loanDepot (LDI) 8 Mar 232022 Q4 Earnings call transcript

Good afternoon, and welcome to loanDepot's Year-end and Fourth Quarter 2022 Conference Call. [Operator Instructions].

I would now like to turn the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. Please go ahead.

Thank you. thank joining and call. everyone, afternoon, you our for Good loanDepot. Relations I'm Investor at Gerhard Erdelji, Officer Today, Depot's discuss we'll Loan results. quarter XXXX year-end and fourth

volume, pull-through this guidance statements and deemed but financial pull-through expenses. gain current rate Factors with I remind in could Risk sale future weighted These are forward-looking Before be like statements, due Actual may performance on statements available our statements of to fact, regarding the conference other risks company's not SEC. section forward-looking are periods All that that than results statements to and operating begin, including, include that origination historical described call limited the forward-looking company's differ or we weighted the in volume, our these factors filings statements, margin materially for future periods. to, may the are and of based would lock everyone expectations to statements from information. on other

and and A Events on website the under a be at investor.loandepot.com Investor posted call the company's will tab. Relations webcast Presentations of this transcript

our our On to and outlook Frank an as Patrick Chief Officer, your President we Flanagan, Lone and financial as questions. quarter and of answer Chief operational Martell; Executive to Financial overview well have today's and call, Officer, provide Depot results,

remarks. after prepared Jeff Mortgage We help are our also joined address might by Officer, Jeff Walsh, to President, have questions our and LDI Chief DerGurahian; Investment any you

Hsieh's Please of note that we notice. taking regarding not will submission questions be a nomination any Anthony

started. to to us things Frank? over turn I'll that, Frank with And get

and outlook. to sharing us joining all conditions, forward Gerhard, my our look and market you, Thank you I for thank perspectives our on results today.

supply-demand impact cumulative of by housing years, grappled and for over increases was imbalances well market you price loans. in high depressive left of as the of dramatic cost of in to as mortgage appreciation broader Virtually participants with This unaffected of of no incomes. extreme structural a the and rapid available was substantial year the and home all the the last by housing household significant know, was as markets. housing home the As five compounded on ecosystem challenge four home inflation part driven the XXXX impact volatility and

The downshift the had XXXX in and XXXX. inherent well industry as to capitalize greatly was the our impact address launch once-in-a-generation medium-term shifting lower announced in activity of loanDepot to process that optimization, July of accommodate To this opportunities most by their strategic longer-term XXXX high home fact on to magnified as of market the expanded technology levels participants impacts short- historically of Vision demographics, activity, operations in XXXX. to we enhancements position buyer of and plan

Vision to money recall, transforming with operating as first-time for internal X X as emphasis targets. purchase conditions and aggressively calls rightsizing XXXX market on and homebuyers four focuses expanded has originations drive may cost you performance to on pillars. line with well As business anticipated structure diverse in achieve our current Pillar servicing transactions Pillar our communities.

as critical well platforms quality optimizing support relates Pillar our exceptional leverage X operating business finally, to and X structure. And as profitable delivery. growth-generating processes in covers and investing Pillar initiatives organizational selectively to and

areas on made the well as the focus remarks on as will some XXXX my and Pat balance XXXX market focus today significant our and context details in in our we've to intend his of Vision provide I in additional XXXX. prepared progress actioning remarks. pillars provide financial in comments

other financial putting We into key a to creating laser resource through homebuyers long-term and shareholder on first-time purpose-driven trusted be focus loanDepot a believe servicing homes revenues, durable making homebuyers origination our value Vision decisions. a XXXX mortgage around when and and unique first-time communities. footprint customer's focused Regarding focuses on home diverse positions ownership that

leadership unified accelerate and XXXX. continue the origination our of implementation and of centralize Vision We functions sharpen operational the focus our to channels to

simplifying we centralizing on as of In HELOC the launch in of during our revenue-generating recent as this growing organization, outlined our well and XXXX. venture. also include addition our formation the opportunities, focused the Vision new Examples to of most strategic fourth builder solution joint which imperatives quarter the fit

