loanDepot (LDI) 8 Aug 232023 Q2 Earnings call transcript

Good afternoon, and welcome to loanDepot's Second Quarter 2023 Earnings Call. [Operator Instructions] Thank you.

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

Good afternoon, everyone, and thank you for joining loanDepot's Second Quarter 2023 Earnings Call.

periods. would include remind company's forward-looking financial in I conference that operating begin, performance may call statements future we like everyone to this and Before regarding the fact trends. All weighted sale are forward-looking statements gain including, limited weighted on our not margin guidance but statements origination rate other of lock statements, statements could volume, be than that deemed to pull-through expense to, and historical volume, pull-through and statements are the on information. These company's current available expectations based

may differ to webcast periods filings tab. under investors.loandepot.com from Investor these factors Actual are call due future & results SEC. Events the and the our materially forward-looking statements of company's this Relations section will risks that website A for transcript with Presentations the of other be at or a the Risk posted described in Factors on

well On Executive Chief our David to President provide today's an Financial your operational question. to Officer, answer Frank as our loanDepot we of Officer, call, and Chief results, outlook Hayes, as and overview and financial and have Martell; quarter

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

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

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

plan. as leadership to financial to business David partnering David our the knowledge him we David call. know and and strong well mortgage welcome record XXXX to execute like forward Hayes well I to of I'd continue to I Vision Before begin, brings a as with loanDepot. track look industry as deep

best commitment most from in downturn to the very to endeavors. and opportunity Pat he I arising public We for leadership helped last also private company helped shepherd the gratitude the take Pat his loanDepot. critical dramatic recently, the my challenges year. want Pat ownership, wish to to to Flanagan the his address company future from express this and market

the half downturn in in housing market, the of the and that plan. our first represent I out results objective we on XXXX historic Vision marker believe quarter laid imperatives progress Despite an strategic our second our

operating of As operating operating which pillars: on calls as our organization delivery; and you conditions best-in-class our transactions Pillar X to optimizing initiatives drive emphasis focuses for purchase X set in X X Pillar originations well first in July may current quartile Vision Pillar profitable with transforming has X structure. and growth-generating market an critical on rightsizing achieve business platforms anticipated business was as Pillar XXXX, targets processes finally, with performance; quality and relates line our to announced to purpose-driven investing XXXX, to recall, aggressively in cost structure money lending; and internally and support expanded and covers leverage

our was leverage. of same quarter to top expansion. quarter continue operating margin second second and consecutive aggressively At the strong time, cost productivity The sequential drive and line growth we

sale sequentially margins. Our up due or quarter, second on and quarter higher from primarily purchase XX% the volumes million revenues XXXX $XX were by gain transaction first

for all of Purchase transactions accounted in approximately QX. XX% originations

If by volumes. origination quarter, a our with associated litigation. will core results, their go in result In expenses Vision to nature, a this due be attributable operating accruals X%. legal and nonrecurring This costs the Dave quarter-over-quarter these primarily reduction excluded our of through to expenses $XX by our program to were increased expenses. variable was the settlement in XXXX including certain X% second During growth costs higher expenses, legacy our volume-related million would moment, driven or operating

in our the million accounted loss. or QX a reduction This a in million on $XX quarter. and focus leverage, quarterly for productivity Profitable $XX net first follows net in reduction growth, together with sequential our loss XX% laser operating our sequential

Vision While homebuyers our to supports the work our to are resetting pillars unit communities. also focused we of low with and on including diverse volumes, other that we purpose-driven structure continue first-time lending align to XXXX, cost generally on strategy expand

XXXX, ranked for the largest loanDepot all third mortgage lender country's minorities. as During

to third overall all ranking also #X #X Asian African is Americans serving #X Hispanics, loanDepot the the serving addition #X Americans, lender In for serving minorities, Americans. the serving Native lender lender the lender and

we the of helping the a As build and in and stable bedrock all role is vital plays know, communities. American Dream strong homeownership to

a for XXXX. critical a support of our is deepening homebuyers component our first-time diverse Vision Further and

products, tools, more lender, As to for people inclusive purpose-driven are is accessible a to digital Through create and hard team our our our path our day more working on and families. we passionate and homeownership. achievable a sustainable making homeownership every

provides which for growth with achieving the Our goals, consistent also their customer option adoption powerful financial customers our during product, HELOC strong with a quarter. demonstrated

Pillar our make Finally, to organization we towards continue significant our as XXXX outlined plan, in structure. X of Vision optimizing strides

Accounting our and Officer. Hanson Officer, Marketing During as Graeler QX, Chief our Darren Alec Chief promoted we as

executives, Officer David talented our Chief and recruited also Officer. Melanie including Human Financial Chief our as We Graper as Resources

Mortgage Finally, our division President, digital LDI we our Walsh. consolidated Jeff under LDI

leadership and deliver superior committed financial our for is team improved and entire value performance customers shareholders. and energized Our to to our continuing

key to want my remarks thanking Team stakeholders today loanDepot for prepared their I and by other conclude our support.

