8-K
loanDepot, Inc. (LDI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (or date of earliest event reported): August 8, 2023
_____________________
loanDepot, Inc.
(Exact Name of Registrant as Specified in its Charter)
_____________________
| Delaware | 001-40003 | 85-3948939 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification Number) |
6561 Irvine Center Drive
Irvine, California 92618
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (888) 337-6888
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br>Symbol(s) | Name of each exchange<br><br>on which registered |
|---|---|---|
| Class A Common Stock, $0.001 Par Value | LDI | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On August 8, 2023, loanDepot, Inc. (the "Company") issued a press release announcing its results for the three and six months ended ended June 30, 2023 (the “Earnings Press Release”). The full press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
On August 8, 2023, the Company posted on its website at www.loandepot.com a presentation (the “loanDepot Presentation”) on certain financial and operating initiatives available for viewing during the Company’s conference call and webcast announcing its financial results for the three and six months ended ended June 30, 2023 at 5:00 p.m. Eastern time on August 8, 2023.
A copy of the loanDepot Presentation is furnished pursuant to this Item 7.01 as Exhibit 99.2 to this Current Report on Form 8-K and incorporated by reference herein in its entirety. The loanDepot Presentation includes references to non-GAAP financial information. Reconciliations between the non-GAAP financial measures and the comparable GAAP financial measures are available in the loanDepot Presentation. The loanDepot Presentation should be read in conjunction with the Earnings Press Release. The Company reserves the right to discontinue availability of the loanDepot Presentation from its website at any time.
The information furnished pursuant to Items 2.02 and 7.01, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, or the Exchange Act, as amended, except as specifically identified therein as being incorporated by reference.
Additionally, the submission of the information set forth in this Item 7.01 is not deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely by Regulation FD.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description |
|---|---|
| 99.1 | loanDepot, Inc. press release dated August 8, 2023 |
| 99.2 | loanDepot, Inc. Q2 2023 Investor Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| loanDepot, Inc. | |
|---|---|
| By: | /s/ David Hayes |
| Name: David Hayes | |
| Title: Chief Financial Officer |
Date: August 8, 2023
Document
loanDepot announces second quarter 2023 financial results
Company reports second consecutive quarter of sequential double-digit revenue growth and ongoing cost productivity gains resulting in significant narrowing of net loss
•Revenue up 31% or $63.9 million from first quarter 2023, primarily driven by higher pull through weighted lock volume and gain on sale margin.
•Total expenses increased 5% or $15.7 million from first quarter 2023, primarily driven by Vision 2025 related costs and higher direct costs attributable to increased origination volumes, partially offset by cost productivity.
•Quarterly net loss narrowed by 46% to $49.8 million, or $42.0 million, from first quarter 2023 net loss of $91.7 million primarily due to increased revenues and cost productivity.
•Adjusted net loss for the second quarter of 2023 was $34.3 million as compared to $60.2 million for the first quarter of 2023.
•Company continues to maintain strong liquidity profile, exiting the quarter with cash balance of $719.1 million.
IRVINE, Calif., August 8, 2023 - loanDepot, Inc. (NYSE: LDI), (together with its subsidiaries, “loanDepot” or the “Company”), today announced results for the second quarter ended June 30, 2023.
“loanDepot continues to make significant progress against the strategic imperatives laid out in our Vision 2025 plan,” said President and Chief Executive Officer Frank Martell. “We delivered our second successive quarter of strong top line growth and margin expansion on a sequential basis, and at the same time, continued to drive cost productivity and operating leverage. Importantly, we reduced our sequential quarterly net loss by $66.0 million in the first quarter of 2023 and by $42 million in the second quarter.
“While we continue the work of resetting our cost structure to align with generationally low unit volumes, we are also focused on the other pillars of Vision 2025, including capturing opportunities inherent in our strategy to expand purpose-driven lending that supports first-time homebuyers and diverse communities. During 2022, loanDepot ranked as the country’s third largest mortgage lender for all minorities1. Home ownership is a bedrock of the American Dream and plays a vital role in helping to build strong, stable communities, and further deepening our support for diverse and first-time homebuyers is a critical component of our Vision 2025 plan,” Martell added.
