Rocket Companies, Inc.

Home affordability is a multifaceted existential challenge. There is no quick fix. This is a two-sided market, buyer demand and seller inventory, and meaningful progress requires improvement on both fronts. On the supply side, not enough inventory is coming to market because too few sellers are moving. On the demand side, Americans want to buy, but affordability barriers keep too many on the sidelines. That's the reason for today's exciting partnership news. We're tackling the challenge directly, partnering with the biggest and best brokerage in the business. Rocket and Compass have formed a historic strategic alliance designed to strengthen both sides of the market, built around a lead funnel, unique inventory, distribution, and mortgage expertise. Redfin brings 50 million monthly active high intent buyers in the most comprehensive home listings platform in the industry. Compass offers a network of 340,000 real estate agents and unique inventory. Rocket Mortgage drives affordability through our preferred integrated pricing bundle. Our goal is simple and unifying. Expand inventory and create a more streamlined, affordable home buying and selling experience for American families. Our alliance with Compass is proof that we're far from done. We believe homebuyers and homeowners deserve more. This is bigger than affordability or inventory. It's about sparking more sellers, enabling more buyers, and creating a new standard for the home ownership experience. That concludes my comments on the quarter and the full year. And with that, I'll turn things over to Brian.

Thank you, Varun, and good afternoon, everyone. Today, I'll walk through Rocket's strong fourth quarter and full year results, underscoring the strength of our business model. I'll also provide an update on our integration synergies and walk through our outlook for the first quarter. 2025 was a pivotal year in executing the AI-driven homeownership strategy we set in motion three years ago. We acquired Redfin and Mr. Cooper. We made bold moves in AI and automation. We continue to invest in our brand and technology platform. All of this fuels our strategy and sets us apart. The result is a home ownership platform with unrivaled scale across search origination and servicing powered by leading technology in prime to disrupt a $5 trillion market rocket is one of one. In 2025 we matched that strategic ambition with operational discipline and focus. For the full year, we generated $6.9 billion in adjusted revenue and $132 billion in total net rate lock volume. Full year gain on sale margin landed at 283 basis points. Our adjusted EBITDA margin for the year was 19%, with adjusted diluted EPS at 28 cents. And in the fourth quarter, our first fully combined period with Rocket, Redfin and Mr. Cooper, the power of this platform was on full display. In the fourth quarter, adjusted revenue hit $2.44 billion, beating the top end of our guidance range by $140 million. We delivered $42 billion in net rate lock volume, excluding the correspondent channel net rate lock volume was $36 billion with a robust gain on sale margin of 320 basis points. Adjusted net income for the quarter was $316 million, translating to 11 cents of adjusted diluted EPS. Now I'd like to highlight a few of the key drivers of outperformance this quarter. The first was a meticulous rollout of an integration plan that was six months in the making. Upon the closing of the Mr. Cooper transaction early in October, we unified Mr. Cooper clients under the Rocket brand. We transitioned Mr. Cooper loan officers to Rocket's proprietary origination system in suite of AI tools. We overlaid our propensity models against Mr. Cooper's portfolio to identify immediate opportunities, routing those clients into Rocket's personalized digital experience. The impact was near instant. We saw a meaningful uptick in conversion rates, driving higher recapture on the Mr. Cooper portfolio compared to pre-closing levels. This momentum accelerated throughout the quarter. resulting in our largest fourth quarter for refinance since 2021. Our output in the fourth quarter highlights a critical milestone. In Q4, closed loan volume from our service portfolio hit an all-time high. More than half of our refinance closings came from service clients. For context, in the fourth quarter of 2020, this number was 30%. This is the flywheel effect. These clients come with near zero client acquisition costs, and retaining them for life generates client lifetime value that is worth multiples beyond the book value of an MSR asset. Our closed-end second product continues to resonate. Volume nearly doubled year over year. In fact, the month of December was our largest month ever for the product, surpassing $1 billion of origination volume. On the purchase side, our Redfin preferred pricing bundle is gaining traction. Volume increased by 40% quarter over quarter. This was the leading driver in the double-digit growth we saw in the direct-to-consumer purchase closings year on year. In the fourth quarter, jumbo loans grew nearly 70% year over year as we expanded the jumbo products available to our loan officers and mortgage broker partners to address more specialized needs. This performance came against a market where mortgage rates tested the bottom of their three-year range and unlocked pent-up demand. Homeowners who took rates in the high sixes or sevens in recent years moved quickly to refinance lower their monthly payments, and we were ready for them. The market's momentum has continued into the first quarter. In January, the population of homeowners benefiting from a rate and term refinance surged to $4.8 million, or over $1 trillion in unpaid principal balance. That's a four-year high. We have reached a tipping point. For the first time in this