loanDepot (LDI) 6 Aug 242024 Q2 Earnings call transcript

Good afternoon, and welcome to loanDepot's Second Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. ahead. go Please

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

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

Our and contains into the performance provide benchmarking believe analyzing business and measures additional performance financial presentation comparison. that certain of facilitating company-to-company insight our and operating today value we non-GAAP

results, answer our Depot and our we call, of to operational Lone will Chief well an reconciliation Hayes today's details President posted which our measures, non-GAAP Dave Frank these as more Chief measures, Officer; provide On the be website investors.mondepot.com. A call. quarter and earnings have financial at the GAAP of outlook this your of website For as directly call most to Financial is transcript Executive comparable please including and to conclusion this Officer; today's on to on questions. refer Martell; to release, available and and after financial overview webcast our

have LDI us to things that, We Walsh, President, started. remarks. our Jeff help joined to questions Chief and DerGurahian; Frank Mortgage get by over with I'll Investment to are turn address you after Jeff any prepared might Officer, also And Frank?

QX I I to the Gerhard. my to progress XXXX topics: on the toward Vision program; XXXX us perspectives you, third performance look the the highlights, view finally, and and our of achieving forward everyone appreciate taking our X time impact validates XXXX. progress significant join I and Vision Today, which believe second, of sharing XXXX. first, loanDepot's the and following the making we're for and market financial on Thank of balance operational And afternoon. current this call outlook strategic the conditions

announced in contractions to in in we know, and a volumes you XXXX significant generation. mortgage in housing mid-XXXX and Vision response As most abrupt one

lending the XXXX market battle Over as X strategic in and short value the and purpose-driven scope company Vision followed of for past years, the pillars has realities Vision made transactions with to Pillar purchase A years first-time and the in the synopsis description emphasis #X, follows. brief of these we origination of on creation that business market ahead. with pillars company's X the on term, driving while tackle of positioning the transforming sustained a of focuses the short its profitable XXXX, growth, pillars the expanded X against as leadership plan homebuyers. we've well each progress been

a foundation realities, unique emphasis parts operating client servicing driving organization, engagement, the goal of such with and including best-in-class and profitable in and in reducing management we MelloNow we've business operations. underwriting also targets quality, including best as Over equity And mellohome layers operation, in expenses affordability our the quality drive past on we've centers form unnecessary of be products loan as to investing X on lending brought compensation products, growth in We've our revamped VA leverage. point-of-sale and an nonvolume-related initiatives our investing mortgage homeowners. innovative lending talent. rightsizing becoming cycle of complexity line eliminated have X date, reduced business Pillar generating cutting-edge which of and and end address million long-term revenue new with expanded producer in engine, simplifying retention next-generation To home solutions had reduced #X, for joint and with we the digital calls quarter and and lowest $XXX cost marketing structure organizational years, while of expanded platforms. and our the first-time by XXXX, over our to highest credit, of the number home home production homebuyers of the In from that automation available and organization and homebuilders. Pillar added the of expanded issues Pillar deployed structure loan, as life silos venture well solutions. with X launched quality, our relationship many programs and our this that line of second our the We've AccessONE+ suite finally, invested launching AccessZERO. the of stand-alone area, we annualized recruitment in-house a and equity we XXXX. aggressive Depot's By support of second Loan cost, our

the the market The $XXX has the year, historic for program. half additional been while navigating our of first organization in completed instrumental operational reset During this years. reality over We've in million markets successfully capabilities. of past we building the implementation mortgage downturn XXXX productivity the the Vision an few

to company also our to people, a investments expand significantly believe exercise. on expense the position and base, requires reduction technology a profitability these While delivered grow our share us we've Vision market of more and platforms. far We forward. in products set -- invest is cost-cutting XXXX just continually going comprehensive It than

the strategic of new plan the the we plan to from strategic XXXX we lay plan, over months, map coming the and new market for course Over upcoming follow lifetime our which will sustainable pivoting release customers during partner cycle. and will of entire QX leadership Vision plan out drive announce We durable to journey. profitable their our road growth to a details innovate be earnings homeownership as to a

our of in Now since downturn. most market strongest the by operational we believe measures, I of delivered our the second performance, beginning results terms quarter

