opportunity for Rocket. A National Association of Realtors report showed that four in 10 homebuyers are now millennials. 75% of the clients who apply using Rocket's online platform or app are first-time homebuyers and or millennials. Rocket Money's clients also share similar demographics, and we continue to nurture and place them on the path to being future first-time homebuyers and Rocket Mortgage clients. In the past few quarters, we've responded quickly to our clients' needs in these challenging times of high inflation and volatile rates by bringing to market a slate of new innovative mortgage products. The fast rollout and relaunch of these products was made possible through the power of our platform and the collaborative efforts of our capital markets, product strategy, technology, and marketing teams. In September, we introduced our Inflation Buster program, which reduces a homebuyer's monthly mortgage payment by one percentage point in the first year of their loan. Inflation Buster gives homebuyers a reprieve when they need it most in their first year, when they have the highest housing-related expenses, such as moving costs and furnishing a home. Inflation Buster has resonated with homebuyers and pairs well with our rate drop advantage program, which covers many of the costs to refinance in the years ahead if rates fall. Last quarter, we placed renewed emphasis on our rate shield program, which gives our purchase clients confidence in a rising rate environment by locking in rates for 90 days while they search for a new home. Our home equity loan product has proven very popular for existing homeowners who are looking to tap the equity currently available in their house without sacrificing the favorable interest rates they have on their first mortgage. We are also innovating to better serve our enterprise partners. Last quarter, we announced a new partnership with Santan Dar, which went live in under 60 days. Mortgage volume through this partnership is ramping up quickly, with client applications outpacing initial projections. Over the next several quarters, we will extend our partnership to include full digital capabilities and additional client segments. Turning to our platform, the Rocket platform and its engagement tools are the engine that will expand the top of our funnel, lift conversion, and lower our cost to acquire new clients, thereby driving growth in revenue, and profitability over the long term. These tools allow us to keep our clients connected to and active within our brand until the moment they're ready to transact. This helps us eliminate the need to reacquire previous leads or compete directly for new leads, reducing our cost to acquire clients. Rocket can leverage the valuable insights we gain from our platform to make more personalized recommendations. Rocket Money, a key component of our platform, continues its impressive growth nearly doubling paid premium members year over year. To put the size of the opportunity into perspective, today we have more than 24 million Rocket accounts, the single sign-on solution for the entire Rocket ecosystem. With these accounts, we have deeper insights into our clients, allowing us to provide a much richer experience through our platform. Last week, we announced our new Rocket Rewards Loyalty Program, a key component of our platform. Rocket Rewards gives our clients points for taking certain actions, such as applying for a pre-qualified approval letter, utilizing mortgage affordability calculators, or reading informational articles about the home purchase process, ultimately helping to drive education and brand loyalty across the Rocket ecosystem. Early signs are very encouraging. Within the first 72 hours, over 70 million points were awarded to both new and existing Rocket clients for completing over 17,000 activities. While you may have seen membership or loyalty programs in other consumer industries, such as hotels, restaurants, travel, and e-commerce, this is an industry first, and we believe a game changer for Rocket. When we surveyed our clients, a resounding 88% told us they value a Rocket affiliated rewards program in a way that would encourage a long-term relationship with our brand. Rocket rewards will continue to create real value for first-time homebuyers where affordability is the biggest challenge to achieving their goals. With these 24 million Rocket accounts and robust engagement tools, such as Rocket Rewards and Rocket Money, we are building ongoing relationships with our clients, engaging with them, reducing our cost to acquire, and extending lifetime value. Our robust capitalization, our fortress balance sheet, and most importantly, our team members' incredible passion for building these experiences will allow us to not only weather the storm, but grow in today's environment and through the market recovery. The investments we're making today will create shareholder value as we capture opportunities in the financial services space, the mortgage market, and beyond. In these turbulent times, we remain focused on fulfilling our mission to be the best at creating certainty in life's most complex moments so that our clients can live their dreams. With that, I'll turn it over to Brian to go deeper into the numbers.