Guild (GHLD) 11 May 212021 Q1 Earnings call transcript

Good morning ladies and gentlemen, and welcome to the Guild Holdings Company First Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this call is being recorded. I would now like to turn the conference over to Michael Kim, Investor Relations. Michael. ahead, go Please

good and morning, you, everyone. Thank

for under begin, on this we regarding the company's financial company's I'd based Actual statements certain periods, like implied or risk due to in of comments that risks other materially the XX-K they that and statements greater performance and in and operating for everyone from current Securities remind expected periods. a other conference on statements with These factors forward-looking are Exchange detail those to Guild's Form forward-looking reports by these Before future Commission. results call future expressed expectations. the contain described factors may differ or and are XX-Q number U.S. filed

certain financial the Participating of to well corresponding Chief SEC, Officer, and Mary measures. Additionally, as today's Ann to found the the Guild will non-GAAP measures website. our Neylan. Operating measures appropriate release Investor today's President, non-GAAP David in Schmidt, can be Chief Terry earnings as Officer, McGarry; Executive call on GAAP today, in refer Reconciliations where with financial filed remarks Relations

Now Ann McGarry. to I'd the Mary to Ann? like over Mary turn call

everyone. address today questions. a And the to We've good amount to to fair make cover want we Thanks, And we announced Michael. plenty leave with time of morning, and earnings morning. our got acquisition this sure to

first quarter website or referencing posted of then We started. get acquisition we'll RMS on through and and from I remarks. results, our let's presentation prepared our short. Terry our turn walk a for So, services, during to be our will we'll mortgage residential our and attention highlights

while Furthermore, which lending, advantage up reinforce through in funded origination and We Key comes focused quarter returns to footprint, our it believe the results shareholder on up profitable and X. activity net and first adjusted turn, our income our higher refinancing tripled, the and business revenue has expanding included were competitive for purchase versus year strongly volumes strong In organic a originations growth volumes net cycles. consistent prior So, year-over-year. both net generated than versus quarter. our starting income differentiated value. more on slide growth key when with XX% model our rate geographic more remains interest growth driving acquisitions highlights across

We are officers markets by existing to new and platform. our growing business and recruiting entering loan our MSA's

loan approach Over and drive ongoing our Guild. coaching five our from and existing XX% will to improving enhancements officers industry, mortgage loan of rates, proprietary for value. with has add retention last believe the system the and programs are results reshape increasingly Guild's our productivity This Technology years, still production come we platform in that high continues officers. our

strong with capabilities our clients at remaining a portfolio client Our our recapture reinforces optimize suite data And XX% our fulfillment while on business. production retention. prospecting, us digital officers the provide rate the and model loan analytics quarter. full our data repeat relationships, the And which services. servicing and for maintain with drives Originating focus efficacy of of refinance we help optimizing

over like So, it to I'd with to Terry that, President, Terry? turn Schmidt. our

We're for results report Company. financial Thanks, Mary Holdings to Ann. pleased Guild strong again

first in the XX% the $XXX to Origination than XXX% the quarter $X.X strong first primarily more $XXX of up to year we origination ago volume growth net purchase which the loan gain quarter share earnings for change to to generated totaled totaled for origination compared segment, first by adjusted remained fair income to volume while it a billion million, volume driven all loan value strong. Net assumptions, origination in of sale over per $X.XX on we model and share. per inputs or the year-over-year Starting the year-over-year Adjusted revenue margins billion growth while year-over-year at of on of of to quarter, in representing Bankers sale X% due year-over-year XX% XXX% originations $XXX our on net totaled origination XXXX, points. the to up increased loans. from average income net with the compensation contingent grew basis the acquisition XXXX, excludes million related For quarter by of liabilities stock-based revenue loan the driven volumes. fees increased $XXX on was MSRs primarily $XX from closed million of $X.XX XX%. grew XX% generated together, with originations adjusted through basis Pull business year-over-year. income, $XXX Association volume to locked in $XXX from locked million the XX% diluted year-over-year growth and net and quarter, million $X.X Mortgage And margin X% quarter. million Segment adjusted Gain Putting points, by XXX higher pull-through of segment million. XXX