positioned company. important are on we present this the tangible and million for a are period hand, efficiency seeing more focus we valuable in increasingly exiting believe and forward XXXX company. stronger and $XXX I pillars challenging, our revenues no also well continued positive believe Vision strategic for positive initiatives the a operating the With downturn emerge ongoing momentum results doubt, of X believe I as through market first consistently change navigate growing plan. of our and cash remain markets very over the we Our is to on the half, but and

us I that, financial the now results take will the more will David to over who turn detail. With in call through

loanDepot. at very team good Thanks, afternoon, talented pleasure a join Frank, to and everyone. It's this

increase at the the was was This of of quarter, end quarter, which we During first last $X.X billion issued origination billion. and high loan between of an $X.X quarter second from guidance the XXXX. $X.X was the billion, volume XX%

loan consisted refinances. billion $X.X originations $X.X in loan purchase in refinance of volume primarily billion quarter Second cash-out originations, and

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

increase result sale weighted primarily The increase gain of pull-through margins. origination from in a lock in income volume rate an and revenue on higher loan higher is

to provided in second Our pull-through weighted basis came gain at basis the of points, XXX quarter points. XXX sale for the above margin XXX guidance on we

margin loan profit wider mix our a on sale a on gain primarily FHA was provision for production, favoring higher profitable to due lower losses. and Our more loans margins in shift

the to from income to now The in our XXXX. $XXX servicing unpaid million Servicing second decreased Turning relatively $XXX quarter in consistent balance of quarter-over-quarter. of principal portfolio our of billion XXXX slightly servicing million at fee portfolio. first remained $XXX quarter the

portion maintaining relationship we agency totaling billion, unpaid with a asset transaction related those of During principal monetize resulting This our us to the quarter, in rights $XX balances servicing allowed direct to the excess sold servicing gain while of $X.X customers. a million.

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

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

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

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

improve XXXX performance and base our operating time. with Vision of align expectations plan component $X.X our to a efficiencies expense of XXXX leverage major and financial create trillion market is over A for size our to

expenses legal for Vision total or the higher commissions, quarter driven $XX primarily million of Our and X% by prior This expenses volume-based XXXX XXXX-related increased the by was expenses. quarter. from second

million, of million higher lease commissions other expenses first expenses, Vision totaled quarter in Our million expenses Vision the XXXX a million. volume-related of charges $X $X direct by asset including personnel-related $X origination originations. of XXXX XXXX-related $X totaled $XX $X and -- incurred including reflecting charges. and consisting impairment million million, and expenses, increased of

During of settlement the the second litigation. quarter, legacy to related we million of accrued legal expenses $X

improvements. Excluding volume-related $XX accrual, by expenses, litigation settlement the compared million quarter, efficiency XXXX-related reflecting charges Vision first expenses operating benefits and our our of decreased the the ongoing to adjusted

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

of to will weighted and margin guidance sale interest be in points. which pull-through quarter billion our rate of second sale the gain reflects gain XXX $X.X adversely on third and quarter quarter, subsequent weighted to the The pull-through $X.X on and expect end XXX between between increased margins. billion, expect basis loan volume rates margin primarily We we reduction our for third the impact lock

Going we expect our count, lower and G&A other and costs reduce decreasing reflecting losses, expenses. continue expenses corporate head to forward, narrow to due to personnel-related

As XXXX, second to we move reduce forward we liquidity maintaining strong a plan of aggressively position the in costs. half our continue and

higher platforms, levels operating and leverage margin also additional deliver and for in XXXX. expect and which position Importantly, us in to of investing we're expansion automation we critical growth operating

to for With the to it back turn ready operator that, Operator? we're Q&A.

comes question Credit Instructions] from first from Your [Operator Harter Doug Suisse.

lines believe kind during I maturities and about -- second your or refinanced you extended line MSR the MSR the like think what quarter. Can terms of now? of talk your one updated I on that you guys look

of the deals. call. lines, We Yes. but This renew Hayes. MSR of David is disclose proprietary on specifics one Those that our don't we are the did negotiated

a Okay. just rates do kind there any or of extension? change what of general, that have in any advance maturities was in near-term -- of I sense kind guess in are, you

will the specifics issued but expand the renew did our XX-Q, were we don't the Well, and We about see on through capacity. renewals concerns be renewed we that lines some third quarter, those line. all that, in the any upcoming quarter. in more did Yes. We

how and that? guess, kind what of is then MSR sales of are additional at growing portfolio, retaining that versus about outlook point, And I Okay. kind thinking kind for you the this of

is this the earnings We company. at an the the Frank. important look asset an for as portfolio Yes, for and base important servicing of company

more in it company's and not -- And But portfolio grow would a so of selling be have targeted we part if of contemplating as opportunistic. the the servicing And in forward do, we portfolio. book that that, will do the of go we market And as we've we general, to the steady. we would lot quite like been and strategy. assets that held

then target business? the running that would be the look last one And Okay. would level feel me. of of you comfortable to cash to kind for What hold

is This David again. Yes.