Our venture to We're high-quality business channel joint growing to a unique it. very is that continue in going customers. generates invest

volume. investment quarter, fourth of demonstrated this our delivering JV strong the During channel in benefits team year-end the by differentiated our

we drive In process servicing quality, higher regard, also which we compliance addition significant important and customer our to XXXX. our levels made onto to completed expect In portfolio course growth, satisfaction and of at lower delivery, investments in bringing management the of of over the loanDepot driving its loan in-house recently risk this profitable capabilities mortgage costs. platform,

announced workflow new operational platform, also in loan our deliver and We technology and processes. we which investment state-of-the-art to origination a efficiency expect

initiatives. added we management quality help compliance Finally, new our leadership drive to and optimize capabilities and risk

a mentioned remarks, other to its of of expenses our by dramatic to and was goal at the amount announced structure. every had I for Like cost start we year When $XXX XXXX, reducing million million. change market. Vision of the my loanDepot established mortgage the $XXX XXXX an As extreme reset annualized of participant volatility we

our speed synergies targeted come and downturn this in-house. been. reducing The has for portfolio bringing to in reflect investing how realizing our footprint, bias rightsizing of costs, unique and Lower from of costs reductions sizable staffing operations, servicing implementation and estate our marketing market shrinking just the were real expected consolidating size efficiencies operating from levels, our

go a down second are results goal. quarter XXXX of Today, I our overachieved but $XXX will expenses minute, million annualized. $XXX detail million XXXX over has confirm against reduction or in can the that our team more in non-volume-related our Vision since the over expense Pat

remain and respond quickly our We believe and model. We market costs operating optimize continue challenged to as must plan to that the will vigilant mortgage remain to conditions we XXXX our evolve. in reduce

benefit platforms to continue well to from our industry invest With believe ongoing positioned in consolidation. a to people we we our and balance, as sizable well cash are as

to doubt, also was thanking I progress today remarks by a their period was other very and prepared important key it and conclude for want stakeholders but Team loanDepot of challenging change support. XXXX for my progressive a resulted the difficult in generation, of one our significantly which very narrowing has a reset backdrop in of the of our structure, we have the most company. losses. housing Against cost markets no operating

and aggressively profile We our purchase solution towards our have also shifted builder HELOC joint most revenue ventures. transactions, recent launched our

reductions and a valuable hand, more we the and downturn far, navigate cash current With over in approximately so through believe in rate positioned identified on several $XXX run new to and cost growth million market company. flight, vectors million are $XXX we stronger emerge as in

I Pat, QX through will financial the and to over With detail. turn take will call more year that, us full who in the results company's

everyone. Thanks, Frank, and afternoon, good

volume loan was end $X of the guidance decrease quarter, issued billion, quarter $X fourth XX% was the billion. $X of the of quarter billion third last a from of and XXXX. we During the high origination between near This

and in cash-out Fourth consisted loans, of in refinances. quarter primarily volumes just $X.X billion transactions billion under refinanced $X purchase

$X weighted volume rate-lock the revenue fourth in billion of Rate-lock guidance resulted the we quarter issued billion. of volume pull-through from a for last quarter. which third $X billion of $XXX also to $X represented came Our decrease within quarter the million, XX% in total

decision driven result and pull-through of volume year-end revenue to rate-lock volatility The seasonality of channel. decrease weighted primarily markets, a the completion quarter-over-quarter is lower exit our the wholesale ongoing interest in by in from rate the

sale provided. gain weighted basis margin pull-through within XXX the quarter guidance the in points, Our we for at fourth on also came

Turning now to our diversification and servicing areas of revenue retention focus. Customer portfolio. remain key

began agency portfolio our we month, and the to achieved last in-house of revenue early in our our to allows servicing our transition, enhances diversify goal of which operational and company This bring to XXXX, Mae loan As Ginnie streams. efficiency platform.

business, our through our invest the -- origination strategy will continue With journey entire servicing complete, mortgage the entire complementing customers to in-house transition we journey. mortgage to in serve

marketing enables by opportunities us and customer diverse expenses additional time a products to across our set revenue over of acquisition and services. This capture leveraging

The quarter. the due unpaid billion quarter. XXXX. not compared December as the $XXX XXXX, of billion primarily increased have as increase the any portfolio did balance $XXX XX, servicing boat was September sales during to our of net of We This to from XX, additions during principal portfolio to

the the the quarter fourth balance was of XXXX compared fourth of to million the servicing average Despite higher from third portfolio during quarter the to portfolio, quarter. decreased in This due larger $XXX in fee million $XXX XXXX. quarter of to income third the