“As we move forward in the second half of 2023, we plan to continue maintaining a strong liquidity position and aggressively reduce our costs,” said Chief Financial Officer, David Hayes. “Importantly, we are also investing in critical operating platforms, which we expect will deliver higher levels of automation and operating leverage and position us for additional growth and margin expansion in 2024.”
1 Based on 2022 Home Mortgage Disclosure Act (HMDA) data collected by the Consumer Financial Protection Bureau (CFPB).
Second Quarter Highlights:
Financial Summary
| Three Months Ended | Six Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands except per share data) <br>(Unaudited) | Jun 30,<br>2023 | Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,2022 | |||||||||
| Rate lock volume | $ | 8,973,666 | $ | 8,468,435 | $ | 19,596,763 | $ | 17,442,101 | ||||||
| Pull through weighted lock volume(1) | 6,057,179 | 5,325,488 | 12,412,894 | 11,382,667 | 32,212,939 | |||||||||
| Loan origination volume | 6,273,543 | 4,944,337 | 15,995,055 | 11,217,880 | 37,545,786 | |||||||||
| Gain on sale margin(2) | 2.75 | % | 2.43 | % | 1.16 | % | 2.61 | % | 1.62 | % | ||||
| Pull through weighted gain on sale margin(3) | 2.85 | % | 2.26 | % | 1.50 | % | 2.57 | % | 1.89 | % | ||||
| Financial Results | ||||||||||||||
| Total revenue | $ | 271,833 | $ | 207,901 | $ | 308,639 | $ | 479,734 | ||||||
| Total expense | 330,148 | 314,484 | 560,657 | 644,632 | 1,166,913 | |||||||||
| Net loss | (49,759) | (91,721) | (223,822) | (141,480) | (315,141) | |||||||||
| Diluted loss per share | $ | (0.13) | $ | (0.25) | $ | (0.66) | $ | (0.38) | (0.93) | |||||
| Non-GAAP Financial Measures(4) | ||||||||||||||
| Adjusted total revenue | $ | 275,709 | $ | 226,190 | $ | 273,273 | $ | 501,899 | ||||||
| Adjusted net loss | (34,329) | (60,247) | (168,863) | (94,623) | (250,255) | |||||||||
| Adjusted EBITDA (LBITDA) | 6,499 | (29,336) | (191,510) | (22,838) | (265,916) |
All values are in US Dollars.
(1)Pull through weighted rate lock volume is the principal balance of loans subject to interest rate lock commitments, net of a pull-through factor for the loan funding probability.
(2)Gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by loan origination volume during period.
(3)Pull through weighted gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by the pull through weighted rate lock volume.
(4)See “Non-GAAP Financial Measures” for a discussion of Non-GAAP Financial Measures and a reconciliation of these metrics to their closest GAAP measure.
Operational Highlights
•Quarterly non-volume related expenses increased $2.2 million since the first quarter of 2023, primarily due to higher Vision 2025 related expenses and legal accruals.
•Incurred expenses related to the Vision 2025 plan of $6.8 million during the quarter, including $4.5 million of personnel related expenses and $2.3 million of lease and other asset impairment charges. Vision 2025 expenses totaled $2.6 million in the first quarter of 2023.
•Accrued $7.5 million of legal expenses related to the settlement of outstanding litigation.
•Pull through weighted lock volume of $6.1 billion for the three months ended June 30, 2023, an increase of $0.7 billion or 14% from the first quarter of 2023, resulting in quarterly total revenue of $271.8 million, an increase of $63.9 million, or 31%, over the same period.
•Loan origination volume for the second quarter of 2023 was $6.3 billion, an increase of $1.3 billion or 27% from the first quarter of 2023.
