loanDepot (LDI) 7 May 242024 Q1 Earnings call transcript

Good afternoon, and welcome to loanDepot's First Quarter 2024 Earnings Call. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]

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

afternoon, good and you, everyone. Thank joining Thank Call. Quarter Earnings First you for XXXX loanDepot's

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

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

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

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

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

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

products to progress recovers. market line as technology stabilizes XXXX with and the well momentum our We people, mortgage platforms, investments foundational and top Vision exited in should which us make our positive serve important continue goals, including eventually towards XXXX and

first-time creation our enabling profitable with expanded first-time for and one, number launching an initiatives line XXXX leverage; cycle life client foundation business lowest-cost, that new star the long-term transforming strategic emphasis the owners; aggressively our our and following solutions highest-quality and origination producer. lending in north in our form and the four, transactions with structure cost relationship Vision value pillar emphasis driving purchase-driven quality, reducing with home with four pillar while pillars realities purchase of pillar investing buyers automation a becoming structure simplifying investing market three, company's growth-generating and for two, an operating and engagement, on rightsizing remain be of of The shareholders: organizational on driving in innovative to loanDepot's pillar homebuyers; goal and complexity

a quarter, During the significantly incident. impacted cyber the company was first by

impacted we've and lost expenses results. to relatively reported, As quickly, however, additional restore first previously financial revenue quarter were operations we able our

our thank our operations to our who our and support restore want entire team customers. normal business business quickly I partners to worked tirelessly and

been in of to Fortunately, to has live individuals. impacted not we we for sincerely types and a any disrupt operations has this expect incident acts these are do this material expect where frequent and our caused industry world the XXXX our whole. Unfortunately, as impact to further have incident nor a do we incident spared. a not increasingly sophisticated, concern any regret We

quarter moment, cyber results. the greater a on impact in incident In will of Dave financial the detail discuss first our

Like the by increasing reported in includes QX, last top figure the X%. cyber incident. revenues line with we growth generated impact This of positive quarter, negative year-over-year

in focus mix loans. and servicing homebuyers, attributable in revenue primarily Our a on VA which FHA first-time on part of to margins. higher increase higher QX reflects and benefits The resulted sale large gain due our in margins in growth was to profitable serving

resulted which We on focus relentless in repurchase our also quality, loan from reserves. benefited lower

was business a HELOC and growth our also margin contributor the revenue of to expansion. meaningful our growth year-over-year Finally,

becoming This reductions despite costs. In expenses marketing focus costs. efficient we reduced line from lower million first X% by in were operation, came primarily and quarter cyber-related on incurring reduction Cost an an salaries our with year-over-year. continued additional $XX

XXXX, to regards to expect to systems revenue-generating increasing of upgrades the our well in we With as remainder as key of continue our invest operating platforms. and ongoing capabilities

organizational We related million, These facilities-related call. identified efficiencies also to discussed to expenses. continue process to productivity $XXX third-party specifically we our benefits approximately vendor expect are and last deliver of annualized reductions spend, which on and and

later Bankers higher-for-longer has from been Association, of to published by terms expectations call, market their the Mortgage last approximately which the reflected for for to the trillion. XXXX. by pushed activity the XXXX interest volume since estimates early by XXXX, A in XX% recent lowered stance In to been our out lower in mid-XXXX have Reserve rates $X.X Federal forecast

to want team their by for stakeholders large prepared support. I and our conclude remarks today my thanking loanDepot

pathway Our focus market as the future more normal positioning returns of on and delivering activity. leadership creating imperatives while a for the market Vision levels against XXXX us is profitability to for

but this markets our in remain to to doubt, years come. to the stakeholders year increasing of no Our and challenging, value the deliver believe over positioned is that loanDepot all I course of

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

good Frank, Thanks, and afternoon, everyone.

to the this revenues $XX and higher quarter due million loss decreased quarter expenses. in in year of of from million to both the first Our net XXXX lower adjusted first $XX

rate the to within in taking revenue cyber to During Rate of billion. reflected the XX% volume compared of for billion issued incident. contributed from the in $X.X and Rate of to part lock quarter was quarter billion, of XXXX represented origination million adjusted decrease $X.X platforms we to of $XXX first $XXX volume in first million quarter, impact first pull-through off-line which January the our lock came total last of the guidance the $X.X lock weighted response XXXX. quarter volume

customer locks. revenue with expenses we not revenue. time that But take associated by to $XX our bear approximately that impacted did We incur systems from in were first quarter lost and mind estimate off-line volume-related was unable million were adversely also the

origination within issued also between XXXX. the Our of quarter, $X.X first billion quarter and decrease we of loan was volume the quarter for This $X.X billion. $X.X guidance from was a the X% billion of last

The increase result on higher of and revenue year-over-year weighted primarily income in fee gain sale servicing pull-through margin. a is

sale the gain to of the weighted XXX quarter to came of first compared at in on our XXX pull-through margin in points points quarter points, for and Our first basis XXX XXXX. guidance within XXX basis basis

due Our of sale overall primarily to in increase loan margins the margin production. higher our gain an profit on was

from and a lower benefited volume profit quality margin to loan higher improved also a We on and provision loss HELOC production. due our

servicing balance increased portfolio slightly billion $XXX.X XXXX. billion $XXX.X principal our of our to now from unpaid the the The servicing of to Turning quarter portfolio. first from end

