loanDepot (LDI) 12 Mar 242023 Q4 Earnings call transcript

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

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

Good afternoon, everyone, and thank you for joining loanDepot's Fourth Quarter and Year-End 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 and All pull gain are forward-looking statements through including, limited through weighted our not expense on guidance but statements volume, weighted other of rate statements, statements could lock trends. be than that deemed to pull margin to, sale historical origination volume, information. company's These statements available on expectations the current are and based for may or forward-looking factors the periods results statements due our that in these Actual materially from SEC. of future differ described with section to other Risk the filings risks Factors are

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

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

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

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

and sharing all perspective Thank forward rebound you, look us which on made to eventual progress our results. our you believe today. substantially the Gerhard, the I joining for position resetting investments loanDepot making and platforms capture mortgage thank in processes, market benefits significant on XXXX, critical my in as cost of business we and as us structure our volumes. organization, well technology the to in

was largely middle market channel of for the of in XXXX. full the Our of volumes the revenues This exit lower year XX% result were decline wholesale XXXX. the of and our down

reset $XXX of adjusted our million laser narrowing our in to as our time, million significant of XXXX XXXX. of period continued aggressive cost net Vision implementing expenses same $XXX loss our XX% XXXX. resulted structure a in reduced The the in Over focus on we we from

benefit the systems, our and return our improvements foundation in-flight are XXXX, and achieved platforms in investments to Vision to in productivity XXXX of with necessary combined expected XXXX, with Together XXXX profitability. planned actions

platforms main an second, As XXXX our operating business the with cost processes initiatives on you leverage our may address first, aggressively at expanded purpose-driven and on finally, transactions, to Vision transforming in current origination and emphasis simplifying third, and purchase and and drive profitable money rightsizing and growth, lending; areas: focus our business to investing to quality critical market generating projected operating structure recall, organization support future and structure. delivery; X fourth optimizing conditions; best-in-class

Vision approximately nonvolume-related XXXX portfolio successful growth-related we At Since HELOC and our we reduced $XXX annualized have initiatives launched expanding in XX%. million over by our or we time, invested XXXX, same launching July product. as the of servicing in such expenses our

and improved In will addition, expect the and metrics we delivery which and implemented company quality significantly continue benefit market we recovery. important improvements, post process achieved platform to

with we expanded benefits in training team our programs. Finally, reinvested and employee

also of launch our our the our and XXXX, growth which loan In reserves. to resulted offering late HELOC revenue was growth. higher were a primarily benefit relatively and lock servicing revenue pull due flat In weighted quarter, year-over-year This basis, fourth the on our heightened in year-over-year lower focus repurchase on through XX% was volume. of meaningful quality, revenues a the in to contributor increase our on the

to decreased positive XXXX the the Vision of period, and occupancy X our lower primarily from quarter XX% Over costs. due results same expenses program, salary

estate and on approximately of expenses. spend, achieve $XXX XXXX, basis. we process related gains come Regarding benefits additional efficiencies lower and productivity million will annualized These third-party to primarily from an expect real lower organizational

a the make systems, with the our growing that of align strategy homebuyers. of choice number and significant to with represent of in platforms partner LoanDepot being diverse that our has continued investments processes communities increasingly

servicing Looking levels platforms. fund important support expanded in automation ahead, benefit operating productivity engine. One our will the and tangible melloNow automated underwriting is programs reinvestment leverage and we origination expect of reinvestments and recent our higher of of example

utilizes melloNow customers at digital detects reputation which of process technology XXX continue income and to validates And days. leading analyzes initiative a as The organizations loan innovator others than fraud the Tech brand launch earn swiftly minutes approval a in and of in believe credit the build loanDepot a HousingWire's has reports, point housing. and most employment the innovative the Mortgage space. mortgage forward-thinking with that it, expect celebrates and conditional our delivers award, verification melloNow or this rather sale I XXXX loanDepot data a in in to to excellence like we hours of longstanding industry. helped