•Purchase volume increased to 73% of total loans originated during the second quarter, up from 71% of total loans originated during the first quarter of 2023 and up from 59% of total loans originated during the second quarter of 2022.
•For the three months ended June 30, 2023, our preliminary organic refinance consumer direct recapture rate2 increased to 69% from the first quarter’s refinance rate of 67%. This highlights the efficacy of our marketing efforts, the strength of our customer relationships, and the value of our servicing portfolio for adjacent and complementary revenue opportunities.
•Net loss for the second quarter of 2023 of $49.8 million as compared to net loss of $91.7 million in the first quarter of 2023. Net loss decreased quarter over quarter primarily due to an increase in revenues and operating efficiency benefits.
•Adjusted EBITDA for the second quarter of 2023 was positive $6.5 million as compared to adjusted LBITDA of negative $29.3 million for the first quarter of 2023. Adjusted EBITDA (LBITDA) excludes the impact of interest expense on non-funding debt, fair value changes of our mortgage servicing rights, net of hedging results, impairment charges, and other operating expenses.
Outlook for the third quarter of 2023
•Origination volume of between $5 billion and $7 billion.
•Pull-through weighted rate lock volume of between $5.5 billion and $7.5 billion.
•Pull-through weighted gain on sale margin of between 245 basis points and 285 basis points.
Servicing
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Servicing Revenue Data:<br><br>($ in thousands)<br><br>(Unaudited) | Jun 30,<br>2023 | Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | |||||
| Due to changes in valuation inputs or assumptions | $ | 26,138 | $ | (21,368) | $ | 98,795 | $ | 4,771 | $ | 297,792 |
| Due to collection/realization of cash flows | (41,619) | (34,657) | (66,380) | (76,276) | (143,502) | |||||
| Realized gains (losses) on sales of servicing rights | 7,021 | 140 | (2,493) | 7,161 | 7,540 | |||||
| Net (loss) gain from derivatives hedging servicing rights | (30,014) | 3,079 | (63,429) | (26,936) | (263,720) | |||||
| Changes in fair value of servicing rights, net | $ | (38,474) | $ | (52,806) | $ | (33,507) | $ | (91,280) | $ | (101,890) |
| Servicing fee income | $ | 117,737 | $ | 118,961 | $ | 117,326 | $ | 236,699 | $ | 228,385 |
2 We define organic refinance consumer direct recapture rate as the total unpaid principal balance (“UPB”) of loans in our servicing portfolio that are paid in full for purposes of refinancing the loan on the same property, with the Company acting as lender on both the existing and new loan, divided by the UPB of all loans in our servicing portfolio that paid in full for the purpose of refinancing the loan on the same property. The recapture rate is finalized following the publication date of this release when external data becomes available.
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Servicing Rights, at Fair Value:<br><br>($ in thousands)<br><br>(Unaudited) | Jun 30,<br>2023 | Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | |||||
| Balance at beginning of period | $ | 2,016,568 | $ | 2,025,136 | $ | 2,078,187 | $ | 2,025,136 | $ | 1,999,402 |
| Additions | 75,866 | 59,295 | 180,455 | 135,161 | 450,215 | |||||
| Sales proceeds, net | (78,191) | (11,838) | (86,464) | (90,030) | (399,314) | |||||
| Changes in fair value: | ||||||||||
| Due to changes in valuation inputs or assumptions | 26,138 | (21,368) | 98,795 | 4,771 | 297,792 | |||||
| Due to collection/realization of cash flows | (41,619) | (34,657) | (66,380) | (76,276) | (143,502) | |||||
| Balance at end of period (1) | $ | 1,998,762 | $ | 2,016,568 | $ | 2,204,593 | $ | 1,998,762 | $ | 2,204,593 |
(1)Balances are net of $13.3 million, $12.2 million, and $9.1 million of servicing rights liability as of June 30, 2023, March 31, 2023, and June 30, 2022, respectively.
