Rocket Companies, Inc.

of Investor Relations, you may begin. Good afternoon, everyone, and thank you for joining us for Rocket Company's earnings call covering the fourth quarter and full year 2024. With us this afternoon are Rocket Company CEO Varun Krishna and our CFO Brian Brown. Earlier today, we issued our fourth quarter and full year earnings release, which is available on our website at rocketcompanies.com under Investor Info. Also available on our website is an investor presentation. Before I turn things over to Varun, let me quickly go over our disclaimers. On today's call, we provide you with information regarding our fourth quarter and full year 2024 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 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 investor relations 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 for our reported results can 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 Varun Krishna to get us started. Varun?

Good afternoon, everyone, and welcome to Rocket Company's fourth quarter and full year 2024 earnings call. Today, I'll walk through three main topics, our performance over the past quarter and full year, our key investments and progress, And lastly, I'll comment a little bit on where we're headed looking forward. Reflecting on my first full year as CEO, I joined Rocket for the immense potential to build a legacy, one that's still unfolding and one that will transform homeownership forever. Over the past year, we kick-started this journey by executing a strategic evolution, realigning our resources, and sharpening our focus on homeownership. This transformation is powered by the dedication and passion of our team members. They are our heart, our mind, and our spirit, spearheading change, redefining possibility, and manifesting a better way to serve the homeowners of today and tomorrow. In service to this, we are executing with velocity to realize our ambition of helping everyone home. We see this in our financial results, and I'd like to start by calling out just a few highlights. We closed the year with very strong momentum. In Q4, we generated $1.2 billion in adjusted revenue at the high end of our guidance range, representing growth of 34% year over year. Adjusted EPS was 4 cents a share. Our full year of 2024 results reflect the same strong execution. Adjusted revenue for the year was $4.9 billion, a 30% year over year increase, Our focus on efficiency drove significant operating leverage, resulting in 18% adjusted EBITDA margin up from 2% the year prior, and adjusted EPS came in at 23 cents. While our financial results speak for themselves, the true impact lies in the 365,000 clients we've helped achieve homeownership or leverage their home equity. Behind every number is a life-changing moment the excitement of a new homeowner opening the door to their first home, or a family finding stability. Personally, this, the lasting impact of home ownership, is what truly matters. Our financial performance was driven by profitable market share growth, our North Star metric. Purchase remains our focus for growth, with no single player holding more than a single-digit market share. We grew our purchase share year over year through focused innovation and execution, improving every part of our business. And we are investing strategically to accelerate this growth. So what lies behind these numbers? It starts with what we call the rocket super stack, the platform advantage that fuels our growth and scale. It's built on four key layers, our end-to-end ecosystem, proprietary AI-driven technology, a seamless multi-channel experience, and the strength of our iconic brand. We continue to make progress on each layer, and I'd like to unpack some examples. Our ecosystem is the foundation of what makes Rocket unique, and its heart is our origination and servicing flywheel. The scale of both sides feed into and amplifies the other, allowing us to grow in non-linear ways. When we help clients become homeowners, it's just the beginning of our relationships. whether it starts with mortgage origination or servicing, every client interaction, whether answering a buyer's chat inquiry about affordability or providing immediate assistance after a natural disaster is a chance to strengthen that relationship. So we don't view our servicing portfolio as just a recurring cashflow asset. Each loan represents an opportunity to help a single mother own her first home or assist a family in paying for their child's college tuition or a hospital bill. This is what client first mentality means and it's what drives our industry leading recapture rates with clients returning to us at