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Paper losses on its mortgage servicing rights portfolio pushed Rocket Companies into the red in the final quarter of 2023, but the lending giant put a positive spin on its fourth-quarter and 2023 results, saying it was operating in a difficult market It has achieved positive adjusted earnings for three consecutive quarters.
rocket report Thursday’s fourth-quarter net loss of $233 million was primarily due to writedowns on the company’s $509 billion portfolio of mortgage servicing rights. Fourth-quarter revenue increased 44% from the same period last year to $694 million, and the company cut expenses by 5% to $937 million.
Rocket posted a full-year net loss of $493 million as revenue dried up faster than the company could cut expenses. Despite revenue falling 35% to $3.8 billion in 2023, Rocket cut full-year expenses by 18% to $4.2 billion.
Rocket collected payments on 2.5 million mortgages on behalf of investors as of year-end, and the mortgage servicing rights portfolio generated approximately $1.4 billion in annual recurring servicing fee revenue, the company said.
As is the case with many mortgage lenders that also service loans, Rocket executives say adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is a better performance measure.
Falling interest rates in late 2023 prompted Rocket to write down the fair value of its mortgage servicing rights portfolio by $358 million in the fourth quarter, in part because lower rates make borrowers more likely to refinance and ultimately choose another loan servicer. .
Rocket achieved $55 million in adjusted EBITDA profitability in the fourth quarter and $67 million in 2023, leaving CEO Varun Krishna to express confidence in the performance Made a positive review. Krishna noted on a conference call with investment analysts that Rocket’s adjusted EBITDA was positive for the third consecutive quarter “despite industry conditions being the most difficult in three decades.”
Varun Krishna
“Our consistent execution drove excellent results for the quarter and full year, especially given the market backdrop,” Krishna said. “Over the past two years, we have significantly reduced our cost base and taken difficult but necessary steps. actions to right-size the company. This helps us prioritize and focus on what we do best.”
Rocket SharesIt has traded as low as $7.17 and as high as $15.19 over the past 12 months, rising 7% from Thursday’s closing price of $10.98 in after-hours trading following the earnings release.
Rocket said mortgage originations were $17 billion in the fourth quarter and $78.7 billion for the full year. Rocket said its share of purchase mortgage originations grew 14% in 2023, while its refinance market share increased An annual increase of 10%.
While Rocket Mortgage is Rocket’s largest business, the company also connects consumers with real estate agents through its brokerage subsidiary Rocket Homes and provides closing and settlement services through its Amrock subsidiary.
Rocket said the home equity loan and new ONE+ and BUY+ mortgage products “resonated strongly with new and existing customers.”
The ONE+ mortgage allows low- and moderate-income borrowers to purchase a home with as little as 1% down without the additional cost of mortgage insurance, while the BUY+ program offers homebuyers who work with Rocket Homes partner agents up to $10,000 closing credit.
“The vast majority of customers who come to us through home equity loans, ONE+ or BUY+ are new customers who have not yet borrowed money from us,” Rocket said in its earnings release.
Rocket also pursues long-term goals, providing personal financial services to consumers through its subsidiary Rocket Money, which has 5 million users. The Rocket Money app, formerly known as Truebill, was the most downloaded personal finance app on the Apple App Store in December, the company said.
Rocket kicked off the year by hiring Airbnb veteran Jonathan Mildenhall as its first group chief marketing officer. The company said it expects first-quarter adjusted revenue to be between $925 million and $1.07 billion.
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