| % Change | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Servicing Portfolio Data:<br><br>($ in thousands)<br><br>(Unaudited) | Jun 30,<br>2023 | Mar 31,<br>2023 | Jun 30,<br>2022 | Jun-23<br>vs<br>Mar-23 | Jun-23<br>vs<br>Jun-22 | ||||||||
| Servicing portfolio (unpaid principal balance) | $ | 142,479,870 | $ | 141,673,464 | $ | 155,217,012 | 0.6 | % | (8.2) | % | |||
| Total servicing portfolio (units) | 482,266 | 475,765 | 507,231 | 1.4 | (4.9) | ||||||||
| 60+ days delinquent ($) | $ | 1,192,377 | $ | 1,282,432 | $ | 1,511,871 | (7.0) | (21.1) | |||||
| 60+ days delinquent (%) | 0.8 | % | 0.9 | % | 1.0 | % | |||||||
| Servicing rights, net to UPB | 1.4 | % | 1.4 | % | 1.4 | % |
As of June 30, 2023, approximately $115.3 million, or 0.1%, of our servicing portfolio was in active forbearance. This represents a decrease from $174.0 million, or 0.1%, as of March 31, 2023.
Balance Sheet Highlights
| % Change | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands)<br><br>(Unaudited) | Jun 30,<br>2023 | Mar 31,<br>2023 | Jun 30,<br>2022 | Jun-23<br>vs<br>Mar-23 | Jun-23<br>vs<br>Jun-22 | |||||
| Cash and cash equivalents | $ | 719,073 | $ | 798,119 | $ | 954,930 | (9.9) | % | (24.7) | % |
| Loans held for sale, at fair value | 2,256,551 | 2,039,367 | 4,656,338 | 10.6 | (51.5) | |||||
| Servicing rights, at fair value | 2,012,049 | 2,028,788 | 2,213,700 | (0.8) | (9.1) | |||||
| Total assets | 6,203,504 | 6,190,791 | 9,195,187 | 0.2 | (32.5) | |||||
| Warehouse and other lines of credit | 2,046,208 | 1,830,319 | 4,265,343 | 11.8 | (52.0) | |||||
| Total liabilities | 5,406,160 | 5,349,629 | 7,981,324 | 1.1 | (32.3) | |||||
| Total equity | 797,344 | 841,162 | 1,213,863 | (5.2) | (34.3) |
An increase in loans held for sale at June 30, 2023, resulted in a corresponding increase in the balance on our warehouse lines of credit. Total funding capacity with our lending partners was $3.9 billion at June 30, 2023 and $4.1 billion at March 31, 2023. Available borrowing capacity was $1.7 billion at June 30, 2023.
Consolidated Statements of Operations
| ($ in thousands except per share data)<br>(Unaudited) | Three Months Ended | Six Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30,<br>2023 | Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | ||||||
| REVENUES: | ||||||||||
| Interest income | $ | 33,060 | $ | 27,958 | $ | 62,722 | $ | 61,017 | $ | 115,687 |
| Interest expense | (30,209) | (26,760) | (39,923) | (56,969) | (79,813) | |||||
| Net interest income | 2,851 | 1,198 | 22,799 | 4,048 | 35,874 | |||||
| Gain on origination and sale of loans, net | 154,335 | 108,152 | 146,562 | 262,487 | 509,692 | |||||
| Origination income, net | 18,332 | 12,016 | 39,108 | 30,349 | 98,181 | |||||
| Servicing fee income | 117,737 | 118,961 | 117,326 | 236,699 | 228,385 | |||||
| Change in fair value of servicing rights, net | (38,474) | (52,806) | (33,507) | (91,280) | (101,890) | |||||
| Other income | 17,052 | 20,380 | 16,351 | 37,431 | 41,707 | |||||
| Total net revenues | 271,833 | 207,901 | 308,639 | 479,734 | 811,949 | |||||
| EXPENSES: | ||||||||||
| Personnel expense | 157,799 | 141,027 | 296,569 | 298,826 | 642,563 | |||||
| Marketing and advertising expense | 34,712 | 35,914 | 60,837 | 70,626 | 162,350 | |||||
| Direct origination expense | 17,224 | 17,378 | 33,996 | 34,603 | 87,153 | |||||
| General and administrative expense | 54,817 | 56,134 | 63,927 | 110,951 | 113,675 | |||||
| Occupancy expense | 6,099 | 6,081 | 9,388 | 12,180 | 18,784 | |||||
| Depreciation and amortization | 10,721 | 10,026 | 11,323 | 20,747 | 21,867 | |||||
| Servicing expense | 5,750 | 4,834 | 10,741 | 10,583 | 32,252 | |||||
| Other interest expense | 43,026 | 43,090 | 33,140 | 86,116 | 47,533 | |||||
| Goodwill impairment | — | — | 40,736 | — | 40,736 | |||||