If you year. early last recall, of MSRs sale had a we quarter third bulk in of the

results hedge We record value and impact our servicing believe liquidity. do this We the volatility not operations. of our of in in portfolio, full strategy against changes the protects and earnings so fair we

positions Our our the in strategy for adjust is we servicing rate reaction dynamic environments. and portfolio hedge to changing interest hedging

in protected well against We believe our servicing potential the defaults marketplace. portfolio rising is

rate coupon The to was times. contributed average during portfolio points loan age average score of a of only the ongoing of months, X.X% was the average the uncertain year-end basis characteristics weighted and generate revenue more XXX. economic XX XX%. these and only end the average FICO origination at past days at These should was the due than delinquency low December, As was XX XX weighted reliable, with loan-to-value

expense our A major lower and will approximately and component performance of operating the trillion XXXX, result market. total and base this in origination believe to smaller expectations that align create in financial we plan mortgage over volume been expense base for We efficiencies improved our shrinking time. for our will was leverage believe our we've with Vision XXXX market much $X.X

volume-based Our from marketing by salaries lower total expenses and quarter, XXXX for expenses million by lower including driven or $XX the the XX% lower personnel of prior quarter G&A decreased primarily both expenses. and fourth commissions,

origination since volume-related and and of the expense consisted reduction of $XX Vision million Our direct non-volume-related of total in commissions form expenses. lower million of announcing XXXX expenses expenses $XXX

the million of of by annualized XXXX. to the of One to $XXX goals for non-volume-related plan expenses an million $XXX the XXXX was second Vision reduce half

related our entire charges incurred Vision million that XXXX XXXX hard including totaled million exceeded by fees. we $X of included quarter million of by charges million. fourth real team, Thanks and of $XXX in The third to expenses expenses the of XXXX Vision an personnel-related $XX million. million, related professional costs, the quarter non-volume-related work Vision annualized reducing totaling exit $X $X $XX estate of goal XXXX

real of our expenses costs third-party headcount primarily reducing reductions, form in we Vision additional other estate consolidation charges. operational and expense with and functions additional reducing reduction continue we the some attrition of While and will achieved XXXX redundant target,

Total expenses due personnel fall quarter to headcount. to of benefits the lower primarily for our continue full reflecting first the lower costs should

low the We the quarter related point expenses expense XXXX our Vision efforts reduction expenses. first full shrinking for of mark expect reflecting the XXXX, will of and benefits

volume-related other home in increase origination buying Looking we activity. expenses higher quarter, commissions forward past primarily traditional expenses, expect increased seasonal driven the first the and by reflecting

billion. the origination Looking volume first ahead between to billion margins, $X and expect we quarter and of $X volumes

lock and weighted pull-through volume sale we expect pull-through points. between quarter our of expect billion gain between billion We first XXX of XXX $X and weighted and on $X margin basis

million million what market management reduced sound tangible In forms light relationships operating of preserve and equity, support on investors. various sheet are normalize. in current $XXX losses keep the believe gain industry-wide our XXXX and conditions, entered will with strategy place cash our $XXX balance of We excellent margins partners are cash of we financing sale unrestricted until other our capital, and of financially of agencies our the and

to Operator? it With operator answers. the turn ready questions back that, we're to and for

We'll go Suisse. Harter, Credit Instructions] to [Operator Doug first

at if little basically this all. point XXX basis about your hoping you was I margin at for gain a points on a bit talk that's could

hear I'm sorry. not the able to question. Lisa, we're

Harter, unfortunately, hear Mr. cannot we you.

Can now? about you me that. Sorry hear

sir. Yes,

retail yes, the on some I basis gain wholesale, it hoping around points sale peers business higher. detail seems margin, the XXX more guess, are So like midpoint the the exiting for around in just for

could hoping that help margin on you context that where might put ultimately out? little around just So and gain settle a more sale

margin we that in so gain quarter. customers origination think activity first the loan to the remain originating the expect, and pretty market as steady sale that Thanks, Doug. our for in said, Yes, we for that we're I profile the of on think reflects that

differences are mix origination and are others the concentration think in where the I geographic marketplace. largely of

about cash talked that is liquidity of you to in continue of comments, I your guess, of near to kind structure run going to leaving probably term? in the levels that in place. the think you're kind I then of kind And mean of Okay. kind high

Yes.

for has I few think the as sheet same management our remain will last the been balance it quarters. strategy

kind of additional Okay. that brought in-house, you grow of sales you that it And MSR thoughts the would or what to to around all now look about try portfolio?

to economics searching and do allow to so. business Yes. of The increase to portfolio, MSR are we'll business us the us, don't as look important the and reduce assets the it expect to that selectively and we

Thank you.