a rate three times higher than the industry average. In fact, 40% of our servicing clients have completed an origination transaction with us two or more times. Beyond our differentiated client approach, we've built a leading origination business with over 40 years of expertise. Scaling in both servicing and mortgage origination requires immense activation energy, not to mention a substantial ongoing investment in operational excellence and the continuous refinement of thousands and thousands of details over time at scale in 50 states. This creates a durable competitive advantage with our origination servicing flywheel serving as a foundational pillar of our long-term growth strategy. We've strategically expanded our servicing portfolio through self-origination, bulk acquisitions, and key partnerships. By the end of 2024, our portfolio reached $593 billion in unpaid principal balance, a 17% increase, while also welcoming 308,000 new servicing clients and bringing our total to 2.8 million. As our servicing capabilities grow, so does our origination business. With housing affordability being the biggest challenge for many first-time buyers, we are committed to innovating and delivering solutions that provide real relief. Our 1 plus 1% down and welcome home rate break programs helped us more than double the volume of affordability products in 2024 compared to 2023. Welcome home rate break lowers interest rates for eligible home buyers by 2% in the first year and 1% in the second. And in February, we expanded the program to offer a 1% rate reduction in year one to an even broader group, making homeownership more accessible and affordable. This month, we launched Rocket Rent Rewards, helping renters turn monthly payments into a path to homeownership. Many of the 44 million renters in the U.S. feel shut out of the housing market, and Rocket Rent Rewards completely changes that. Eligible renters can enjoy a promotional credit of up to 10% of their annual rent, which is a meaningful boost with the average two-bedroom rent at $1,800 per month or $22,000 per year. Both Welcome Home Rate Break and Rocket Rent Rewards are available through our retail bankers and wholesale broker partners. Next, let's talk about technology. Technology is the bedrock of our investment strategy, and it's at the very heart of our organization as well. It's what allows us to create magic to help our team members work smarter and in turn serve our clients and partners better. So let me share a few quick examples. I'll start by highlighting Navigator, our AI-powered workflow platform, which has become a force multiplier for our team members, streamlining workflows, cutting tasks from hours to seconds, and usage has doubled quarter over quarter. We have over a third of our team members now leveraging it. Without writing a single line of code, these teams have built more than 600 custom apps already, enabling fast, efficient development that boosts productivity and enhances client service. RocketLogic, our AI-powered loan origination system, is transforming both how we serve clients on the front end and how we underwrite loans on the back end. Over the past year, we've revolutionized the banker experience, equipping them with AI tools that make every client interaction more personalized and impactful. RocketLogic Assistant automates paperwork, follow-ups, and documentation, acting as every banker's personal AI. And RocketLogic Synopsys serves as a rich client repository, instantly providing insights so bankers can tailor each and every interaction. Beyond just the client interactions, RocketLogic is transforming underwriting by replacing tedious manual reviews with AI-powered automation. In 2024, we more than doubled automation rates for appraisal and asset verification, streamlining key steps while maintaining accuracy. Now, we are expanding this automation across both retail and wholesale channels to drive even greater efficiencies. The impact is clear. In Q4 2024, our bankers and operations teams served 54% more clients than the year before. Over the year, AI-driven automation and mortgage qualification alone saved 1 million hours of team member time, driving $40 million in efficiency gains. Building on this momentum, we are expanding RocketLogic's capabilities to our wholesale broker partners in the coming months, bringing the power of this amazing AI-driven efficiency to even more of the industry. In our experience layer, we are revolutionizing the American home buying journey through a seamless AI-powered digital experience. We are so proud to introduce the all-new Rocket.com and our Rocket mobile apps, offering a home ownership