loanDepot (LDI) 5 Nov 242024 Q3 Earnings call transcript

Good afternoon, and welcome to loanDepot's Third Quarter 2024 Earnings Call. [Operator Instructions]. I would now like to turn today's call over to Gerhard Erdelji. Senior Vice President, Investor Relations. Please go ahead.

you. Thank and joining everyone, XXXX third you call. earnings thank afternoon, our for quarter Good

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

These Risk expectations or future risks statements Actual section with filings Factors forward-looking are periods based available for to the on due other the of our factors these company's results SEC. from statements and the current that may are materially differ in information. described

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

non-GAAP including call. our of website to will A these which on call on today's available on refer after posted details and conclusion website a is the webcast financial our earnings please be the more reconciliation most at this comparable measures, measures, this For release, GAAP directly of transcript to investors.loandepot.com.

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

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

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

strategic the on LoanDepot profitability join the returned time Gerhard. XXXX the of program. you, everyone in I through call today. Thank quarter implementation Vision us successful the our to to appreciate third taking

process were and of by expansion productivity the volumes, higher programs. cost margin origination Our our and improvement results driven benefit

of to the XXXX contractions significant most July volumes we in Vision As XXXX mortgage abrupt housing one well, response our shareholders generation. in in and and of announced know a in

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address enhance added past the X mellohome VA affordability years, Over our products new our lending our homebuilders footprint business with and we've to expanded offerings. issues, operation, grew

launching cycle centered this first-time and Pillar In products, home profitable on with loan. stand-alone including equity a foundation new mortgage we area, of solutions the relationship investing X form growth owners. equity that a credit a innovative and in second life line a of and homebuyers launched initiatives generating of home portfolio

underwriting introduced servicing and our also mellowNow in-house. business next-generation digital our We engine brought

on emphasis complexity automation centered our engagement, client organizational and an X structure on reducing leverage. simplifying with operating Pillar and quality,

we and training have the supporting available health. retention programs of couple best quality best-in-class past revamped the and Over while compensation years, revenues drive recruitment, of the to our

a number our of reduced We many management silos organization. also eliminated parts of in and layers and organizational unnecessarily

expenses simultaneously end of by million. the XXXX, aligning quality goal second producer. the our $XXX loanDepot's cost annualized Pillar investing realities long-term becoming XXXX, with by finally, over of And #X on while From quarter the of reduced its lowest cost in quarter we structure of and third the market are -- focused nonvolume

production. quartile loan top quality achieving While

of the reset a exercise. far and outlined the successfully mortgage understand the this navigating the more but successfully just market, was important downturn historic been -- objectives has market. cost-cutting current Vision realities the than it's in XXXX We Achieving in that in XXXX organization to instrumental Vision for

capabilities and strategic to differentiated housing our platforms for new and market market the leadership created recovers. company position We technology as made are investments products significant operational that in intended and people, our the our

the and to As offer many to years. launch housing Star, we opportunities look new this new Project market, to to forward focus company for blueprint and North next of on horizon to proposition now I'm end, to To our announce strategic differentiated capitalizing time a is value look our more healthier normalized the forward it a the stakeholders. for our pleased X on

our investments North in best-in-class and including focus of and solutions Vision platforms on Star the growth, XXXX, builds customers' imperatives operating homeownership ultimately revenue that our journey. and transform foundational durable -- positive leverage, Project on and productivity support