all We strategy XXXX, XXXX we high-quality a revenue entering around year in origination customer Despite strong In challenges by successfully built million, up X.X homeownership trusted efficient, growing the platform in-house. XXXX. we've with become $XXX underpins in our management, to under at $XXX the presented a ended million our model which were more business from that portfolio an entire the partner brought for multichannel assets are market the journey. servicing durable servicing and a prioritized XXXX, that our million

of believe in published a we As Bankers volumes Association recently Higher to returning boost unit to mortgage look levels. from profitability. support of XX%. XXXX we mortgage volumes market foundational provide XXXX expected goal approximately ahead Mortgage volumes, XXXX are forecast together achieve this with we as will to to market our Most of Vision imperatives, from the our for call push successful year, implementation improve

cyber I'd experienced the call over in on the like to Before I January. we incident briefly touch Dave, to turn

that perspective. an to financial not quarter have a will but disclosed, material have full our we results, first impact is expected from event recently on As impact a year

focus perpetrators event XX.X credit this sensitive access. the these public quickly is identity of call. these these has monitoring charge matter information cyberattacks the any questions the portion personal approximately subject and individuals sectors any presented requires that in Although intrusions from to to between unprecedented the individuals. regret increasing services of the possible The nature will ensure concern impact the moved future. types theft provide or no of prevent company to Due to at of the to coordination has We and was order, sophistication protection operationally to this on very the individuals. short of able this challenges to take ability not and private related The incident, recover in million close in Q&A sector's sensitive private by to unauthorized deeply related this cyber we company

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

no remain momentum I change we but for believe demonstrated have very important markets doubt, company. challenging, positive Our the a and forward

through now Dave, our results I'll detail. turn will take financial who to call us in more this over

good Frank, Thanks, everyone. and afternoon,

the During was fourth adjusted $XX.X by primarily net fee driven somewhat third to to in higher quarter, revenues loss quarter offset seasonal in the million. by the modestly activity, slowdown home This income. our due from increased $XX.X lower servicing million purchase

Our included costs implementing our impairment and higher restructuring nonrecurring as reduction also quarterly asset supplemental program. expenses charges cost we began

billion billion. refinance we the loan quarter in volume billion loan $X from seasonality. decrease was was billion, the originations reflecting and $X in issued a guidance originations, quarter XXXX, cash-out last quarter, primarily third Fourth between of $X.X During purchase of loan quarter consisted refinances. and This of $X.X volume primarily the $X.X of within XX% fourth origination billion

XXXX, part lending services on growth As launch contributed market the purpose-driven Vision of new to of company's our share products the focus during and the and in quarter.

and points are XXX basis in basis share quarter-over-quarter. Association, more purchased from and Mortgage our share. improved market Based unit the in XXX Bankers on to we quarter to from share growing the effectively points fourth points data even quarter XXX competing headwinds, points the XXX from basis improved basis Despite the third

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

sale result lower origination rate volume, a of decrease from a primarily on is loan somewhat and revenue. revenue offset in gain margins income decrease lock higher by The in servicing

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

higher was gain to profit an HELOC and product by on on in the contribution our venture of primarily margins margin due conforming sale channel. wider profit Our and seasonally proportional increase from our offset volume joint margins somewhat and our larger production, FHFA

the servicing The fee third in We impact principal unpaid $XXX earnings the million portfolio. our full liquidity. from quarter servicing quarter of million XXXX. increased increased so balance quarter-over-quarter. our results our Servicing $XXX to hedge the believe now fourth to million in protects the $XXX million in from not $XXX our volatility portfolio Turning the XXXX income of of and the to against in fair this portfolio do our in of we operations. strategy record changes We value of servicing

hedging servicing is environment. potential portfolio changing in the the our well interest strategy rate believe we to Our against reaction the our hedge is dynamic portfolio for and adjust rising servicing positions We protected defaults.

