loanDepot (LDI) 7 Nov 232023 Q3 Earnings call transcript

Good afternoon, and welcome to loanDepot's Third Quarter 2023 Earnings Call. [Operator Instructions] I would now like 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 Third Quarter 2023 Earnings Call.

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

A our and Financial webcast our to Frank of as and and we David outlook Officer, transcript under website a financial posted call, on and this President Martell; Events Executive be and operational Chief at to Chief call as the Presentations questions. quarter answer results the Relations your today's well overview Officer, of loanDepot and will tab. On Hayes, company's Investor provide an have investor.loandepot.com

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

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

in conditions continues of to the you you, I our forward Thank joining July on laid out sharing we and imperatives XXXX to loanDepot market back us XXXX. my Vision thank for results. make plan look significant perspective against today. Gerhard, all and progress our on

market our modestly share quality business our fourth and future were sale aggressively we margins. first, conditions; gain an investing quarter, operating business critical transforming to essentially finally, As and organizational you from expanded third and originations structure. In areas: increased second, cost generating purchase-driven current optimizing revenues may transactions recall, quarter our and address on operating lending; prior leverage as improved structure processes growth and in initiatives our main to focused Vision rightsizing drive best-in-class on support our simplifying and unchanged the third, the X emphasis and delivery; purchase and projected market XXXX platforms to profitable on and money with

the benefited home company's contributions for mortgage market down our we modestly platform, from lending. same quarter third a The in were origination partnerships X% during our revenues trend decline contributed during trend. mortgage servicing the operations minutes. overall discuss and interest of the rates and David Higher period. outperforming the Importantly, core other in to will from the this area revenue results positive few builder quarter, modest equity

While been short remains construction housing in this home new year. a supply, stock general, bright spot has a

home regard, we our continue builder housing closely this XXXX needed a new in much and to with believe we be In critical partners for stock beyond. work new construction driver and will adding

product, Another for in HELOC customers. bright recent to financial continues quarters our which has our powerful tool a as spot serve been

product revenue HELOC becoming positive our quarters, several a and steadily, past the performance. this to contributor meaningful Over is grown has our financial

positive home We trend this levels homeowners continue to as record growth equity. expect access of

deepening Further a As in communities. and I calls, support of of build that vital first-time is role on dream Vision diverse critical bedrock homeownership homebuyers American the for and to and our strong discussed believe plays component XXXX. is helping we the past a stable

interest accessZERO prices. power, rates concerns payment With with and launched As eroding assistance. grappling for purchasing homeownership for accessible offers rising in these down affordability more a program, making achievable more consumers' home our payment homeownership about our team make families. we and passionate to a down purpose-driven up accessible X% lines, lender, to Along intended recently is homeowners aspiring traditional high accessZERO requirement,

accessZERO with first-time helps significant to the payments down of we homes come the of saving barrier, to challenging unlock with As new purchase for grappling a for for housing. particularly ways that in today's our obstacle continue higher customers homebuyers to address rising environment, cost

our The delivered of we were mortgage increasing XXXX, important market. Vision lower of gains significant in the driven benefits the progress continued against quarter third backdrop in losses. implementation leverage. of and improvements and operating productivity has challenges successive cost reduction, the This by come operating Through expansion of continued margin

reset approach We the disciplined market. continue align to the to expense our management maintain structure as cost our we of size to with

our note second sale well current addition as efficient, lowered include the expenses for we making in we're position production as launch and customer last by in investments In These total to point emerges company quarterly Vision reduced also important more third X%. us we downturn. of loan the quarter, of contact management year, and by the to $XX XX%. total becoming million It's XXXX have or market expenses Since from our primary the investments leadership that as of the to in systems the approximately capabilities. quarter

in go-to-market record-low deliver look well XXXX sale similar with to to impacted forward during of We XXXX. expect housing expectation environment, areas XXXX, this of capitalize to we stock lack as our current will our as profitable volumes XXXX, on substantially As levels. affordability, the that that market industry for will multichannel to platform is In continue the factors including be have remain we volume-constrained us that the to growth. believe

In reductions. and become quarters, profitability. next In plan actions nonvolume-related taking of in in efficient regard, will pursuit drive additional we of continue few moments. of several expense a $XXX $XXX additional are productivity David will an provide details to more addition, this our target aggressively this million reductions including we million the annualized our which on over reaching plan

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

we doubt, Our navigate a present stronger our we a momentum tangible believe Vision downturn more a increasingly over and programs ] markets contributions X of in forward we are seeing the this our period from pillars the focus business additional [ that positive are and in but for continued from productivity positioned and our the positive $XXX valuable cash XXXX of emerge very important believe flight to change of and on plan. challenging, With I company. of result market on is hand, million cost also strategic company. consistent well no each units, remain through

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

and Frank, everyone. afternoon, good Thanks,

During X% decrease last quarter between of quarter, billion $X from the volume loan third and was a the quarter issued billion, XXXX. of the second $X.X we origination This of was within guidance $X billion.