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Pillar X with through purchase participants, realtors industry mortgage and focuses and on an partnerships geographic reach key expanded footprint builders. our growing capabilities including and

on our focuses maintain best-in-class recapture servicing continuing in rates. to scale X portfolio at invest Pillar and

loan quality on In support down. and will workflow our customer revenue a mortgage focuses term, this as automated, substantially higher ultimately, we processing experience turn touch, to data-driven low durable and building times a superior X margins operating we Pillar profitability. deliver drive drive and to out consistent leverage,

developing mortgage the recruiting, about is best successfully available. X industry's employer Pillar finally, talent retaining and of choice, the becoming And

silos organization, our innovation enterprise. layers to increase throughout reduce ownership simplify the to continue and and will eliminate management We unnecessary

communities support X,XXX-plus throughout diverse homeowners, our increasingly of Project on the key life believe clients their partner become resilience coupled provides of embarked multichannel homeownership and homebuyers We first-time platform the talent cycle journey. the Star, including confident the and ingredients our North needed loanDepot. lending Team team, We with in unique of members go-to to for the those

up mortgage I on will for today observations with wrap a outlook housing prepared markets. remarks current few my the and

the that of lowest housing factors stock through many persistent fueled home has overall underbuilding; market and volume by lack chronic in have of to couple years, -- XXXX be Over the public-private existing hangover sales that sales, only mortgage addressed of the homebuyers including a the the and -- challenges cooperation. affordability contributed housing for ultra-low experienced impacting can We and home resulted lower the XXXX. XXXX since in crisis and rates concerted an first-time past

and up sale. for forecast XXXX. Bankers of forecast of this an more at rates mortgage assumes activities for growing a a trillion led The is volumes mortgage Despite XXXX and liquidity initially progressive trends internal Association consolidation supported as formation management. forecast or these $X.X $X.X XXXX improvement, market on linked intelligence, by for forward, believe market increasing challenges MBA homes possibility the market trend upward demand we mortgage home equity and Based recently personal debt for for Mortgage which other looking as household in is products for home trillion, moderation by transactions well there housing from mortgage

conditions is XXXX of of exciting well Project With Vision terms market in successful new loanDepot Star, and on in ahead improving completion believe we positioned North an beyond. plan to capitalize and XXXX the

other to company. toward tenacity, you've support. as all a in the Working stakeholders delivering key closing, of I'd face forward your the their significant of adversity Team commitment demonstrated for together like In resilience for changes positive member loanDepot, purpose, common every and thank ongoing as the our while and well important momentum

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

Thanks, afternoon, Frank, and everyone. good

fueled the quarter the of XXXX completion the Vision successful in XXXX. has as quarter The improvement operating a first coupled the mortgage company's saw since profitable served third strategic positive validation downturn that the market, beginning modest as pleased which, our the of strategy quarter objectives return our with the of profitability. are in of company's to delivered the We of the when market leverage, -- we first

an focuses processes returns embark result that company XXXX adjusted of operating net posture to the from revenue $XX and reported we on consistent We positive we third will stable sources growing higher transitioned revenues and gain in profitability adjusted in a million the adjusted as compared loss Now of to $X and third to sale margins. quarter North primarily quarter volume net Project million on in due investing higher on income that Star, of in by leverage. shareholder

XXXX. of lower During to increase of in last XX% we rates on quarter, guidance of $X was lock of pull-through volume a $X from for $XXX contributed million to came the rate Rate of $X.X of the high a the compared volume and block volume third which portion quarter weighted billion in quarter third quarter. reflected the the of the $X.X $XXX impact to adjusted total the represented year's revenue end billion million issued billion, and prior billion,

proven Our delivering rates multichannel a supply-constrained fell. long-term in year-over-year third where the volume interest refinance strategy meaningful market. in originations, quarter successful increase a has purchase higher by the during quarter particularly in of period originations third the and in

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

Our across higher set. other on our mix from our and margins sale product away benefited gain primary wider channel margin from overall a toward primarily channels JV

was the billion $XXX of prior in from the the earnings rates part near Servicing quarter $X was billion. million custodial balances and third year's to Our high on XXXX, last $X.X of balances. the -- custodial to in fee guidance also billion billion. quarter, X% $X loan volume the for origination higher we and of income interest $X.X between volume increased of This quarter higher quarter was from of issued third increase in from higher due and end the $XXX credits XXXX million an

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

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

primary by X% the increase commission, direct the quarter. were expenses, for third in and million increase XXXX expenses the higher of of $X marketing volume. overtime, total the quarter from Our origination year prior reflecting or increased The drivers