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

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

X% impairment total restructuring-related $X and quarter. expenses, other Fourth Our lease of and expenses. legal costs by decreased million from the or including quarter asset expenses for charges, the fourth higher XXXX quarter prior

$X direct origination consisting lower decreased origination Our million, expenses commissions volume-related of by expenses, reflecting volumes. and

supplemental program prior $XXX expected Restructuring-related totaled million due of impact to XXXX. annualized of productivity reduction benefit improvements $X.X up $X.X million the in from and to launching primarily quarter, cost million, our charges asset the impairment targeting

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

salary quarter. XX% asset charges expense are essentially Through full settlement our began actions third-party reflect unchanged operating expenses, plan. we vendor not $XXX of confirmed the the or this year, Adjusting fourth lower $XXX and and of for volume-related through our spend, the cost achieved restructuring estate-related of productivity the reduction litigation impairment million have These primarily the impact and expenses and were million costs. do of supplemental real end we accrual, improvement February in

to of XXXX. in achieve planned savings remainder the expect We early the

first impact and $X.X of pull Volume lock billion the the $X.X seasonal in and billion. to we and origination between home ahead buying activity expect guidance volume event. Looking the cyber decrease of both quarter, through the January reflects weighted

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

due related primarily $XX other will somewhat, the expect of quarter, decrease approximately $XX During related seasonally These impact expense charges. first we lower of by as reduced the expected to million marketing offset expenses to well directly partially million and January to restructuring incident, the cyber net recovery. will expenses as of benefits insurance be

quarter has the Our cash million a support strong allowed cost same with maintain in us at ending and over liquidity the time, $XXX reset programs. reinvestment critical position, to and, platforms of

had and As mortgage for markets recover, we XXXX. delivering of pillars a positioned our XXXX through the success to housing begin focus against on the we relentless Vision believe

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

Your Harter first of Doug the UBS. line Instructions] comes [Operator from question from

-- Is incremental that talking How about those? expenses? we talk you of can about increased about think a Are those kind expense volume-related of those? the that saves for you're productivity in lowering expenses? should non-volume XXXX, or On

The Yes. approximately related, non-volume majority $XXX of $XXX It's are million. vast those the of David. million

the if how of then, of base lines, Great. those start And you scalability back along when kind do expense to about ramp guess, think industry I up? volumes the

Yes, that I'll one. take

we that So and lot really X the to of systems leverage a our those pretty the invest is we've market ability productivity does what the so good in done rebound. about benefits as drive feel I think and years operating and fundamental last of automation leverage

also the of example, which which is this line a process earlier, for I on and the good discussed time. delivery helps automates is a example is underwriting melloNow, chunk -- So

go investments, the of been we pressure benefit and think the make to for forward. we'll despite we've those as able those those we we think So market, significantly

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

quarter? can January. how also, originations Just kind the what of your And that trending us sort were post of you this you kind of note, impacting that sense your think give of a for data to cadence in were the your they CPI of print ahead and if How on January January ballpark, the quarter-to-date, want for kind much do then of breach? is guidance expectations in on impact, get

this Well, is Jeff.

feel regain pulling the We loans In and quickly good in ability of we shape. of at on a of did operate the to had did we terms job kind through time fairly hanging our good our to the and of event. recovery, we're pipeline volume that

So and QX. tracking of on now have towards been kind we stabilized seem track goal back to we're in and our

And compared basis Yes. kind note, margins, with a last on on and your sequentially. outlook particularly relatively strong obviously, terms it. Got year-over-year of that in of for year,

has So terms in to the evolution give Or us an competitive of sense environment. of of really just dynamics, industry a equilibrium? gotten the competitive the

and for of mean good come the of on that seeing those in recent numbers to marketplace. role And based that amount plays well the and out seen, the capacity capacity out when a I improvement margin obviously infrastructure that the marketplace. market of on the a have capacity we've the are of still duration the further seen us come see capitalize turns. the who Yes. But game the we're ability bodes I've as we big And come marketplace. in out the for certainly