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

a volume in Our last $X.X volume end we billion quarter. by is rate somewhat of result billion. second contributed $X.X the servicing volume, pull-through higher offset lower revenue rate issued origination on billion lock in at the decrease the primarily decrease X% third revenue which revenue. quarter a a lock loan the lock the of gain sale guidance represented in total of for to $X.X million, in The to lower of from $XXX quarter weighted came a income from margins of decrease Rate

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

venture activity in on larger an on margin by HELOC production, Our improvement margins higher sale to gain continued margins a product, primarily increase our repurchase offset our joint from wider channel. profit and in profit proportional contribution our on our was due

provisions Thanks structure of of we've Vision we've there's our of our loan results improved have on primary result, losses mentioned, financial and our significant a in repurchase. a that the our team, production. the the margin. a for as of amount pillars been these quality, reducing by previously substantially to the quality decrease Through to on loans increased asked been the gain Frank one improving and our is and of XXXX As work organizational enhanced efforts, focus we sale optimizing

the to from quarter's increased the $X portfolio billion $XXX while of Servicing $XXX in our to a our unpaid portfolio. a the billion to fee $XX of maintaining excess third from customers. now balance second sold we balances servicing of Similar in $XXX unpaid those portion totaling to transaction million Turning allowed our billion, of XXXX second principal related to relationship gain This activities, third quarter principal monetize income XXXX. servicing servicing million. million asset resulting the agency The $XXX of to the quarter-over-quarter. direct quarter during servicing in rights quarter, with us increased

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

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

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

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

expense align time. Another major shrinking improve performance and component our financial market size over base leverage to to and create of operating efficiencies with Vision XXXX is a

the quarter. expense recognized our Our prior Savings all categories. from for almost were of XXXX quarter or total by X% the expenses decreased million $XX of third across

Our direct from charges Vision million, reflecting XXXX lower charges. volumes. expenses were due and volume-related by related to $X.X quarter, reduction origination primarily expenses origination a $X consisting personnel-related prior in down of the million commissions of decreased million, $X

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

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

rate ahead and of and billion $X weighted pull-through expect we between the lock fourth billion. billion billion $X quarter, and of volume Looking between $X.X to $X.X volume origination

expect between gain weighted We XXX XXX fourth also sale basis our to and margin quarter pull-through be on points.

our our margin the seasonal from reflects gain venture joint a sale home increase in volume volume guidance the reduction channel in in seasonality. buying proportional activity reduction in decrease and our primarily on reflects guidance The

expenses expenses will driven quarter, seasonal decrease but to expect and reductions by as salaries headcount continue During lower from the expenses marketing volume. also approach the fourth volume-related we decrease lower from lower in we primarily

we across end other which savings and as reductions, non-headcount-related our $XXX as lower other plan organization and first million the vendor The rate we is quarter, annualized expense expense This FTE run plan remainder categories. are of related. well by in XXXX. expect most fourth of are to achieve of will consist as savings non-volume costs of be of savings. additional in of mentioned, of the beyond Looking related. the in estate real an $XXX flight, targeting The corporate savings the already including Frank majority the [indiscernible] million savings quarter

market our on position of margin expansion the in face underpinned to ability a the focus effective capital ongoing Our maintain management have cost and reduction, contraction. strong efficiency, liquidity

profitability. the on liquidity end. We levels quarter quarter ended Importantly, prior the as laser-focused from essentially rate of with toward remain we progress unchanged significant third we cash run balances maintaining

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

Instructions] James. first comes line Your John the question with Davis of from [Operator Raymond

This with is Taylor just on to start thinking profitability. for of how JD. you're to returning just Maybe back timing about

announced pretty could predict, runway additional obviously update on cuts makes give You cost an that significant would but to commentary made you -- savings. that get already to back I further just great. be could any difficult cost to understand it or and your macro get profitability

next continued to Martell. it's Appreciate third loss the spring really the get into third the quarter, $XX in speaking, we if the reduction in of And Frank we're profile. We're season and optimistic can seasonality, for selling and second as Taylor, get question. accounting look quarters into I million, the at think we roughly pleased you year. the profitability that with

I can't think see that barring the at planning exogenous market that's any moment. in we . the we're downside what on

Instructions] has questions. up. further Kyle from queued Jefferies There no are [Operator Joseph

we some your and And originations the want has Are we come 'XX? of an taken on supply be supply think get to down take about industry. demand dynamics kind need getting the Or you of equilibrium? do muted Just talked enough to in to, supply kind out? I into to still

Yes. This Walsh. Jeff is

greater the as We think But from reduction. at leaving out well. still this I the capacity market, side side. see capacity is production and on seeing origination are market point the a both fulfillment than we come standpoint, capacity originators the of the

opportunity scenario, a need more an likely as that So higher if really happens. in reduction. capacity for rates the seeing for of as we that longer us of kind kind being forming And bit we're up

Got just you. And for quick then me. follow-up a

and in debt loans buying thinking about capital Just balancing on with that. allocation or your of you're originating priorities terms us that back just how refresh

David Yes. This is Hayes.

maintaining say focused we an on growth a of of that And as time. to to So at We're look that stack the very the XXXX do from we're into levels we'll that as are continue the out on invest we're going to would overall I that. near-time perspective. their into sort higher debt and our debt perspective, maintain the company initiatives all automation, we'll in liquidity opportunistic sorts market. view address that's in we to several continue next there, notes quarters continuing tougher that through progress But at priority. And of

sense. Make it. Got

[Operator Frank the Instructions] time. are Martell, this There no I questions over call to further at back you. turn

We that and the key continue I as outlined apprised Jean. and well. behalf look we David, us I Thank as of and On today, you, to our thanks, support. to Look, thank forward everybody to want and imperatives for for as our everybody questions part the keeping Walsh XXXX. Vision Gerhard, we against joining our everybody, stakeholders the their rest of team, progress Jeff of Jeff DerGurahian appreciate

and losses and in the very comes. position company the that market significant liquidity for when are progress, the operating of continue maintain We significant levels eventual our reduce rebound importantly, to making

I updating Thanks, again, look and forward in time the your you everybody. So today appreciate to future.

This today's concludes call.

disconnect. now may You