Servicing our grew unpaid to business, XX, as March $XX XX% to Turning year-over-year principal XXXX. our of balance billion

servicing the adjustments. prior quarter, XXXX largely by value income reflecting net attributed with $XX suit, fair quarter $XX turnaround XX% to the first to a a loss favorable year and of other million $XX MSR in to fees compared segment in of total increased loan million, servicing year-over-year Following the million totaling for

sold Importantly, the market growth of of total we rate sustainable across a quarter drives our backdrops. model in for business further rights that loan and interest retained XX% variety of reinforcing servicing symbiotic first XXXX

to our our as long to Our of lines shareholders. strong billion XX, March credit of of balance with remain unused and $X.X for warehouse as on funds lines $X focused billion We down term million liquid XXXX. as with well sheet of allocation of value cash capacity and highly remains warehouse cash used excluding capital $XXX equivalents, pay drive

about Class record Class on payable In XX, common XX, addition the acquisition, Directors and per the May or cash stockholders originations, funding to $X in Board XXXX. of reinvestment on of our special May to declared and of B RMS the business, ongoing XXXX a dividend share A

looking While April several ahead, From challenge billion origination for XXXX, perspective, To volume we others forward-looking billion. the activity continues to macro and providing $X.X in was factors we industry many as likely loan adjusted total for did soften $X.X do a broadly. update are rates want second on the as growth locked through have pull interest that provide our mortgage to communicated, guidance, approximately more point, anticipate prospects we not an was near-term And volume rise. the industry quarter. refinance to volume

demand as competition to profitability. now sale and Turning trends supply remains and margins will likely normalize converge Gain on intense.

growth with is existing specifically, are long-standing our term we and retail cycles, we on gain impact and sustainable scale turn. remain these purchase origination platform near said, model partners More referral enabled macro and margins, different interest compete volumes, origination our clients. and reflecting technology rate reinforced to expect across we will differentiated confident trends which stack. combined track on our across expected and purchase XX-year cycles favor increasingly proprietary We are our not relationships and industry to purchase past our business immune sale revenue with by leverage distribution delivering service, price record, Moreover, That that business volumes headwinds, volumes focus in profitable earnings. as not

on has retail to historically the relative margins gain and channels. driven higher the channel Finally, sale correspondent wholesale

exciting mortgage residential back to discuss me services let Ann? it our Mary turn Ann to Mary now, acquisition. So

transaction residential represents acquisition the and announce think from provide We to of and compelling and will some of financial pleased We're transaction the a Terry Terry. services. very attractive is Thanks, of I highlights. use mortgage strategic this perspective a capital.

Let increasingly XXXX me start by and powerful which valuation X.XX equates multiple. will we emphasizing, believe a with upfront and purchase combination in-house cash Guild's RMS as leveraging and scale, technology, upfront consist estimated X% forward. market this share, of be we The earnings, accelerate attractive platform is times in move will to The that earnings is stock. XX% growth consideration to profitability accretive price to an originations

addition, And profitability personnel business. segment transaction interest. hurdles. XX% the their is the includes third includes continue to In out production More expected run our and key that XXXX. RMS's transaction quarter management to RMS's earnout consideration earn close pretax structure capped in of will earnings an is subject team of This three-year specifically, the at to minimum to the component align

X, transaction highlights. Turning me to the let walk through Slide

and for growth. prospects repeat leading will impressive be extend capabilities, Northeast geographic in RMS's position our client business. thereby servicing and technology RMS of length capture leveraging in-house the extend our footprint complement Guild's into will First, By enhancing relationship key better to meaningfully the expertise, and positioned markets,

and a continue volume respectfully. post as highly originations Similarities position purchase at to through business RMS's United with allow centric the us retail or a XX% aligned consistent origination have focus and provide XX% their channel. XXXX, purchase this and strategy the us Guild of broader mix well XX% durable States market across RMS. in on a We is and to business and efficiently and for approach RMS, of XX% percentage clients higher terms Guild's, than generate Since client Second, margins the total will averaged volumes experience believe consistent mirrors close. to integrate in

as standpoint. Third, earlier, financial I mentioned compelling very the is from transaction a

to the excess per alignment share. capital. an and represents return strong a culture a trusted on the supporting liquid communities cash we building and Fourth, opportunity generate strong to sheet leveraging XXXX are both to transaction local be We dedicated client teams invest accretive expect balance great our earnings to with deal attractive to and relations. There's