platform that seamlessly integrates home search, financing, and mortgage servicing into a single beautiful experience. We've seen more than a seven-fold search in clients starting mortgage applications directly from home listing pages on Rocket.com compared to the previous Rocket Homes experience already. Now, unlike other home search sites, which cater to more casual browsers, we built Rocket.com meticulously after studying what truly works for serious homebuyers. We've streamlined the process with smart filters like commute time and unique photo viewing, allowing effortless exploration with a clean and ad-free design. Rocket.com also features our proprietary AI-powered chat assistant on every page, an always-on expert in local real estate and mortgages. Trained on millions of home listings and transcripts, terabytes of housing data, and mortgage regulations across all 50 states, it provides instant data-driven insights to homebuyers. So when buyers ask, is this house priced correctly? They receive immediate, meaningful answers backed by real data they can trust. The Assistant also connects buyers directly to bankers and agents, even taking mortgage applications and updating approval letters. It effectively put a buy button on every home in America and created a site that is truly alive. Last, but certainly not least, is unleashing what we believe is the untapped, explosive power of our brand. A trusted brand is one of the most powerful drivers of decision-making. It creates an emotional connection that makes a lasting impression. And when done right, it speaks not just to logic, but to the heart and to an irrational level of emotion, especially when it comes to something as important as home ownership. Under Jonathan's leadership, we have deliberately and strategically evolved our approach to marketing and positioning the Rocket brand with a fresh look and a deeper purpose. At this year's Super Bowl, we introduced Own the Dream, our core creative idea, through a commercial set to John Denver's Take Me Home Country Roads. In a historic, never-been-done-before moment, the experience seamlessly transitioned from a television ad to a live stadium, as 65,000 fans at the Superdome joined in a full stadium sing-along. It was an unforgettable experience, proving the power of music and the dream of home ownership and securing Rockets' place in Super Bowl advertising history. The impact was immediate. Traffic to our digital platform surged, and according to the Harris Poll, Rockets' brand awareness increased by nine points in familiarity and six points in consideration, the largest lift of any brand measured. Our brand refresh is the first step in an ambitious journey to solidify Rocket as the leader in homeownership and make it one of America's most culturally relevant brands. This investment has two key objectives. First, we are investing to elevate Rocket into a true household name. While we're already the most recognized player in mortgage, we believe that Rocket should be a brand that people know, trust, and connect with throughout the homeownership experience, and we are making the investments to make that a reality. Our Own the Dream core creative idea reinforces the belief that everyone deserves a shot at the American dream. Designed for longevity, this concept celebrates the modern, diverse vision of home ownership while unifying our messaging across all platforms. Second, we have a significant opportunity to expand our reach and connect with key growth audiences. America's demographics are shifting. The average first-time buyer is now 38, nearly a decade older than just 10 years ago. And by 2030, 56% of first-time buyers will be Hispanic, while single female buyers will outnumber males two to one. So to serve this next generation of homeowners, Rocket's brand must be inclusive, dynamic, and reflective of today's ambitious and diverse America. If there's one message I hope sticks with you today, it is simply this. We are shaping the future of homeownership. Modern, personalized, centered around the client we're eliminating the hurdles that have made home buying complicated for decades we are replacing them with a seamless intuitive experience that is unmistakably rocket 2024 was a foundational year for the next chapter of rocket and we're carrying that momentum into 25 with a simple purpose to help more people achieve home ownership the opportunity ahead is immense and we're investing in executing with urgency to seize it so we're dreaming big We're executing bigger, and I couldn't be prouder of what we've built or more excited about what's ahead. Thank you, and with that, I will turn it over to Brian.