cycle, the cohort of mortgages with rates at or above 6% now exceeds those below 3%. Our unique business model is engineered to perform across every phase of the rate cycle. When rates are elevated, our servicing portfolio serves as our foundation, generating recurring cash flow. When rates drop suddenly, like they did in the fourth quarter, the same portfolio ignites our recapture engine. We ended 2025 with a portfolio of $2.1 trillion in unpaid principal balance. Our portfolio does two things. First, it generates approximately $5 billion in recurring annual cash revenue. Second, it provides a massive captive audience for new originations. Today, over $300 billion of our own portfolio carries a note rate above 6%. These in the money clients stand to lower their monthly payment through a rate and term refinance. Paired with a recapture rate that is over three times the industry average, we operate the industry's largest recapture engine. What others view as prepayment risk, we view as a massive origination opportunity. This means we define our own trajectory, regardless of macroeconomic conditions. While the performance of legacy originators and servicers is tied closely to rates, Rocket has built a business model that is durable and can grow across market conditions. With our robust capital position, we will continue to invest for growth. We ended the year with $2.8 billion in available cash and total liquidity of $10.1 billion, including available cash and undrawn lines of credit. Let me shift gears to the historic partnership with Compass we announced today. Rocket and Compass stand together to help solve home affordability, an issue that has kept so many Americans from owning the dream. The partnership rests on three strategic pillars. First, Redfin is now the exclusive home search portal for Compass's private and coming soon listings, inventory that exists nowhere else. This gives our platform a distinct data advantage that drives consumer traffic. Second, Compass becomes Redfin's largest brokerage partner. This immediately expands our distribution footprint, complementing Redfin's W2 agent network with Compass's 340,000 agents. Third, Rocket Mortgage becomes Compass's digital mortgage partner. We have already demonstrated our ability to integrate and deliver value to home buyers through our preferred pricing bundle with Redfin. Now, we're scaling that playbook with deeper integrations with Compass. Ultimately, this is about the consumer in tackling affordability. It's about bringing more inventory to market and better mortgage pricing for consumers at scale. Turning to integration, Redfin and Mr. Cooper are progressing ahead of schedule and are on track with all major milestones. We've already captured $140 million in Redfin expense synergies in under six months, and we're on pace to exceed our initial goal. In roughly five months after closing, Mr. Cooper synergies are on track and ahead of plan. We expect expense synergies to be fully realized ahead of the original time of the end of 2027. Furthermore rocket and Mr Cooper service clients are now united under the rocket digital experience and brand marking a key integration milestone. We recently migrated an impressive 600,000 loans in a single day to a united servicing platform and the transfer went off without a hitch revenue synergies are pacing well. Redfin mortgage attach rates are on track to surpass 50% and the first quarter after the deal closed our recapture engine is already lifting recapture rates on the Mr Cooper portfolio. Before providing our forward outlook, I want to point out a change in our financial presentation, due to the acquisition of Mr Cooper. To standardize our reporting, starting in the first quarter, we will be reclassifying warehouse interest expense on loans held for sale. It will move from a contra revenue account to a direct expense. This has no impact on profitability. It's simply a reclassification on the face of the P&L. Turning to our guide, in the first quarter, we expect adjusted revenue to be between $2.6 billion and $2.8 billion. This guidance range includes $150 million related to reclassifying that warehouse interest expense. The midpoint of our guidance reflects our conviction in continued mortgage origination market share gains. Turning to expenses in the first quarter, we anticipate approximately $2.6 billion, assuming the midpoint of our revenue guidance range. This figure includes an estimated $150 million reclassification of warehouse interest expense, $110 million in amortization of intangible assets, $85 million of stock compensation, and $50 million in estimated one-time acquisition related costs. Excluding these items, underlying expenses are expected to be roughly $2,200,000,000 in the first quarter. We also expect $50 million of seasonal items in the first quarter that were not present in the fourth quarter. This includes the reset of payroll taxes in 401 matching and Rocket Money's January marketing campaign that drove record subscriber growth. As always, our forward-looking guidance reflects our current outlook in visibility in the quarter. 2025 set the stage for 2026 and we're just getting warmed up. Forecasters expect the mortgage origination market to grow meaningfully this year, but no matter where the market lands, we are built for growth. Operator, we're ready to turn it over for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad. you would like to withdraw your question simply press star 1 again we ask that you please limit yourself to one question only your first question today comes from the line of ryan mckeveney from zelman your line is open hey thank you guys uh congrats on the results um we would love to dig in a bit more on the the strategic alliance with compass um so a couple couple for me on that uh first one