will and Our States. clients across memorable provide the with integrate similar a RMS Guild efficiently United values experience enable to customer

margins time, finally, M&A proven successful our reinforcing our gain strengthening for over we to expense seventh Next, further acquisitions and record. proven sale expect disciplined enhanced XXXX, our and M&A realize on this synergies is track strategy. generate RMS since And

retail offices it's Seeley independent and number team. Maine a in Hampshire, in management RMS one Northeast. Mid-Atlantic and President James Slide states. and maintains and New XX XX. by is the company XXXX, led to across strong And RMS the Turning the Founded lender has strong purchase with CEO, in an New a tenured lender presence England

over at in XX origination growth of of years, an XX%, even as billion more last volumes rate banner the shown the and Origination loans for consistent net company's and a XXXX mix originations with While time. $XXX strong RMS, XX% impressive have over of business year is total for than Appendix. volumes was annual growth compounded the purchase of million and $X.X income, have accounted more while

we So, expect [Indiscernible] in teams. servicing summary,

As and long able growth term a shareholders. confident we're being for in to deliver value across profitable result, even more drive cycles

to that, So, over will Terry pass greater in detail. I and to back with the business discuss it benefits financial

a firms customer ongoing some Thank excellence our origination corporate acquisition as disciplined and relates you, two similarities walking to distribution upside strategy, high as perspective, business I our cultures. the volumes, even earnings this an integration new will and local rate focus, to smooth want leadership, anticipate expertise. with and orientation acquisition financial presence under the standpoint, level, strong At to facilitate specifically, interest over process, strong from margins, it and marketing synergies earnings a transaction we well is these across the XX. From attributes given We be growth expect believe operational shifts. reflecting strategies on RMS through execution deal to cultural a brings potential Mary region capabilities driving into for a as time our scale and channel mixes, Slide there Guild's sustainable consistency spend financial in fits proven and markets, Ann. we and a backdrop time in highly More service purchase strategic great RMS alignment. of firm's immediate for creative

already you strong ROEs strong on XX with And us the opens attractive can standalone up in Appendix. on previously has sizeable the so last for basis, years market XX generated the transaction Slide and untapped Even a maintains growth. potential the and consistent RMS as growth upside see for RMS a over

after geographic and over to RMS acquisition. the out XX, our Slide Moving maps reach before

RMS locations, officers we lay clearly RMS loan the competitive nationwide approximately the retail counts add Through officer further branch of the XX, and in XXX enhances strong acquisition presence and how our XX across adding bringing On than in core growth enhances more prospects. demonstrated, in As transaction, loan Northeast. our provides foothold out competencies will to the a our branches. and mix leverages XXX XXXX total positioning Slide our we

on Xth combined shown given strongly mentioned as RMS's for strategy. mix amongst business of billion more focus mix Guild proforma with for footprint earlier overall more acquisition, down on in are margins essence, believe originations XX% interest which left. we consistent retail RMS points last purchase with retail with rate to of purchase Proforma channel accounting and bringing above December market on retail earnings lenders at the volumes, Guild's ranking As is market the loans channel the looking on gain the origination cycles. period XX%. purchase attractive XXXX doubling XX, $XX RMS's XX% we the or its generated our at non-bank the five-year across bottom the chart drive XX the consistent In year, sale will ended And percentage aligned XXXX,

through disciplined collaboration. and Slide as broadly, to have a innovation, strategy growing to on proven acquisitions and We look our shown history with of XX. that share teams values and creativity track management record we with partner a targeted More commitment

we focus maintain component sustainable positions implement executing driving prioritize a them plans that driven transaction growth. We have post-acquisitions, efficiencies, to And approaches to while also strong markets meaningful them and strategies optimize to in and key of to on companies successful. interests maintain allow with made that on investment. attractive continue clearly historical as continue We on operational structures earnouts we incorporating to align return integration local growth defined

of key growth strong component strategy post-acquisition. is Another in our meaningful driving realizing synergies

back last each XX increased acquired transaction the second and of closing. the XX% origination Looking over and companies averages years, XX% the six volumes third years, by across following completed transactions in for

we Finally have timeline Slide shows acquisitions for XX the since seven XXXX. the made