focused continue We position. strong be to on a very liquidity maintaining

sheet. time We in challenging sheet balance know, a But do you X% of down navigate to the fortress at year balances some have through liquidity had of balance maintaining in being, liquidity. markets. and for goals assets sheet. liquidity the our these As expecting we drew keep we're to excess balance We on put least last the target

the Jefferies. Our line next Kyle question of from Joseph comes from

Okay.

you 'XX, the from? productivity gains it volumes on guidance, us a your a head sense give you you at as in looking are looks Can coming Just mentioned but like expect count. where XQ similar lower for

the Yes. was talked quarter. line do as being I specific it don't we count, second if the the in know on market third at kind in look but about of head we've in quarter

as the we're technology gains. A gone of is has in part redesign, Vision leverage operating area think process invest continuing XXXX. into well our productivity into to lot as and -- I which

to of gain be a we'll more ability per in terms So to of see our generated. loan type that continue productive

reducing obviously, been have are we count. addition, we head In --

and process through but We expect continue -- to uncertainty through productivity through gains and be technology expect that -- funded that to both the platforms. we largely market given the

of think may despite had As XXXX. our platform that of in we LOS productivity our gains as online that well when investments we they couple underwriting making choppiness pretty the come will market we're add you areas large and in in recall, a the significant

those are your into expenses? And and of specifically? kind the more be then outlook. chop -- it. But in And origination Got would terms there there wood obviously, is just any that which any Yes. better line of -- more kind expense in factors with to outlook, items of

Yes.

the as overhead, I talked both part we improve more we of our in well in -- company operational areas, his corporate get remarks, think the in G&A some prepared productive tools base at about and think our marketing, and platform. of sales I as as the really look obviously Dave and we

So I think broad-based. it's pretty

But and we Obviously, we most to would come seeing And and those first to have I uncertain that of I we the the to reduction in to as have very along. that they react react trends the quarter quarter programs into the market, by think, to versus address beyond. large, third -- a but challenges second have continue quarter in you're expect flight. our and

Barker question next from from comes Your Piper Kevin Sandler.

want the produce base? Right. MSR to is, to you relative relative I is twice to manage think Is or Or do the from -- to MSR. up -- that equity, your origination a it questions think channel? think the origination as about size was another can of how the it your size your channel certain on percent about X.Xx, as way do much a regarding regarding as target you your within of pre-XXXX. MSR follow it equity and roughly Doug -- you have there about to I relative to some high you just is there of noticed the overall which any it's it's

Yes, I'll one DerGurahian we off our company. recapture believe, answer, mechanism of but the economics portfolio, meaningful we obviously to servicing of is very the advantages, very for our a have of let effective is which

to forward. mentioned it cetera, earlier, servicing we want as As go as target to book build sizes, intelligently relates we the et I

kind we in quarterly the varies market. we're to of managing of on we're with that the strategy. that faced kind which The is in overall so And pace depending conditions do

market with go able needless to dealing certainly. But to as the But going pretty where are, I out for conditions, in as been balance say, that's rate of want that's to hold I general, trying we portfolio now the we pace we've to expanded again, that steady. something a which environment have and with And bit think right with we're figure we actually this the fluid said, year, to it the all forward.

add to answer. you anything I my to this this -- -- answer So don't Jeff, want know if to to

and I so what I And or steady and the of at to design. to to platform pretty our them. we're origination well refine customers works it think we continue -- covered incremental this can that's the see you Yes. providing Frank, that and the with products overall you level, well. refinance been has trying mean portfolio portfolio touching opportunities composition the with by achieve

direct-to-consumer Okay. then about particularly the loan Great. And done you maybe around compensation at structural center loan within impact how to anything particularly even operations you or for have really or to compensate better margins the the the the or efficiency in the structurally call officers, direct-to-consumer you you margins officers on like look addition strategies, in how think order to drive channel? drive higher structural

is Jeff there. percentage a of compensation revenue the as the total to kind I this maintain mean always try and of Walsh. evaluating we're responsible Yes, a percentage

percentage that shifted also space other But higher I of overall percentage as revenue influenced our more focus government job away a managing, like largely We compensation a commission. of I and unprofitable the responsible revenue. shift whole. of products, into from and think against and say, business markets some products more industry type of a pretty by But and good are a to we industry the commissions driven yield do

There questions. are I'll turn Martell call remarks. Instructions] to more the closing back [Operator over Frank for no

Yes. Thanks, for joining really and us questions. everybody, today good some

do and to to support. members, as we think entire we efforts more the our their I company a you And go and team for the guys. delivered stakeholders I forward. without customers, to And want our for to of forward value the tough our shareholders look do second couldn't our also progress appreciate that. deliver continuing team partners very I quarter. thank in really just in that market the I

thanks, that, with everybody. So

all call. today's Thank you Ladies and gentlemen, concludes joining. for that

You disconnect. may now