Our expected litigation to the third quarter settlement related incident. benefit the insurance associated expenses quarter million, first net class of proceeds a cybersecurity the with primarily $XX connected to of reflect action

down million, XXXX. the totaled slightly and charges $X third Restructuring-related of quarter from impairment

expenses of charges, higher related impact the and overtime commissions, related restructuring expenses, and were expenses benefit, origination the marketing the increased direct Excluding our impairment increase asset in our by quarter the primarily of to forward to as as offset higher productivity going salary-related reflecting build capacity during volumes ongoing volumes well count somewhat an head we expenses, increase initiatives. in higher our for as expectations insurance

billion $X we quarter guidance and $X fourth million lock billion that of locked pull-through during expect purchase the funding in volume and origination in quarter, of to our $X.X weighted the volume $X.X decrease higher and seasonal ahead third activity remains between the Volume pipeline. and the billion. the of Looking reflects volume loans between impact

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

to negatively locked related fourth as MSR expect the impacted also lower absence the quarter volume-related insurance We as from quarter. revenue discussed second loans third servicing the higher of quarter by and onetime of benefit during to the be well expenses previously closings sales

demonstrate towards Our million volumes. to third with reduced liquidity positive and allowing ended benefits accrue Most our the higher operating quarter We $XXX market loanDepot a position. the results us management path and strong our significantly a on of maintain in notably, risk cost quickly profitability, reset quarter cash. focused profile activities can sheet creating balance leverage the that charted have while

operating of As allow we efficiency volumes, will Star to while ongoing market Project we on we higher of to XXXX, capture us continued market anticipate sustainable the challenges, we and profitability variety a capitalize wide of operational believe implementation look benefit North towards our to investments in achieve the continue but environments.

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

Instructions]. [Operator

first Your Raymond line the is from John question James. Davis with of

just going on is for This kind of expectations forward. Maybe Taylor your start with and to JD. hearing non-volume-related expenses

forward? the hire nonvolume investments? from But sure to that, benefit any should recovery insurance base have we this going any think expectations properly you additional the just . additional plans our we Just expense want the had about how quarter. So I obviously set. to cyber make excluding

Hayes. David is This Yes.

and continued from about DOE, think We've I commissions or expenses course the expenses, down think clearly, volumes, into on perspective, channel. in focused year the fluctuate also as initiatives volume-related should and those year. direct highly next to volume-related very remainder you originations our we'd productive on so related to of nonvolume typically work this be which expect is over We tied expense, those I will expenses characterize but especially to marketing productivity of some as that the think fluctuate.

ops around investing members our But initiatives, revenue-generating well. and our staffing specifically as team loan officers we in are

as the building of sort we're we So market. capacity of eventual recovery expect mortgage up the

as go-forward saw The spend. 'XX determined some a go see would other key into vendor from expect be of we on We from similar vendors, some do going into we 'XX to 'XX. levels to yet our come costs to of the that consider thing though. basis, are inflationary activity effect we Those of and in

And Got it. then Star. Very helpful. on North just Project

I think of and partnerships. geographically I was expand that saw initiatives the one to expand

was expanding on a and more looking side, the ones? partnership partnerships current what into? bit focused you I you if to that So just geographies elaborate adding or on could And curious you mostly new on are expand are

have a our we opportunity retail which we're done team, also Smith there's and recently markets Geographically, in in the Yes. we're this well. doing exploring our where market lot end looking expansion fill new venture of This channel joint Jeff business country retail organically. JVs real builders, with with with But at estate we've to which as in in is Walsh. Douglas

now, South the the opportunistic in Southeast kind the for markets us are markets plenty of to expand of and there and across but kind focus to So U.S. of