As provides financial reference earlier, important points believe I mentioned and operational I QX the performance of of loanDepot's XXXX. also progress for that impact Vision

support progressive our positive profitable was tools, as total and as adjusted Our momentum driven of and operational cost well leverage. discipline commitment by platforms and introduction revenue which to operating growth, automation ongoing the

to strong We in gain from operation. in servicing and margins to our factors origination also business continued QX. share The see those of well-regarded contributed higher market contributions combination our

we QX. and reduced EBITDA of adjusted in loss to million, adjusted by and net One profitability, year-on-year $XX total of million. achieved important terms QX, on $XX positive note final our In XX%

we cyber-attack. stakeholders. visibility which with completed litigation elaborate XXXX a for These of During reached achievements, our successfully our the on to notes a exchange later, all milestone and associated unsecured a January clarity tentative tender Dave quarter, class of action settle our bit agreement will and important provide

the This for estimate XXXX Looking July, XXXX. Mortgage In increased forward balance trillion. mortgage their our of forecast XXXX. with to and of into $X.X current $X.X of volumes XXXX compares trillion to the market Association Bankers

moderation home of upward going of household for debt look trends, formation mortgage management. we potential an homes mortgage XXXX, linked interest transactions sale well housing increasing for believe into increasing and activity as and on for an we is As more ahead, for rates, mortgage growing initially home as and/or personal there led based by in equity demand liability market consolidation the trend products improvement, possibility

largest well capabilities our we past and operating will been X The months, is origination focus investing in our as equity and Over also in-market the have provide and actively by home purchase purchase. staff, products as investing specific product franchise of of market portion as offerings, processes the products. additional officers leverage which solutions loan staffing range operational with company retail in expand working a of well serves the home the number primarily and with boosting refinancing as on to that our the

and well and expand we and positioned to that currently revenue investment in our portfolio share With expanding to we've products, flight, market platforms with new in people believe our made increasingly the growth are we date accelerate those to homeowners Team I and prepared volumes for XXXX. thanking lending loanDepot their and solutions begin into heading adjacent by upward lending ongoing to today stakeholders remarks other my of for our conclude track want as support. market

the positioning the focus results is more delivering our imperatives pathway through turn us call future Our to normal With take the us detail. I'll who over in while returns financial activity. Dave, of market for Vision as creating a for more profitability levels XXXX on against our leadership that, and will to market

Thanks, good and afternoon, everyone. Frank,

adjusted impacted the this revenues to second expenses of million decreased the in year $XX accrued in million, to behind by second put both Our lower will impact to million January litigation on. due $XX primarily quarter higher loss litigation touched reaching Frank this the noted, million part were adjusted the XXXX expenses. class that net action in $XX as related operating $XX Frank as to an principle action approximately cyber of agreement the quarter in Total quarter of and XXXX nonoperational charges from us. cyber in the incident class which, settle We of of quickly

notes, $XXX We also outstanding our successfully XXXX million. exchange completed extending and tender maturity the XXXX unsecured by corporate a of debt to reducing

on the recorded million debt. this As loss we of part transaction, a $X extinguishment of

total increase billion X% contributed decrease sales primarily lock The $XXX rate of the service to quarter, and of from volume $XXX revenue and reflected lack of for second XXXX, compared $X.X quarter $X.X was quarter fee supply adjusted and second year-over-year of adjusted a $X.X quarter in and income pull-through last higher of came volume result guidance is XXXX. and billion, in the the in the second of of weighted Rate issued -- on margin. within During homes million ongoing we sale sale. total represented to gain a billion, million revenue weighted lock to the the which pull-through higher rates impact of home

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

growing sale the equity historical from provision Our products. credit higher home well performance strong higher-margin reversal as margin loss on of the of our contributions reflecting gain vintages, benefited production as the of

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

volume the business market interruption cyber-related the its following resumed share growth was of quarter. While sector our during first the origination down,

balances custodial in points the improved $XXX second part Servicing from points share $XXX rates. credits fee quarter quarter increased basis the in in quarter higher in to income second market in compared quarter to million million Our second XXX due to earnings of to on interest from of the higher XXX the of basis XXXX. XXXX XXXX

As servicing of part and we strong of market our billion approximately advantage rights. took debt of conditions monetized balance unpaid exchange, principal opportunistically mortgage the $XX of

the the somewhat As do protects and value smaller expect impact of portfolio, liquidity. changes against forward. the not We a we we strategy in hedge going portfolio, We earnings and our fair our to revenue so decrease our believe results servicing full this the servicing record in result of operations. volatility of

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

personnel-related were quarter. Our were expected and falling the over mentioned FTE litigation by lower head $XX the related lower cyber-related total costs prior charges the one-time offset settlement X% for during increase of year tender previously the transaction. These increased primary of period with second from somewhat driven drivers count The the million by costs. XXXX marketing by quarter of the exchange XXX and expenses costs, to the associated or the by

supplemental Restructuring impairment decreased and and XXXX. improvements completed million that $XXX from estate-related report $X quarter. million, million charges $X quarter achieved costs. second We real second third-party These to vendor lower are primarily reduced SAR during the totaled down we through productivity spend, pleased in the our program were of expenses related

expense expenses and extinguishment on second and a the million by savings, XX% in of charges, million $XX basis. meaningful reducing the comparable million $XXX XX we the impairment to the debt on restructuring the Excluding the cost million in million loss $X incident, operating of of asset $X from the second quarter $XXX cyber quarter the X% accomplished of

of expect ahead the $X quarter, third billion volumes to pull-through and $X weighted billion. origination Looking we and between both