While varied increasing enhance to growth able on technology the realize enhancing and leveraging sizes, terms footprints platform margins, Guild's been efficiencies, and in include sale synergies. expense proprietary contributions, transactions Drivers consistently market post-acquisition. improve volumes, of and to share gain we've have

on currency continue leverage to sheet ample and arise. our they capitalize M&A accelerate balance expect brand strong further to public to to with we opportunities growth incremental ahead, should capacity Looking

we CFO wish Before take Amber, and baby wanted questions, we to our well. her new

will back up I for operator turn to that, the open it call questions. with to So, the Operator?

you. Thank

[Operator question-and-answer now will We the Instructions]. begin session.

go from ahead. question Fandetti Fargo. Don Wells Please First comes with

Hi. Good morning.

in held if in about So, about near-term gain up margin. top was the I in on of talk gain forward a margin April. sale interaction March. talked peers QX have a pretty volumes, looks going could mark in outlook like bit on well you that adjusted And wondering little a lot significant

is question. as industry as we industry margins following the capacity just, tightening, Sure, getting I back normalized getting are the seeing with caught that to take can are levels. far is up Terry. the Yeah, and This that

to on similar levels. is trend about sale expect So XXX basis historically, in we type see we've outside that, that periods, to historical points of that averaged refinance and of gain our we're starting

plan rather it. be going And then dividend? see on forward the Got quarterly dividend, ongoing that a dollar dividend special special the is that's to the going than sort we'll of

Ann? Mary

Yes.

Okay. All right. you. Thank

Don. Thanks,

next The ahead. question Please Rick Morgan. with comes go Shane JP from

what periods trough where resetting period historical you just and demand? for a saw during supply really actually terms we my you question. norms, things historically of a you we have the you in seen do terms exceeded normalization Thank further, see exceeds gain bit sale we like upon little of Dan sale. equilibrium explore on where to that hit taking And of think a could it, just equilibrium, Two --where on in reach as is gain

forward on sale. giving on not We're guidance gain

was However, say I on mark. that points average, extremely would mark. again, But consistent about basis low at we've overtime the the historically, below probably XXX been the XX XXX

Got both to and I that, willingness context, that helpful. are is some also appreciate your both provide it. guidance not And

composition of a sale, the well? about MSR mix shifts, should shifting think of as As and bit little cap in we terms that gain cash on of

be rates I up. MSR say the of rise, would goes case. Because would that the value the as

our to that are the So, increase. the slowing increasing of starting down, rate and we're speeds already values value, MSR prepayment because seeing the

the somewhat MSR will side. it bit higher change a little weighted to on be So,

breakeven? then that reach we cash think and when of of on just And cash it. we flow a How expense, can sale or is - we your a gain mix, from Or reach to commission? about cash perspective? level about going last it point sort think that should about Got commission do the below think question, you a where just is you

never Historically, we've point. that reached

Thank congratulations much, great. to you, Okay, guys and very Amber.

you. Thank

go from question JMP with next The Please Trevor Securities. ahead. Cranston comes

thanks. Hi,

RMS just point tangible tangible built clarification, equal the of book Or value? book any just and first, the expected mentioned value, book is company's premium price sort into there to So, is on when the price the purchase you a acquisition, of to that? purchase

cash $XX that a book. - is million tangible we're premium premium There about paying book,

coming Okay, I book got you. acquisition? servicing over of how the their or is, large And then initially will how part much be how of that much their portfolio as

approximate million $XXX a have portfolio, so they it's very servicing Sure, small.

the Because and outside MSR in we So, will at really sheet days. inventory turn a of balance is really mostly balance XX this sheet multiple looked probably related, entire earnings. as of transaction short-term the their

it's really an So, earnings play.

recapture makes out to attractive the target you sort mentioned they for to I of in guess, sense. the historically why companies guys is time really that, doing? that's an to that expertise has time, something part RMS guys been guys of on? combined to that And over synergy a Or able have that the as expect you go realize you a service? been Thanks. through been And recapture you they've think the guess over come Okay, is and I was on been able business it after. bringing that has synergies similarities be for to not you company the company you the laid And as focus the

But that fair hold they I - like going with they synergy we forward. But have We can a have customer our they portfolio, and Trevor, to our have our a CRM with connected they their and the technology relationships forward. this that. just customers strong recapture see since we don't that purchase benefit from see did a ability life see Ann, amount synergy feel very as they transactions, have and they platform going is that of answer Mary CRM technology and of and don't And the that such own loan, and a as strong refinance don't as a we do building through have we relationships. from will stay positive platform.