| Total expenses | 330,148 | 314,484 | 560,657 | 644,632 | 1,166,913 | |||||
| Loss before income taxes | (58,315) | (106,583) | (252,018) | (164,898) | (354,964) | |||||
| Income tax benefit | (8,556) | (14,862) | (28,196) | (23,418) | (39,823) | |||||
| Net loss | (49,759) | (91,721) | (223,822) | (141,480) | (315,141) | |||||
| Net loss attributable to noncontrolling interests | (26,316) | (48,813) | (122,894) | (75,130) | (179,472) | |||||
| Net loss attributable to loanDepot, Inc. | $ | (23,443) | $ | (42,908) | $ | (100,928) | $ | (66,350) | $ | (135,669) |
| Basic loss per share | $ | (0.13) | $ | (0.25) | $ | (0.66) | $ | (0.38) | $ | (0.93) |
| Diluted loss per share | $ | (0.13) | $ | (0.25) | $ | (0.66) | $ | (0.38) | $ | (0.93) |
Consolidated Balance Sheets
| ($ in thousands) | Jun 30,<br>2023 | Mar 31,<br>2023 | Dec 31,<br>2022 | |||
|---|---|---|---|---|---|---|
| (Unaudited) | ||||||
| ASSETS | ||||||
| Cash and cash equivalents | $ | 719,073 | $ | 798,119 | $ | 863,956 |
| Restricted cash | 61,294 | 90,084 | 116,545 | |||
| Accounts receivable, net | 68,581 | 99,381 | 145,279 | |||
| Loans held for sale, at fair value | 2,256,551 | 2,039,367 | 2,373,427 | |||
| Derivative assets, at fair value | 80,382 | 84,624 | 39,411 | |||
| Servicing rights, at fair value | 2,012,049 | 2,028,788 | 2,037,447 | |||
| Trading securities, at fair value | 93,442 | 95,561 | 94,243 | |||
| Property and equipment, net | 82,677 | 88,877 | 92,889 | |||
| Operating lease right-of-use asset | 34,040 | 35,362 | 35,668 | |||
| Prepaid expenses and other assets | 129,675 | 139,904 | 155,982 | |||
| Loans eligible for repurchase | 647,418 | 672,458 | 634,677 | |||
| Investments in joint ventures | 18,322 | 18,266 | 20,410 | |||
| Total assets | $ | 6,203,504 | $ | 6,190,791 | $ | 6,609,934 |
| LIABILITIES AND EQUITY | ||||||
| LIABILITIES: | ||||||
| Warehouse and other lines of credit | $ | 2,046,208 | $ | 1,830,319 | $ | 2,146,602 |
| Accounts payable and accrued expenses | 407,356 | 449,641 | 488,696 | |||
| Derivative liabilities, at fair value | 8,790 | 35,662 | 67,492 | |||
| Liability for loans eligible for repurchase | 647,418 | 672,458 | 634,677 | |||
| Operating lease liability | 56,552 | 57,837 | 61,675 | |||
| Debt obligations, net | 2,239,836 | 2,303,712 | 2,289,319 | |||
| Total liabilities | 5,406,160 | 5,349,629 | 5,688,461 | |||
| EQUITY: | ||||||
| Total equity | 797,344 | 841,162 | 921,473 | |||
| Total liabilities and equity | $ | 6,203,504 | $ | 6,190,791 | $ | 6,609,934 |
Loan Origination and Sales Data
| ( in thousands)(Unaudited) | Three Months Ended | Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | ||||||
| Loan origination volume by type: | |||||||||
| Conventional conforming | 3,323,678 | 2,893,821 | 10,392,730 | 6,217,499 | 26,105,003 | ||||
| FHA/VA/A | 2,337,946 | 1,678,591 | 3,658,309 | 4,016,537 | 7,626,820 | ||||
| Jumbo | 148,077 | 131,066 | 1,595,843 | 279,143 | 3,383,547 | ||||
| Other | 463,842 | 240,859 | 348,173 | 704,701 | 430,416 | ||||
| Total | 6,273,543 | 4,944,337 | 15,995,055 | 11,217,880 | 37,545,786 | ||||
| Loan origination volume by purpose: | |||||||||
| Purchase | 4,552,919 | 3,512,771 | 9,500,164 | 8,065,690 | 17,530,930 | ||||
| Refinance - cash out | 1,614,747 | 1,324,239 | 5,669,205 | 2,938,986 | 15,498,840 | ||||
| Refinance - rate/term | 105,877 | 107,327 | 825,686 | 213,204 | 4,516,016 | ||||
| Total | 6,273,543 | 4,944,337 | 15,995,055 | 11,217,880 | 37,545,786 | ||||
| Loans sold: | |||||||||
| Servicing retained | 3,943,845 | 3,277,707 | 10,568,649 | 7,221,552 | 27,691,365 | ||||
| Servicing released | 2,134,024 | 2,118,874 | 7,342,889 | 4,252,898 | 13,088,211 | ||||
| Total | 6,077,869 | 5,396,581 | 17,911,538 | 11,474,450 | 40,779,576 | ||||