Thank you, Varun, and good afternoon, everyone. On this call, I'll review our strong fourth quarter and full year performance, highlight key achievements from 2024, and share our outlook for the first quarter. I'm incredibly proud of our financial results and the exceptional execution by our teams. Looking back at 2024, two things stand out. Strong top and bottom line growth and disciplined capital allocation across every layer of our super stack, our key competitive advantage. We are building a company that will shape the future of homeownership. I couldn't be more excited for what's ahead. Our strong execution translated into impressive financial performance. For the fourth quarter, adjusted revenue reached $1.2 billion, which was at the high end of our guidance range. This represents a 34% increase from the same quarter last year and marks our sixth consecutive quarter of year-over-year adjusted revenue growth. We generated $24 billion in net rate lock volume, up 47% year-over-year. We reported adjusted net income of $85 million, or 4 cents of adjusted diluted EPS. For the full year 2024, adjusted revenue grew 30% to $4.9 billion, with net rate lock volume increasing 28% to $101 billion. Our gain on sale margin increased to 295 basis points, up 32 basis points from 2023, driven by growth in both the direct-to-consumer and partner network channels. We delivered an 18% adjusted EBITDA margin, significantly expanding from just 2% the prior year. Adjusted diluted EPS came in at 23 cents. This profitability expansion was fueled by revenue growth disciplined expense management, and AI-driven efficiency gains. Key achievements across origination, servicing, and AI powered our 2024 success. First, origination volume grew nearly 30% year over year, driven by both purchase and home equity loan growth. Purchase remains our biggest opportunity, with no player holding more than single-digit market share. Over the past year, we intensified our focus like never before and grew purchase market share by 8%. Our success was driven by a deliberate strategic approach. We launched innovative home buying products like OnePlus and Welcome Home Rate Break, which resonated with home buyers in a challenging market. In fact, mortgage volume associated with affordability products doubled year over year. We also strengthen our relationships with our RocketPro wholesale partners, reinforcing our commitment to their growth. By providing choice, industry-leading products, and advanced technology, we are empowering them to thrive while driving our own purchase growth. In the fourth quarter, the strategic focus led to double-digit gains in wholesale market share and broker wallet share year over year. Our home equity product continued to shine with volume more than doubling year over year, further solidifying our position as the nation's largest originator of closed and second mortgages. Homeowners increasingly turn to this solution to tap into record high equity while preserving their low existing rates on their first lien mortgage. Notably, over half of these home equity clients were new to the Rocket ecosystem. Creating a strong pipeline of future refinance opportunities as rates decline. This success highlights the strength of our innovative products, targeted marketing, and capital market expertise reinforced by nine successful securitization deals in 2024. The second major area of growth has been the expansion of our origination servicing flywheel. By the end of 2024, our servicing portfolio grew to $593 billion in unpaid principal balance, a 17% increase over 2023. This growth was primarily driven by our inorganic strategy, which added $77 billion in UPV. During the year, we generated $1.5 billion in recurring servicing cash revenue. More importantly, we expanded our portfolio to 2.8 million loans, adding 308,000 new clients this year, each representing an opportunity to earn the right to be their lender for life. As Rude outlined, expanding our servicing portfolio is a critical part of our long-term growth strategy. Our industry-leading recapture rates are built on a singular focus, delivering an exceptional client experience at every interaction. No matter how a client enters our ecosystem, our goal is the same, serve them as homeowners for life. Finally, AI is delivering tangible, transformative results across our organization, enhancing our ability to scale and driving operating leverage in our business. For example, RocketLogic Docs, our intelligent document processing platform, has been crucial in efficiently onboarding servicing portfolios. In December alone, this platform automatically classified over 21 million documents, nearly five times the volume from June and requiring no additional staffing. This proprietary technology positions us for continued growth in our servicing portfolio. In 2024, we unlocked over 1 million team member hours through AI automation with benefits that continue to compound. AI-powered tools enabled bankers and operations team members to serve 54% more clients year over year in Q4. AI is fundamentally transforming the experiences of our clients, team members, and partners, and the results are real. Our massive data lake, early adoption, and deep AI expertise have positioned us far ahead of our peers, and we believe the gap will only widen from here. As Rune shared, we are reimagining every task, every process, and every team member role through AI, supercharging efficiency, speed, and accuracy. Our momentum in 2024 lays the foundation for even greater opportunities in 2025. To strengthen our leadership and shape the future of homeownership, we are making strategic investments in three key areas, marketing, servicing, and technology. First, in marketing, we're making bold moves to elevate the Rocket brand and engage the next