UWM Holdings Corporation Class A

Good morning. My name is Amy and I will be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation first quarter 2021 earnings conference 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, you may press the pound key. Matt Roslin, you may begin your conference.

Good morning. I am Matt Roslin, EVP of Legal Affairs and Investor Relations. Thank you for joining us and welcome to the first quarter 2021 earnings call for UWM Holdings Corporation. Before we start, I'd like to remind everyone that this conference call includes forward-looking statements. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued yesterday. Now I'd like to introduce UWM Holdings Corporation and United Wholesale Mortgage Chairman and CEO, Matt Ishbia.

Thanks, Matt. Appreciate it. Thank you all for joining today. We appreciate you. Definitely going to try to keep my remarks somewhat short so I can take a lot of questions, but we'll take as many questions as we possibly can and want to make sure we answer everything about the business, about the industry, anything you would like to know about our company. Happy to answer every question you guys have. Now, with that being said... Q1, pivotal quarter, outstanding quarter across the board for UWM. I can go into all the details. I'm going to go through the details here shortly. But, you know, obviously became a public company, fortified our balance sheet, expanded our products, and strengthened our focus on growing the channel and the mortgage broker market share. You know, we've done a lot of things in that. We've grown to almost 8,600, over 8,600 team members. and continue to invest in our technology while differentiating our process and speed to close. And so we talk about making the process faster, easier, cheaper. We had a great, great quarter across the board. You know, we completed a state-of-the-art sports complex and training center. You know, we're going to do some great things in the community with that. But at the same time, we also have a big training center auditorium for our team and continue to make an impact in the community in a positive way. UWM is well-positioned. to not only being the number one wholesale lender, which we have been for six consecutive years, but to be the number one overall mortgage lender in America, and we're going to talk about that path here today. You know, to look at the details, you already saw the release, so I'm not going to spend too much time going through every single detail. But $860 million in net income, 42 times what we did last year in the first quarter, $49.1 billion in production, 219 basis points. It was fantastic across the board. Public equity deal we have to close on. Finish the quarter with $1.6 billion in cash. In April, we closed our second long-term, you know, high-yield debt deal. We paid off all encumbered MSR financing. So we have a $2.3 billion MSR asset with a WAC, weighted average coupon rates, at around 3.00. So now it's actually after April. It's below that number in the 2.99 range, which is awesome, with no debt on it, no encumbered debt to that. So it gives us a powerful, powerful position. You know, as you saw in our release, the board approved our quarterly limit of $0.10. to consistently deliver money back to our shareholders for a record date on June 10th and payable July 6th. The board and I always explored increasing the dividend, actually, or looking at a special dividend or a share buyback program. And as you guys have seen, we conclude a share buyback was the best use of our capital to reward shareholders. We announced the authorization of $300 million share buyback over the next 24 months. And quite honestly, with where the share price is, it's a great opportunity for us to continue to buy that But at the same time, we're conscientious of the float, so we're not deploying it all tomorrow, as you can imagine, or today. We're conscientious of the float, but we do have that authorization from the board, which we do appreciate. Other ways of deploying capital is looking at acquiring. Three of the top 25 wholesale lenders were acquired or have been announced to be acquired here in the last 90 days or so, which is a really interesting way of trying to acquire market share. In wholesale, we need the best technology, the best process, the best system, and all the products. It's very little reason to acquire someone. We could spend a billion dollars in cash and stock and acquire a competitor and pick up 3% to 4% market share. And I'm not saying we won't look at that or continue to look at that, but the reality is with our platform, it'd be a very odd situation for that to make a lot of sense for us. It could, but to make a lot of sense for us because we are the leader. We generate a better return for our shareholders by just investing organically, maybe in our pricing and going after certain brokers because you're really not acquiring anything besides, you know, there's maybe a servicing book you might be acquiring, but actually from an origination perspective, we're really not acquiring much in wholesale. And so we can acquire that by sharpening our pricing or expanding our products, which we are doing right now. Now, let's look at the Q1 business strategy, understand the business. So clearly we're the market leader in wholesale, demonstrated a 34% market share in the wholesale channel in 2020. We are going towards 50% mortgage broker market share for UWM in the channel. So that's our goal, 2025-26. We also want the mortgage brokers to be one in three mortgages. Right now, they're hovering around 20%, a little less than 20% of the overall market. We expect that to go to one in every three mortgages. And if we can get half of those, we're going to win as a team together. Now, Q1, we focused on, and Q2 going forward, growing the share of wallet with our loyal brokers. We have so many brokers that love our technology. They love our process. They love our systems. But they always said, hey, I want to do more of my business with you. So we focused on rounding out the portfolio. As you guys