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

quarter-over-quarter. This start to good just X% Maybe It's is with originations. Taylor see share increase unit purchase for JD. market to on over

could color So you during the success quarter? on give drove what relative just any fourth additional this

lender. strong is retail kind Jeff well non-builder, JV again. in #X We're We're builder channel. the as in in this space, both of partnership Yes, as channel the our our own-builder

end as market we've where maintain the really profile top So and we over the of in increase our originators the well newbuild business. market certainly as been our from our take kind last year shifted able share of to talent advantage

ability into of in I gain And kind so and carried into played our of year. momentum that think all of kind this to QX

like then to Got looks the direct just a on XX%. rate, consumer decrease refi quarter-over-quarter it it. And recapture

of the So be decline color quarter-over-quarter just any kind what there would great. drove on

It It in the was smaller seasonally impact in Yes. driven some operational much was QX. as well number. as a

from wasn't percentage kind to that stabilize unit we large. impact basis, historical have levels. a basis, But percentages So a but see of it that now on looked big; it back those

question the Doug Your from comes of UBS. Harter next from line

Yes.

income. million there -- a follow-up $XX the was a question looked Was on on First, portfolio? increase servicing similar-sized like what sequential behind what the

again. Yes. David This is

period. depending on So variations cash as we've before, said you collections for timing the will see quarter-to-quarter,

So impact in. of that some came of the seasonality

the as a servicing in fees, reclass that We prepaid also saw a elevated out then slight And finally, margin reduction net interest have of we income fee impacted which some did favorably that interest well. number. of a into slightly

level on it. Got Should guess rate more run 'XX. the for or seasonality the XQ think think XQ I just about how to normalized just we as representative? or a the about

was XQ slightly higher with reclass. I but the would say

So probably XXX XXX the range. in to

you consistent the the guess, on those overall seeing size, I of kind market given just that then up kind And of talking viewing some you're it. kind forecasts is you're Or of that overall Got how -- of are of what far where size is so rates in market what kind are for versus of kind volumes that MBA with quarter, first assume? XX% about? the the

Yes.

Doug, I is this think Frank. --

I for And think trillion. number MBA for this trillion the $X against a roughly at that's forecast year. $X.X was 'XX

So they're dollar a basis. up on

in get part more first at out. we they But that is in look play think back-end closely volumes, the the DSO aggressive second But bit become now quarter. that bit. assuming seeing little we have will may a think first that a close, were we're a in be more that units, pretty pretty of the it's actually bit most slower pressure from going You But profile trending loaded. It to because little some going year I be the of I in what we're forecast. And little our assuming you moderation half, obviously, think. to rates a the rate had we what

the the number the MBA first timing-wise, half. in so far a be half so And we're may second full the perspective. to And a more little still bit it skewed is little good thinking pretty than a year good for bit, So, on one. that

that. Great. And I I appreciate could in more. sneak one if

-- you're X.X than unsecured of the you your away unsecured X.X first debt kind Just first little from thinking how are debt? a the years or about from away issuance, debt more years about maturity,

on We're debt Yes. closely We're actually monitoring markets focused that. the very are quite constructive. that

Our is probably goal to of or in this third get sort resolved of year. the that second quarter

when periods. market appropriate. focused it we'll So We'll those be it's during on the hit

queue Martell our time. remarks. in questions further no turn Frank call to this I have closing the over will back at for We now

joining well. others. appreciate Look, just support. and and year, to forward thank I of and Chrissa. as stakeholders toward as as Association a we're David, are continue And look, rest second future loanDepot, profitability. we the questions a the laser volume Team today, constructive delivering progress, Gerhard, to the the to all key discussed, thank the the rebounds. against keep XXXX, mortgage our looking Bankers we're push foundation look which is including think myself everybody, On focused the we and of for we on conditions We and we as market from being And for Jeff Mortgage Thanks, the half you we this improving their perspective of for us company appraised by forward really behalf market which forecasted, certainly, everybody Vision we'll

joining us with thanks for So that, today. again

now conference concludes participation, you call. Thank This your disconnect. for you may today's and