a Yeah, on servicing to add sell And sell business model to basis. Mary primarily point, or basis. been release to on a the service Ann's their has flow

release. issues servicing has there retaining they some small, started their liquidity their long-term but to some March, in was plan when was So, so service just back volume, been

at life of that are they be life of and drive that's just life super their business that, So, of for a growing to loan customer concept. that part to excited to super, huge get able to like Guild feel they be And going forward. such

So, we're really excited.

that sense. Thanks Okay, of makes lot the for a comments.

questioner Giuliano go Compass Instructions]. next Please Bologna ahead. is [Operator The Point. with

the Good and used housekeeping morning, a be acquisition. of is little and congratulations with sense the great the pay period? how lines, Mae currently there's a cleanup down types cash and then, the with topic more the is, to any bit what just of contribution much is? similar And if EBO of warehouse your MSR of on and starting kind quarter get a Ginnie guess being dividend of kind questions. off productive in liquidity also curious to I lines, I'd total

Sure.

$XXX of and at So, end on our warehouse side was buy QX down million our million. the the cash $XXX was

cash total we year. and So, that actually about if you $XXX down our million, financing then of at our the end MSR the paid add is

at is XX%. MSR leveraged our so, And about

capacity there to lot a we've got of borrow. So,

like very have we in liquidity lot good still we levers And to we a needed from So, of a get perspective. shape to different feel if we're it. cash

And where we're we're comfortable at. we feel very so,

of be selling they've it's the service outside basis, margin not production margin some their obviously, volume, over there's of very Then I that. from curious been opportunities. I'm I to MSRs necessarily acquisition maintain kind exactly an historically. here. are sounds a the would forward. if That margin recapture can with margins numbers there majority it's change. impacts just - are opportunity et there release switching Guild Obviously, necessarily also then perspective, to increase for our the of there's quickly. curious And Because the to the for out good. hard play into and end retain to going But also earning cetera? say So where back the those different that will opportunities forward on that is by ability servicing, factors come realize having is

improve we the and by servicing. believe good Yes, to side, a execution retaining there yes, secondary on is opportunity the the

been well And to RMS. minimum able improve a So, XX- we'll acquisitions. we going in as able increase with with points basis at forward XX with execution the past, do the to by we've be believe past that that

think, on some a that for and I back think, decade has flow taxes out cash and that around so pretax of origination basis, Guild's or going I been they're release. of kind how position be something the and curious That's on servicing historically, positive selling versus kind going there's service - some also past similar of they to retain your shifted RMS they I'm if mix if release? similar of over if and in position a in would

eventually Yeah, their time, we Guild we business over look mirror performance they will that And we're very, else and when believe is mix to integrated they everything Guild's like we and in fully have. that very will believe Guild's. comparable

Yeah, our the to platform. Ann's point, transaction in end to you integrate keep the take completely it's to that to is feel a year onto them got mind through we this of going big us and Mary

based Guild's to platform, going once then and execution experience will that we're experience retaining, gain on completely sale through So, the end transition. on to the margins our take they but they're the it - will year on of

quick was Ginnie the there's you see recurring? very if quarter, Ginnie Okay did contribution on, click in a great. then or Mae And just there Mae EBO any that if

Ginnie mean, You contribution? Mae

the of If you're, From early buyouts? some

for number the got of amount loans, We did increasing. amount I've been this buyouts been. loans yes, get I'll decent a is has of there but quarter. we and to that respond can it look were early us, we to first have the for has but bought there you. number Yes, at I decent

growing. So, it is it yeah, is

material. But it's a not

XXXX QX QX it $X and million. It [ph] I million is. found to for $X.X of was it. it compared here about Yeah, a was

now. and very appreciate and time I'll in Amber. I helpful. congratulations to queue back really jump the great That's

to concludes conference session. closing This McGarry, CEO like to over would question-and-answer turn remarks. the the I Ann back Mary the any for

your Well, time interest. calls. future everyone look our progress discuss to thank for continuing we forward Thank and you. to you And on

call. conference today's concludes This

your for you have You Thank and may disconnect lines. pleasant a participating day.