Ginnie by portfolio UPB. During the opportunistically monetized quarter, billion of portion Mae of $X totaling MSRs a we our selling

part Servicing of fee the in $XXX XXXX in due million credits balances first in higher from rates. on income the increased quarter million quarter interest from custodial $XXX earnings to first XXXX to of higher

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

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

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

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

X% for marketing quarter. The the decrease the prior million approximately FTE were primary of quarter first driven by personnel-related head decreased Our total by count drivers of expenses year period XXX lower and $X during lower the costs. costs XXXX falling by from or this

have expenses would substantially if results. $XX cost decreased to it added which Our our cyber hadn't for been the in net incident, million more

consisting Part of cyber-related lost of quarter during compensating year-ago and lower support Our commissions incurred expenses, the the despite $X costs by commissions. were direct origination by volume-related officers loan origination quarter them volumes. million expenses, our from to increased the for

volume quarter. costs starting to We with second again, these expect with the correlate

asset program targeting improvement and in $X to the totaled quarter up of due million, supplemental $X.X million XXXX, our charges million of from earnings related productivity primarily benefit of $XXX first improvements XXXX. impairment the to Restructuring annualized ongoing impact expected

April decreased third-party of XXXX, primarily our salary have end expenses spend, the costs. real XX% and vendor Through estate-related targeted through or reduced $XXX These million improvements. of achieved we are confirmed

remainder in We planned the expect to of quarter. the second the action savings

compared the the settlement $X.X expenses to legal of prior in quarter. quarter, year related litigation none accrued we of During also million to expected the first legacy

savings, meaningful the quarter from restructuring incident, and accrual, cyber of the by reducing XXXX. adjusted and of X% expenses in litigation first accomplished XXXX impairment Excluding million expense settlement in we million the quarter the cost the $XXX first asset to charges operating of $XXX

tempered second to Looking $X.X guidance ahead and recent the the billion to activity the activity and $X.X in billion. rates, volume by between reflects of between $X increase expect pull-through origination volume home-buying consumer. in weighted expect lock we cost seasonal we and quarter, $X billion, billion the in increasing interest of increase Volume

the pull-through We interest margin XXX also recent and on XXX reflects basis weighted quarter points, also expect between in second be to gain rates. sale our which increase

marketing commissions, expenses origination will costs primarily somewhat, reflecting the and quarter-over-quarter, expect somewhat quarter. first increased we quarter, second after offset expenses, absence the by to higher increase volume due of cyber-related the During

company get to quarter we near believe of notes our on mentioned outlook continuing these to executing including we We'll the are available by the more the derisk the unsecured will benefit share options XXXX. our we As as stakeholders. the in plans. our our maturing last of for evaluate on we notes addressing to We all fourth term, capital in closer that call, for structure, address

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

interest volume pressure While continue increase profitability. rates aggressively expectations, market we focus to on to the on return plan to put have in recent our

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

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

guidance just that absence Can confirm the of $XX that up of to even expenses? cyber-related expense for with the be you them just gave, you're expenses, you million the looking

of pull-through is from the QX really funded Yes, It's to driven volume David that's This by QX. up correct. going expectations just Hayes.

then right. and maturity, that to around thoughts there All And that. could you've the there that when to be as about resolution any talk on I timing can progress debt maturity? XXXX turning made appreciate you some

Hayes. is Sure. this Again, David

through in that. of we We've working some are options remarks, and are engaged my prepared mentioned looking advisers series As front. a that actively at on

current. go little about last don't or call, on a bit to think these talked this seeing the We quarter envision we bonds wanting I see too.

to second of the looking It's been markets. pretty care we're them take third So constructive in quarter. or

we're but going the transact when the company, for horizon. it's So on to near-term makes it most sense the

next Your of the Instructions] Jefferies. question of line Joseph Kyle [Operator comes from

this quarter, bulk? Just on there, Was you guys too. MSR Or on out bleed in sales color just any done over that bids that time.

Sure. DerGurahian. This is Jeff

market, monitoring opportunistically it we're amount relatively the forward. the was opportunity do before, always makes stated the we As continue way same of where to MSR we'll It or immaterial sense. going portfolio and the where transact, a and to we'll small transact took we

it. think follow-up of quick what cash forward? going Got then a terms do for in just And modeling, balances you

kept pretty similar challenging million. We posture the the levels the having to to of $XXX continue try maintain around of manage number for year. sort going still we're continue of this obviously that so to remainder a We'll to over balances heightened of it's levels Yes, liquidity. market,

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

again, the going their We're joining imperatives. everybody, behalf the and our appraised appreciate today. as We to keep we to rest Vision Okay. our Thank thanks, team, stakeholders Dave I to you, for questions. thank for of on through continue everybody key of And want us progress the And operator. everybody XXXX and support.

thank you again, So and day. have great a

This conference concludes call. today's

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