probably heard, we rolled out the Jumbo program, which has been a huge hit. We did over a billion dollars in April, but we'll do over $2 billion most likely in the month of May with this new Jumbo product that we rolled out. And an interesting thing about that, which we'll talk a little bit about purchase share, is almost half of the Jumbo product is purchased. which is a lot different than our competition, as you all understand. But we also run other programs with rolling out arms recently. We expanded our government programs a little bit more. Manufactured homes. Just rounding out, but we're not going to go down on the credit matrix. We're not going down below 620. That's not what we believe in at this point. We're not going to do non-QM, which other people say non-QM is focused. Certain non-QM loans are a lot more like subprime than what we're interested in doing. We're focused on the highest credit quality and getting a bigger wallet share from our current clients, and it's working. It's working. You know, purchase mix. A lot of people shy away from talking about the purchase mix. Quite honestly, we're not going to shy away from it because quite honestly, we think we are a leader here, and we have been a leader here for a long time. And so we're going to continue to grow. To give you a little bit of a view, you know, people talk about purchase percentage, and that's not as important, purchase percentage, as in actually volume of purchase because everyone's purchase percentage goes up when they do less refinance. As rates have picked up since the beginning of February all the way through the end of April, rates have picked up. What does that mean for you? You know, what does that mean for business? April was one of our best new registration months of all time. and we did about 43 percent of those new registrations were purchased and so understanding that that trend you know compared to i think we're in the 20s last year uh you know in this time and so realizing that that's a big uptick of purchase while our volumes stay high so you'll see i think in the first quarter i mentioned you know that in the third quarter you'll see our biggest purchase volume uh volume not percentage purchase volume of all time in the third quarter And quite honestly, you might even see it in the second quarter because things are going really, really well. We rolled out the FHA program in December. We rolled out the Jumbo program in March. And we're seeing a massive adoption of our purchase program also with our technology. We announced the all-in initiative in March, so it really showed our commitment to the channel. The all-in initiative was on March 4th. We basically gave an addendum to our clients and said, hey, guys, if you want to work with UWM, we're all in. We're going to continue to invest in technology, our ecosystem, give you the differentiations to help you succeed in your market. But if you're working with these two other mortgage companies, two mortgage companies out there that are doing things to hurt the broker channel, you work with them, you can't work with us. Now, there's 70-plus lenders out there that people can work with. Most brokers work with eight, nine wholesale lenders tops. But either way, we aren't going to be in the same portfolio as those two other lenders because those two other lenders are actually trying to hurt the broker channel and focus on the retail channel. So we decided to do the right thing. And we made this decision. A lot of media, a lot of press around this, which is obviously the media is slanted based on who pays them the most. A lot of times from a marketing perspective, and it's not going to be us. It might be one of those other two lenders. But the reality with the data is this. It's been overwhelmingly positive, more positive than we even expected. Over 10,000 brokers said they're all in with UWM. About 600 or so said, hey, we're not. We're not going to sign the denim, and they declined, and we wish them the best. And about 1,000 or so that do an immaterial amount of business, they haven't responded or haven't done their work. But all in, we won on that, not because of the more volume. Of course, we got more volume, but that wasn't the point. The point was alignment with our brokers. setting the message that we are going to do whatever right for the consumer which is mortgage brokers and For our broker partners in West what we did and needed a quick early read on it in February rates were low and and then in March April they kept rising and so from February April is not really apples to apples comparing the months because rates were much higher in April but net of any brokers we lost and at the same time of the brokers we gained we did over 17,000 more submissions and in the month of April and February, so massive, massive adoption, positivity. It was almost, you know, I couldn't have imagined it going so well. And obviously my competitors, they don't like the decision, but our business is not designed to make them like us. Our business is designed for our shareholders. for consumers, for our team members, and for our clients. And we've done a great job with this, and all that announcement has really driven that home. As you guys know, we really believe with all of our hearts and actually the data that the best way for a consumer to get a mortgage is through a loan officer. A loan officer who will navigate the process for them. And the loan officer should not be captive to one lender. They should have options. And that's why the brokers are the best. And that's why we're focused on the independent channel. And if they go to a broker, we are the elite mortgage lender. wholesale period we're really the mortgage lender across the board but in wholesale technology service product pricing and so and then on top of that we don't compete with them and so understand that that differentiation has helped UWM and will continue to help UWM and so the all-in announcement was really just sending a message that we are all in with brokers high level of confidence and that UWM is the right partner and it's worked out extremely, extremely well. You won't see that data really into the second quarter, maybe even into the third quarter because there's obviously a lag effect of loans closing at our competition, but the reality is that I wanted to give you a quick snippet of February to April, massive increase in a worse market we grew, and that's really tied to the all-in announcement along with the loyalty that our brokers have appreciated UWM standing up for what the right thing to do is, which is standing up for the broker and the consumer, and that's what we did. Now, To move forward a little bit on operations, you know, we talk about speed, speed to close. We are elite at this point. 