Your of next the UBS. Harter from Doug question is with line

to just comments. of closing could you expand Hoping your one

a look kind on you on would that little make wanted And said to One, expand in that heard profitability You I 'XX bit. scenarios. range you if of to comment under just sustainable right. have sure that could a of just

is Frank This for Martell. Doug. joining call. the Thanks Sure,

and So proved of as what primarily as of it uptick take forecast you making volume, quarter, we make said, forward third think MBA that it and get money. -- company think channel good the look, currently about that David the sits direct pretty revenue to to which that, at we look in was modest as money I our look in chances we're feel we 'XX, I volume, the would benefited kind but the in that to our

has -- the It area has I with and lot for Certainly, but there's of we actually volume. put think is pent-up year, and a we been next MBA us. fluid equity expect situation. that an rates of out. the And upside fundamentally refi that's lead that consistent that way with a home believe in to forecast

making said lot disruption done kind think no a to But we of off. So not -- I market trillion pretty that we're there's earlier, company about the swing around cost feel hopeful $X market, work the been in forecast $X And trillion, that to our automation driving that fixed good feel on we'll company. would what the and there's in get of David just the we if we're chances. of

leverage So to if we volume, get try expect do operating to some drive as we well.

well So forward as we right pretty X, year. a market look we're positioned and now, X to for playing we next out that sit

growing the the do you of more it? of as think about those MSRs? how financing of And talked retention more consumption it. kind servicing MSRs/cash retaining you that Star, be through Got portfolio. about of part North And of Project Would

also the opportunistically Doug, there. We'll Jeff to and this something opportunity the DerGurahian. the attractive look going presents that we've is this MSRs opportunities itself, that do We'll acquire market we I is of can to the come to that. on organically. continue The is been to path portfolio, on portfolio extent add growth is at think, as

where to I best the that several is. attack out think place next we'll that figure over growth quarters the

the and we cash extent continue grow out to have to the need the lines the And origination to financing that that it, profitable we'll in are there, and that finance business share. lever take terms the to assets of we

Instructions]. [Operator

is Jeffries. Derek Your line from the next question Sommers with of

on kind I the what wondering you you're of was if could seeing traffic just touch kind of recruiting environment, there?

market, still again. originators. to We're Yes. We're loan both Jeff lending. in-market in Thanks. offers, recruitment direct retail is a seeing Jeff organic made It's of higher positive high-producing and competitive This see multiple -- end, originators, offers Walsh. we in loan where traction

people we're So that really growth. is the of organic and good doing in of forward I still we're kind a last strategy of great but competitive, winning think moving job over lot continuing really a quarter,

partnership Or in-market Got kind kind a would the be the partnerships whole. Douglas origination? just of be compare kind it. through serve kind Smith incremental helpful. And would builder then the of and these as direct does anything channel, color a there of on Any incremental just how kind JVs Or maybe helpful. expense base to the of of

Yes.

group we're excited great Our broker venture is model in is a profitability model with growth they up separately. business a But banker there And venture seeing in for in very, And of different joint over Smith what entity. a retail been couple obviously this set story. new JV with or the because a really they business market JV new channel. run spot market bright are a the kind very sharing the as really build model over predictable. own resale. really versus typically its in where of us last compelling It's the the has positive as we're years it's are obviously, than We're it business Douglas, of about is

So as much we and it as to like business like we would really of can. do that

back there no time, I closing this questions. At Frank call any are over will Martell for further hand now to today's remarks.

and of for -- thank behalf want on Gerhard, rest Jeff Jeff and us Look, joining everybody DerGurahian really today. for our I for of Tamika. to your Walsh call the Dave, Thanks, team, the

the of the for North suite in we X taking believe share company. a will that means market we at and of proud on forward the realizing complete Completing the years. forward. services the accomplishments home we significant loanDepot delivers Star full a dream regarding everything, market dedication the here. optimism leadership we as fuel focus team the of of in a as really It's And XXXX loanDepot, with have Vision I'm the saying, we resiliency our accomplishment look team American of and potential potential and exciting and very At coming times represents go professionals that growing think we Project importantly,

appreciate everybody, time. again, thanks and So I your

for today's call. you concludes joining. Thank This

your disconnect may You now lines.