Your next question comes Sandler. Barker, Piper from Kevin

on Thanks this taking Capuzzi Hi, question. Barker. my Brad is for Kevin for

on then view cost achieve have feel reduction, profitability? you to be do other comfortable up be you'll able side you able a significant you'll And the cycle? the to the on when Given do scale of

Yes. Frank. This is

-- expense structure think I as I think all, team our significantly. we of said, did I reduced great job, a that, first the and

I out Yes. think grow can of are we the confident that we cycle?

I think absolutely.

we think said, I as challenging I anticipate, very a XXXX.

we and but can actions also and that where the committed market So market very we on market have downsides, remain focused we to investing. goes, address are the

We have in-flight investments and the when efficiently effectively. certain help that grow making that returns will we're to us market

me. That’s taking for for Thanks question. it my

comes question Kyle next The from Joseph, Jefferies.

for Thanks taking my question. afternoon. Good

to need you in supply really mortgages, industry. we obviously, that? up Has level, for demand? the stabilize that's high Just your to demand caught from up catch for with would know perspective, Or with supply rates just done

think capacity quite come we've out would quickly have Yes. I as seen thought. we don't as

that's in prepared I going would a there's forward, capacity I And happens. of when our But reduced now. beneficiary reduced be room occurring capacity it hopefully think view. still for think we're that

then that the -- quarter What X of the at looking loan mix follow-up or loans. you released of think servicing $X.X that like it. in-house, in that servicing just going $X.X you forward? is looks type sold and Got clarification billion billion just loans those quick do now guys of of the And

quarter I servicing bulk was a servicing no think sale There referencing of the that were fourth you're quarter. third in sales event.

Davis, question next Raymond Your John from James. comes

JD. This is on thanks for for Taylor question. the taking Hi,

on start you gotten feedback the first Can expectations how your rolled launch out? you've far has when talk launch. the gone to just and HELOC the maybe about versus it Just so you

This customer just forward, see and XX% and more product created expanding meaningful of volume get opportunity. those the part consumers more We're kind having from Yes. portfolio. been terms The a not in revenue is business Jeff in market now well. we opportunities the kind in the of the the going of the going of Walsh. term, is long-term We've also of launch short becoming the our and but the in offering, that

to It's ahead schedule. Vision are cost Great. Maybe XXXX more. one just of see cuts your good

additional your the you've particular restructuring any reduce have through As in cost of gone exercise structure, area? any you to opportunities costs found

Yes.

continue efficient. every there's and I data -- opportunity think I think look, to always get more to cost, reduce we

longer I and in short term think term. some nature are are some

right was think I the going on now what cost-cutting XXXX. doing that mirrors in we're

the to though, we're new excited term, us. that's the to that really recently. for opportunities longer significant and longer We LOS going but platform quality think other announced I about cost was think medium generate and efficiency, reduction that term, over also

investments So there's one just that's of we're others. making, many example

we about cost we feel make the now to But are is think and of we right I momentum market right what's I think and continue last cost actions market where at will how coming really and year think, good look So evolves and important, good plans out the that accordingly. we have now.

Thanks. Great.

James Stanley. Morgan from comes question Next Faucette,

my is Thanks on for taking Netter the for questions. Blake This James. line

refi the the out was HELOC volumes. trending your renewed you on you has out I'm purchase launched in given your of XX% quarter, quarter market outlook kind your refi cash focus and fourth product? so of and So first how baking recently for are what far assumptions about been that wondering the into during cash

Yes.

inclusive would significantly less -- out out out that that is steady are product mix expect dependent of finding we're rate from refinances cash quarter that debt Pat. cash are sort many as HELOC cash those is or consolidation. many fourth pretty customers And this and origination total. benefiting that of through is refinance remains forward. And So going the I The included the in that of

expect the steady So remain it to I would mix rest of for the year. about

as And lenders lower the and easiest average scores out to so refi spectrum. like moving that interpreting declining purchased the speak it. of parts while Got been are people credit of follow-up a relatively it some so quite have quality Industry-wide, out down past are looks like over to materially kind remained already cash FICO flat, have quick finished cashing mean on the to borrower, have loans the that. loans to year, and

seeing cash outlook? does of this in refi opportunity how And less that impact that? space any wondering I'm because you going your out forward are

