Hello, fellow finance aficionados, and welcome to another round of Wall Street Whispers! I’m your host with the most, a stock market maven with a knack for demystifying the dizzying world of dollars and cents. Today, we’re setting our sights on a company that’s been shooting off more fireworks than a Fourth of July barbecue – Rocket Companies, Inc. (RKT).
But before we delve into the fascinating world of finance, let me assure you that there will be no jargon-laden, sleep-inducing talk here. No, siree! We’re all about serving the hot and spicy of the finance world, with a side of humor to wash it all down. So, buckle up, and let’s blast off on this Rocket Companies journey.
Rocketing Through the Basics: Who Are Rocket Companies, Inc.?
Rocket Companies, a financial technology company, has been a hot topic on Wall Street. If you’ve been keeping an eye on the financial grapevine, you might know that Rocket Companies is an umbrella for a variety of personal finance and consumer technology brands, including Rocket Mortgage, Rocket Homes, Amrock, Rocket Money, and many more. They’re like the Avengers of the financial world – different brands with individual powers, all coming together to save the world, or at least your financial health.
Unfortunately, every superhero has their fair share of ups and downs. Just like when Spiderman discovered his suit was dry-clean only, Rocket Companies has hit a few stumbling blocks in the market.
Rough Patch or Turbulence? The Recent Market Dip
The company’s stock has recently been on a downward spiral, experiencing a seventh-straight decline. Now, if we were discussing space rockets, a downward trajectory would be a cause for concern. But we’re talking stocks, so this descent may just be an opportunity for savvy investors.
The Impact of CEO Jay Farner’s Retirement
A contributing factor to this recent market nosedive is the announcement of CEO Jay Farner’s retirement after 27 years of steering the Rocket ship. We’ve all seen the movie – CEO retires, stocks plummet, investors panic, right? But here’s where we might need to separate art from life. Stock dips can represent a golden opportunity for investors willing to play the long game, as companies like Rocket often bounce back even stronger.
But wait, there’s more!
Navigating the Financial Reports: Understanding Rocket’s Revenue
Rocket Companies’ latest quarterly results have shown a decrease in adjusted net revenue. They experienced a 54% fall from last year but a 29% rise from last quarter, settling at $882 million. In simpler terms, Rocket’s financial rollercoaster dipped but now it’s starting to climb again.
| First Quarter 2023 Financial Summary | |||
| ROCKET COMPANIES | |||
| Q1-23 | Q1-22 | ||
| (Unaudited) | |||
| Total revenue, net | $ 666 | $ 2,671 | |
| Total expenses | $ 1,082 | $ 1,608 | |
| GAAP Net (Loss) Income | $ (411) | $ 1,037 | |
| Adjusted Revenue | $ 882 | $ 1,931 | |
| Adjusted Net (Loss) Income | $ (111) | $ 293 | |
| Adjusted EBITDA | $ (79) | $ 450 | |
| GAAP Diluted (Loss) Earnings Per Share | $ (0.16) | $ 0.40 | |
| Adjusted Diluted (Loss) Earnings Per Share | $ (0.06) | $ 0.15 | |
| Q1-23 | Q1-22 | |||
| Select Metrics | (Unaudited) | |||
| Closed loan origination volume | $ 16,929 | $ 53,977 | ||
| Gain on sale margin | 2.39 % | 3.01 % | ||
| Net rate lock volume | $ 19,535 | $ 49,614 | ||
| Amrock closings (units) | 35.9 | 168.3 | ||
Caught in the Crosshairs: Rocket’s Legal Woes
And let’s not forget the recent class action complaint against Rocket Mortgage. The claim? Running an aggressive telemarketing campaign, including contacting numbers on the National Do Not Call Registry. Now, we all hate those unsolicited calls, don’t we?
Looking Ahead: Future Prospects for Rocket Companies
So, where does all this leave us? It’s a mixed bag for Rocket Companies, really. The company is facing some challenges, but remember folks, what goes down (usually) comes up. If you’re willing to weather the storm, you might find that this Rocket still has plenty of fuel left.
