Rocket Companies, the Detroit-based parent company of mortgage lending giant Rocket Mortgage, saw profits plunge year-over-year in the second quarter amid decades-high inflation and signals of an economic slowdown.
The company on Thursday reported net income of $60 million on revenue of $1.4 billion in the second quarter. That’s down approximately 90% and 48%, respectively, from the second quarter of 2021.
On an adjusted basis, Rocket posted a $67 million net loss on revenue of $25 billion. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, came in at a $27 million loss.
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Rocket Mortgage had a closed loan origination volume of $34.5 billion in the second quarter — down nearly 60% from the same period last year. The company’s gain on sale margin was 2.92%, up from 2.78%.
“As the mortgage market continues to transition, we are actively investing in our business and transforming the Rocket services and engagement platforms to better serve our clients,” Rocket Cos. CEO Jay Farner said in a statement.
CFO and Treasurer Julie Booth, citing “change in the industry,” said the company slashed expenses by roughly $300 million in the second quarter “and will continue to execute a prudent approach to cost management.” The company had been targeting $100 million in cost cuts.
“We are also investing our capital into the Rocket engagement and services platforms to expand our client base, drive higher conversion, and lower our client acquisition cost, setting the foundation for our next stage of growth,” she added. “We will continue to deploy our capital in a strategic and disciplined manner to generate long term shareholder value.”
Meanwhile, executives provided updates on various aspects of the business, including two rebranding initiatives. Truebill, a personal finance app Rocket bought in December, will rebrand to Rocket Money this month. And Edison Financial, the company’s Canadian digital mortgage broker, will become Rocket Mortgage in Canada.
Rocket Money, formerly Truebill, saw paying premium members surpass 2 million users in July, more than doubling year-over-year, Rocket reported. The brand launched a beta version of its first credit card during the second quarter.
In July, Rocket Mortgage signed an agreement to originate mortgages for Santander Bank. It also entered into a partnership with banking platform Q2.
Rocket Homes, the company’s digital real estate platform, saw real estate transactions grow 25% year-over-year in the second quarter. It also had two record months for closed units.
In the third quarter, Rocket is forecasting closed loan volume of between $23 million and $28 billion and a gain on sale margin of between 2.5% and 2.8%.
The company reported having total liquidity of $7.3 billion. At the end of the quarter, it had an available cash position of $4 billion, including cash on hand and corporate cash used to self-fund loan originations.