| Loan origination margins: | |||||||||
| Gain on sale margin | 2.75 | 2.43 | 1.16 | 2.61 | 1.62 |
All values are in US Dollars.
Second Quarter Earnings Call
Management will host a conference call and live webcast today at 5:00 p.m. ET on loanDepot’s Investor Relations website, investors.loandepot.com, to discuss its earnings results.
The conference call can also be accessed by dialing (888) 440-6385 using conference ID number 2021948. Please call five minutes in advance to ensure that you are connected prior to the call. A replay of the webcast and transcript will also be made available on the Investor Relations website following the conclusion of the event, or can be accessed by dialing (800) 770-2030 following the conclusion of the event through September 7, 2023.
For more information about loanDepot, please visit the company’s Investor Relations website: investors.loandepot.com.
Non-GAAP Financial Measures
To provide investors with information in addition to our results as determined by GAAP, we disclose certain non-GAAP measures to assist investors in evaluating our financial results. We believe these non-GAAP measures provide useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. They facilitate company-to-company operating performance comparisons by backing out potential differences caused by variations in hedging strategies, changes in valuations, capital structures (affecting interest expense on non-funding debt), taxation, the age and book depreciation of facilities (affecting relative depreciation expense), and other cost or benefit items which may vary for different companies for reasons unrelated to operating performance. These non-GAAP measures include our Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share (if dilutive), and Adjusted EBITDA (LBITDA). We exclude from these non-GAAP financial measures the change in fair value of MSRs and related hedging gains and losses as they add volatility and are not indicative of the Company’s operating performance or results of operation. We also exclude stock-based compensation expense, which is a non-cash expense, gains or losses on extinguishment of debt and disposal of fixed assets, non-cash goodwill impairment, and other impairment charges to intangible assets and operating lease right-of-use assets as management does not consider these costs to be indicative of our performance or results of operations. Adjusted EBITDA (LBITDA) includes interest expense on funding facilities, which are recorded as a component of “net interest income (expense)”, as these expenses are a direct operating expense driven by loan origination volume. By contrast, interest expense on our non-funding debt is a function of our capital structure and is therefore excluded from Adjusted EBITDA (LBITDA). Adjustments for income taxes are made to reflect historical results of operations on the basis that it was taxed as a corporation under the Internal Revenue Code, and therefore subject to U.S. federal, state and local income taxes. Adjustments to Diluted Weighted Average Shares Outstanding assumes the pro forma conversion of weighted average Class C shares to Class A common stock. These non-GAAP measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for revenue, net income, or any other operating performance measure calculated in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies. Some of these limitations are:
•they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;
•Adjusted EBITDA (LBITDA) does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted Total Revenue, Adjusted Net Income (Loss), and Adjusted EBITDA (LBITDA) do not reflect any cash requirement for such replacements or improvements; and
•they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.