17 days, which is actually compared to 18 days in the fourth quarter. The industry is still running 50 plus days. And so massive differentiator there. We will offer, that's faster, right? We will offer lower rates, right? 2.70 is what UWM average note rate in the first quarter was versus 2.78 industry average. 756 FICO, we're top two or three of the top 25 lenders, so high quality. And that's shown in our forbearance rate of 1.48, where the industry is 4.8. Our delinquency rate of 1.54, where the industry is 4.3. You know, our operations team does a great job. We're knocking loans out fast. My chief operating officer, Melinda Willner, along with, you know, my whole team of leaders are doing the fantastic things there, doing a great job. technology where my two technology i was jason bressler and his team are doing great things they have built us to scale at the level we are in position right now to do twice the volume from our architecture perspective than we are today so we can really double our business you know the rit infrastructure rivals any organization we leverage mix of cloud infrastructure api and our own proprietary technology We've made major investments, and we're looking at all different things, you know, from an artificial intelligence look and ADR, OCR. We're making a lot of different investments and at the same time investigating in things that other people maybe aren't or maybe aren't as far ahead as we are. And we have some big tech announcements coming. in the next quarter or two, you'll see, that are going to really take it to the next level. And our client-facing technology is fantastic as well. We have a smart routing system that we built proprietary with our CR system, where we get 5,000 of these a day. And it's smart routing to the right person at the right time, along with our automatic closing process, which we built proprietary. New Close 2.0 is really differentiated, where brokers and originators and title companies and new WM can close automatically, quickly. So consumers have an amazing experience. And at the same time, our Brand360, which is just a marketing platform that we built from scratch, proprietary, which is using different technologies that maybe other people aren't understanding or using to really take it to the next level and help our clients compete at a different level. And so we continue to do different things to raise brand awareness and help the broker channel. I'll challenge you guys. You go to findaborgersbroker.com if you want to find out what UWM, like the brand of findaborgersbroker.com, but just find out what brokers think about UWM and what we've done. Go to that website. Pick any loan officer on there. Go to page 5, page 20. I don't care what you find. You'll find a broker that works with UWM and brokers that understand what we're doing for the broker channel and why we are the differentiator for them so they can compete in their markets. We did a nice Red Wing sponsorship. We were on their helmets. We did a Super Bowl commercial for our brokers. We actually had more media impressions in the first quarter than of all time, over $21 billion. So you get an idea. Our CMO, Sarah DeSantis, has done a fantastic job, and we're continuing to grow. And so day after day, hour after hour, and we'll continue to grow. Quickly, before I turn it over to Tim, I want to talk about two things. People and community. First off, people. 100th Chief Growth Officer Desmond Smith. He used to be at Fannie Mae as a top executive there and also ran City and Chase's retail divisions. He decided to come over because he really sees the light of what the broker channel can do and is the best for consumers and for loan officers. So he's really focused on helping us grow that channel. We have over 800 team members, about 800 team members promoted in the quarter, which means we create opportunity internally. And at the same time, we were ranked the number one training company in America by Training Magazine. This is not in the mortgage business. This is in America, period. We're very proud of that. You know, I came from Michigan State basketball. As you guys know, coaches are known as getting great players, but then training and coaching to be the best version of themselves. That's what we do here at UWM. It's a massive differentiation as we continue to grow. Training is a big differentiator, and we're proud of that. And in the community, we did some great things. You know, it's still a pandemic going on out here, and obviously we made a lot of money. We helped over 10,000 meals we've served at homeless shelters through buying food at restaurants. to help the restaurants and help the homeless shelters do it right in the community. We talk about being dream makers here, not only for consumers, but for people in the community who are doing great things. And at the same time, for the vaccine, you know, we have a UW sports complex, state of the art. We set this thing up, and we set it up for the county to have vaccines for people, not only for our team members, but for people in the community making an impact, trying to put this pandemic behind all of us, so doing our part. And so a lot of great things are going on. I'm going to turn it over to Tim Forger, a chief financial officer. to go through some different things about the quarter. Then I'm going to give you some quick guidance, and then we'll jump into some questions.