Financial Statements
| Condensed Consolidated Statements of Income (Loss)($ In Thousands, Except Shares and Per Share Amounts) | |||
| Three Months Ended March 31, | |||
| 2023 | 2022 | ||
| (Unaudited) | |||
| Revenue | |||
| Gain on sale of loans | |||
| Gain on sale of loans excluding fair value of MSRs, net | $ 265,003 | $ 687,170 | |
| Fair value of originated MSRs | 204,560 | 796,616 | |
| Gain on sale of loans, net | 469,563 | 1,483,786 | |
| Loan servicing (loss) income | |||
| Servicing fee income | 366,385 | 366,214 | |
| Change in fair value of MSRs | (398,279) | 454,380 | |
| Loan servicing (loss) income, net | (31,894) | 820,594 | |
| Interest income | |||
| Interest income | 66,744 | 90,540 | |
| Interest expense on funding facilities | (29,060) | (41,696) | |
| Interest income, net | 37,684 | 48,844 | |
| Other income | 190,715 | 317,372 | |
| Total revenue, net | 666,068 | 2,670,596 | |
| Expenses | |||
| Salaries, commissions and team member benefits | 603,775 | 853,915 | |
| General and administrative expenses | 195,390 | 275,857 | |
| Marketing and advertising expenses | 181,604 | 328,058 | |
| Depreciation and amortization | 30,685 | 21,042 | |
| Interest and amortization expense on non-funding debt | 38,333 | 38,664 | |
| Other expenses | 32,268 | 90,603 | |
| Total expenses | 1,082,055 | 1,608,139 | |
| (Loss) income before income taxes | (415,987) | 1,062,457 | |
| Benefit from (provision for) income taxes | 4,504 | (25,849) | |
| Net (loss) income | (411,483) | 1,036,608 | |
| Net loss (income) attributable to non-controlling interest | 392,960 | (982,896) | |
| Net (loss) income attributable to Rocket Companies | $ (18,523) | $ 53,712 | |
| (Loss) earnings per share of Class A common stock | |||
| Basic | $ (0.15) | $ 0.44 | |
| Diluted | $ (0.16) | $ 0.40 | |
| Weighted average shares outstanding | |||
| Basic | 124,732,722 | 122,691,728 | |
| Diluted | 1,974,629,808 | 1,975,379,132 | |
| Condensed Consolidated Balance Sheets($ In Thousands) | |||
| March 31, 2023 | December 31, 2022 | ||
| Assets | (Unaudited) | ||
| Cash and cash equivalents | $ 893,383 | $ 722,293 | |
| Restricted cash | 64,307 | 66,806 | |
| Mortgage loans held for sale, at fair value | 8,438,714 | 7,343,475 | |
| Interest rate lock commitments (“IRLCs”), at fair value | 182,112 | 90,635 | |
| Mortgage servicing rights (“MSRs”), at fair value | 6,669,939 | 6,946,940 | |
| Notes receivable and due from affiliates | 8,073 | 10,796 | |
| Property and equipment, net | 267,320 | 274,192 | |
| Deferred tax asset, net | 541,248 | 537,963 | |
| Lease right of use assets | 391,897 | 366,189 | |
| Forward commitments, at fair value | 5,101 | 22,444 | |
| Loans subject to repurchase right from Ginnie Mae | 1,626,587 | 1,642,392 | |
| Goodwill and intangible assets, net | 1,253,309 | 1,258,928 | |
| Other assets | 860,289 | 799,159 | |
| Total assets | $ 21,202,279 | $ 20,082,212 | |
| Liabilities and equity | |||
| Liabilities: | |||
| Funding facilities | $ 5,236,034 | $ 3,548,699 | |
| Other financing facilities and debt: | |||
| Senior Notes, net | 4,029,339 | 4,027,970 | |
| Early buy out facility | 423,831 | 672,882 | |
| Accounts payable | 135,039 | 116,331 | |
| Lease liabilities | 448,331 | 422,769 | |
| Forward commitments, at fair value | 87,918 | 25,117 | |
| Investor reserves | 107,134 | 110,147 | |
| Notes payable and due to affiliates | 30,451 | 33,463 | |
| Tax receivable agreement liability | 577,996 | 613,693 | |
| Loans subject to repurchase right from Ginnie Mae | 1,626,587 | 1,642,392 | |
| Other liabilities | 390,274 | 393,200 | |
| Total liabilities | $ 13,092,934 | $ 11,606,663 | |
| Equity | |||
| Class A common stock | $ 1 | $ 1 | |
| Class B common stock | — | — | |
| Class C common stock | — | — | |
| Class D common stock | 19 | 19 | |
| Additional paid-in capital | 294,718 | 276,221 | |
| Retained earnings | 280,997 | 300,394 | |
| Accumulated other comprehensive (loss) income | (32) | 69 | |
| Non-controlling interest | 7,533,642 | 7,898,845 | |
| Total equity | 8,109,345 | 8,475,549 | |
| Total liabilities and equity | $ 21,202,279 | $ 20,082,212 | |