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

the reflecting expect third quarter. the decrease we during the we During incurred quarter, expenses primarily will unique second charges

strong us to sheet people, while balance with cash. management -- ended liquidity allowing significantly litigation same farther reset cost position At resolution to we the reduced the of time, in profitability make towards million and programs. investments the activities Our risk have our the and where continued pathway profile quarter strong has proactive a platforms maintain and $XXX of outstanding we our

market our laser persistently While we're to with interest on for continue pressure commitment ready discipline Q&A. rates operator we work to Operator? to are revenue profitability back With higher grow it that, to costs. turn that to volumes, put and focused and on the manage

Thank you.

now begin first of question the Harter. Instructions] Your question-and-answer from ahead. [ Please will line Operator We Douglas the session. go comes

Thanks. about in talk -- the Could on was MSR that you first type you the or what of coupon quarter? sold what the

DerGurahian. was largely originations a XXXX from It XXXX Hey coupon and Doug, this lower vintages. is Jeff

of are you potential more -- servicing rate opportunity do before Great. as that unlock And at then, a volume? refinance it think today? there portfolio, from Or then look more you just can more is come needed your or about broadly could it how the move you both

There's that expand obviously do we to move our debt enhance to rates look equity and our to to base. term borrower opportunity, continue whether and or it's do products to help lower, continue home refinances if today and consolidation happen rate through we'll

you're that switch about home might I thinking there term? equity rate from rate a opportunity to mean is that that

range a the products wide in rates portfolio. There's and of still

to So as we use have we tools the whatever continue market outreach have our to we to borrowers. optimize moves, the

you. thank Okay,

next comes the ahead. Derek Instructions] question Sommers. And Please your line [Operator of from go

good Hey, everyone. afternoon

your guidance, break embedded you the what QX what's into assumptions out looking on could Just guidance, embedded maybe into volumes? are that particularly or

speak I Yes, it. to can

comparative. that we the quarter of second come the margin, true-up sale did the loan have which of XX as the off basis points probably a is year-over-year we reserve biggest gain one about benefited assumptions was on loss So for

for mix gain out closer So inform just our quarter. sale to of will on refinance towards general our shift little And margin bit a think third maybe that the conditions, guidance coming market then XXX. reduce I

moving your it. And Okay. both perspective and forward, you -- operational from guys do from Got how then on about lines headcount think well? maybe capacity as warehouse

lines. that operationally? on I'll the feel concerns and front. any warehouse can speak ample as up to ramp have got needed we've We We capacity don't like

Yes. the Thanks for question.

will as likelihood. I we the as market my the that we're number remarks, continue and last LOs mentioned, have over through months, leaning the X been and in operational So into that's anticipation well, capabilities of the increasing staffing mentioned we prepared operationally, our increasing have gradually moderate. I automation, think to through And some rebound levels. I will that rates And as an some

think the So leverage we But up to capacity the up also operating believe pick I with that volume. to the we that. have automation pick incremental associated

So not in might have the been it as as people-intensive past. it's

positioned, the we're environment. think about we're I optimistic fairly rate more So well and

back Got few. a it, thank in you. hop I'll

Your next John the from question of comes Davis. line

on for Hey, guys this Taylor JD. is

relative growth see the us to you the total So that up yes, for to going quarter. it market Can little was the rate drove anything a higher tick note of unpack if share during that there's just industry?

Jeff Yes. Walsh. This is

of is cash-out unique there market, home allows consolidation side. a most part is we're segment as Frank debt lean we're for as builds, that also gaining of us area channel just due a availability both home refinance, new and market our our well. and end well to inventory. positioned team seeing the mix equity parts specifically in with the the resale mentioned, And think into the market retail various side us been has to as the market But which just which of the share in unsure well that and channel strong I the growing

Great, thanks.

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

Kathleen. you, Thank

fundamentals heading think same And and becoming first-time complete quarter to growing demonstrate Dave, team want in the at And XXXX, of partner really of trends seeing potential increasingly to of and you're remain implementing that Jeff the home into innovated proud talk everything, dream. and results. thank achieving but the and we're our think with sustainable I joining look, reflected of for we're results that, time, thank into often rest that the market the progress and I a loanDepot. we second trusted making. their good resiliency on dedication laser-focused our I'm homebuyers professionals and suite loanDepot, you, about improving Jeff of means throughout for that's profitability and rising all clearly I At going do American services Vision Walsh teams XXXX. financial journey positive and deliver the think, accomplishments DerGurahian Team our call for homeownership. the today. So the of the products Gerhard, of I everybody, fuel work gone

today So you time in with future. to and everybody's the that, updating I look forward appreciate

This concludes today's call. conference

may now disconnect. You