To this of I meant when some maybe I serve the is to some the -- think those HELOC Jeff. think FICO degree, shock is borrowers rates. that a sticker product higher see they current have of

rates are adding which than higher current forward, their think to are I rates. continually even mortgage at stack, going consumers debt

So we first it's to whether out. cash that option, continue for or expect this borrowers to come HELOC consolidation to lien us see

Thank you. it. Got

William Napoli, The is Bob next Blair. question

trying Hi, color. guess thank little to I you. more Good get a afternoon.

the think liquidity thing can maintain book and protect you is turns. the here important value most to market much as your I until as

mean going may looks rebound Now for you know, market in market like rough be for XXXX, not be to until, higher longer. to a have rates prepared. we it I is mean, don't the I interest I longer, the mortgage get

How much get this How side. you cash around get you're burn, for are at way, about so you you a expect have the profitability I that? to to do you mean, thinking -- have zero to other or market, cash

do on you So are much your thoughts have? How what that? room

And you flow seems tough get question and in done done cash tough market, a like flat a reducing great But I least job market. you've to this more generate at it's how -- to to -- it and has you've can be really mean, where expenses. done free

are mortgages you that you you interest in benefits years on of so some when the kind do of think mean high a all how couple have I room from a refied these this rate So now? get market, how much color can I when --

question, good This Pat. a Bob. It's is

$X.X to lower trillion sort first for a the that of significantly prediction the most other year. than is thing probably is market recognize think forecast of our I

So get thought started even had we've our building process we to last base already much a market smaller be back able to expense of than that in profitability And to year. are we'll that have -- do we'll to to we to the starting and closely see watch see if home -- some materializes activity, pickup and spring. purchase in seasonal very through

other think We'll protect of a as balance stabilized significantly we to we -- percent normally total would cash than are I more liquidity. market. carrying continue assets in a higher the

need that additional have of that we've the access equity to unlevered so -- allows over and We we in market demonstrated conditions to expense the amount have will and ability significant outperformance But more us a of should I focus we our million than MSRs $XXX adjust of capital is the $XXX on and last representative that. of cuts year think million it. to

the the size is Our cuts necessary down the made $X $X.X be along market that to trillion close original would way. and We adjusted view trillion. to expense

I remarks and on the balance current our we'll so cycles. would and have we to that discipline continue my market earlier, as adjust focus management keep And sheet focus business, liquidity. to maintaining going we're say on And in we think to that strategy

to in breakeven year? perspective financial income market a the from Can this net over you next get

Yes. actions. our solid selling planning as a don't out, in we're continue will conditions. we volume. think we'll spring. to in $XX neutrality we're my I answer. taking planned you I the prepared And market is we flow to in we're don't drive and on right think -- depending anybody And said, in I adjust very as on stated, I as the year said a And prepared season low we remarks, I cash a pointed certain the but toward market taking uptick which see hopeful Look, have any And we're we does, think Pat I trillion, this think as a market. profitability operating

to we strategy management a be that sure. activity it's managing a cost liquidity, continues through function market But we'll very I in this management and have market, a Vision certainly cycle. the looking management we rate generation continued and of cost and materialize, roughest prudent a have under getting just activity. us -- to run the think through the the will But sound aggressive capital and the doesn't see It's for at Star be That North profitability XXXX. market

Thank you. Appreciated.

session. to or turn does closing for Martell, the I'll That call over Frank back conclude question-and-answer any additional you remarks. the

Thanks, Lisa.

value company, insightful our you So well, your to today. of everybody creation your keep we'll the encapsulated of we of a today. that and XXXX. On Pat, continuing We time appreciate rest is in and your really to progress, really Vision term both loanDepot, for and thanks, in us the everybody, and the Jeff, all short and interest team the a and thank I for Jeff support continued and on questions shareholder continue believe plan joining appraised longer-term want behalf

So again, thanks very a great and much, have day.

conference And this call. concludes today's

now disconnect. may You