generation of homebuyers. Our previous brand strategy was successful, but as the consumer landscape has evolved, it was time for a refresh. Rocket is the most recognized mortgage brand, yet today it doesn't stack up against some of the more prestigious brands outside of our category, leaving room to grow. In fact, our unaided awareness prior to the brand restage was just 12%, and the engagement among mortgage borrowers was only 17%. Even among those familiar with Rocket, many didn't see us as a brand that represented them. We weren't fully connecting with the growth audiences driving the future of homeownership, female, Hispanic, and aging first-time homebuyers. Our brand must resonate with their aspirations today and in the years ahead. We launched our brand restage and own the dream core creative idea at the Super Bowl, one of the biggest stages, alongside the debut of Rocket.com, our all-in-one homeownership platform. These moves are already accelerating brand awareness and expanding our reach. Our Own the Dream core creative idea is an asset that we believe stands the test of time, continuously delivering value and forging authentic connections with the next generation of Rocket clients. We've made a full-scale shift toward an integrated approach across brand performance and product marketing. This investment cements Rocket as America's home ownership platform with a brand that reflects our vision, mission, and unwavering commitment to helping millions achieve homeownership. Second, we're accelerating our origination servicing flywheel, building on 2024's success in bulk acquisitions and strategic partnerships. This is a strategic growth area where Rocket holds a clear advantage, leveraging both our industry-leading recapture rates and our scale across origination and servicing. We will sustain market-leading recapture rates by sticking to what works, delivering exceptional client experience at every touchpoint. Our approach blends the human touch with AI-driven enhancements, creating frictionless, modern experiences on Rocket.com and our digital apps. We will remain highly selective when deploying capital to acquire MSR portfolios, ensuring every investment aligns with our long-term strategic vision. Additionally, we see tremendous potential to expand through partnerships, like our collaboration with Analy, while using AI and automation to streamline onboarding in operations. Finally, we will continue to double down on AI and automation to supercharge our team members and transform how we operate. This builds on decades of technology investment in our comprehensive data platform. AI is already unlocking business value by enhancing team member efficiency. Empowering 14,000 team members with AI allows us to iterate faster, work smarter, and achieve more with the same resources. Looking ahead, we believe AI will enhance every aspect of Rocket, from boosting conversion rates through greater personalization to making mortgage manufacturing more efficient, all while preserving the human touch that defines our client experience. Our technological advantage and our expanded reach across retail, wholesale, enterprise partnerships, and servicing positions us to capture a significantly larger share of the market. From a capacity standpoint, today we believe we can originate $150 billion in volume while keeping our fixed costs flat. Our investments in marketing, servicing, and AI are setting the foundation for long-term growth in market leadership. Our financial strength allows us to invest aggressively while competitors pull back. We ended the year with $2.9 billion in available cash and $7.6 billion in mortgage servicing rights, a combined $10.5 billion of value on our balance sheet. Our $2.9 billion in available cash includes $1.3 billion on the balance sheet and $1.6 billion in corporate cash used to self-fund loan originations. As of December 31st, total liquidity stood at approximately $8.2 billion, including available cash and undrawn lines of credit. This financial flexibility allows us to make bold strategic investments at pivotal moments, something we've done consistently throughout our history. With AI transforming our industry, Rocket is positioned to lead the next chapter and seize opportunities ahead. Now, let me turn to our outlook for the first quarter. We expect adjusted revenue to be in the range of $1,175,000,000 to $1,325,000,000. The midpoint of this range represents roughly 7% year-over-year growth and our expectation of continued market share gains. We expect total expenses in the first quarter to increase by $100 million on a year-over-year basis. There are three items driving this. We expect variable costs to increase as a result of higher production year-over-year. Turning to marketing, Rocket Money spent additional advertising dollars to drive record consumer growth in the month of January. And finally, as many of you saw, we launched our brand restage and core creative idea at the Super Bowl. Aside from these three items, we expect our expenses to be relatively flat year over year. As always, our forward-looking guidance is based on our current outlook in intra-quarter visibility. As we look ahead, we're entering a defining moment in Rocket's journey. Throughout our history, we've consistently maintained a strong capital position while making strategic long-term investments. This approach has given us the resilience to navigate market cycles and the ability to seize opportunities others simply cannot. Today, we are writing a new chapter, one defined by bold strategic moves. We're investing decisively in our future, pursuing ambitious goals and accelerating execution, all while keeping our focus on creating sustainable long-term shareholder value. With that, we're ready to turn it back over to the operator for questions.