Because of these limitations, Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share, and Adjusted EBITDA (LBITDA) are not intended as alternatives to total revenue, net income (loss), net income (loss) attributable to the Company, or Diluted Earnings (Loss) Per Share or as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share, and Adjusted EBITDA (LBITDA) along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. See below for a reconciliation of these non-GAAP measures to their most comparable U.S. GAAP measures.
| Reconciliation of Total Revenue to Adjusted Total Revenue ( in thousands)(Unaudited) | Three Months Ended | Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | |||||||||||
| Total net revenue | $ | 271,833 | $ | 207,901 | $ | 308,639 | $ | 479,734 | $ | 811,949 | ||||
| Change in fair value of servicing rights, net of hedging gains and losses(1) | 3,876 | 18,289 | (35,366) | 22,165 | (34,072) | |||||||||
| Adjusted total revenue | $ | 275,709 | $ | 226,190 | $ | 273,273 | $ | 501,899 | $ | 777,877 |
All values are in US Dollars.
(1)Represents the change in the fair value of servicing rights attributable to changes in assumptions, net of hedging gains and losses.
| Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)( in thousands)(Unaudited) | Three Months Ended | Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | |||||||||||
| Net loss attributable to loanDepot, Inc. | $ | (23,443) | $ | (42,908) | $ | (100,928) | $ | (66,350) | $ | (135,669) | ||||
| Net loss from the pro forma conversion of Class C common shares to Class A common shares (1) | (26,316) | (48,813) | (122,894) | (75,130) | (179,472) | |||||||||
| Net loss | (49,759) | (91,721) | (223,822) | (141,480) | (315,141) | |||||||||
| Adjustments to the benefit for income taxes(2) | 6,916 | 13,316 | 31,952 | 20,120 | 46,663 | |||||||||
| Tax-effected net loss | (42,843) | (78,405) | (191,870) | (121,360) | (268,478) | |||||||||
| Change in fair value of servicing rights, net of hedging gains and losses(3) | 3,876 | 18,289 | (35,366) | 22,165 | (34,072) | |||||||||
| Stock-based compensation expense | 5,754 | 5,926 | 4,712 | 11,679 | 7,021 | |||||||||
| Gain on extinguishment of debt | (39) | — | — | (39) | (10,528) | |||||||||
| Loss on disposal of fixed assets | 751 | 261 | — | 1,012 | — | |||||||||
| Goodwill impairment | — | — | 40,736 | — | 40,736 | |||||||||
| Other impairment (recovery) | 686 | (345) | 5,963 | 341 | 5,963 | |||||||||
| Tax effect of adjustments(4) | (2,514) | (5,973) | 6,962 | (8,421) | 9,103 | |||||||||
| Adjusted net loss | $ | (34,329) | $ | (60,247) | $ | (168,863) | $ | (94,623) | $ | (250,255) |
All values are in US Dollars.
(1)Reflects net loss to Class A common stock and Class D common stock from the pro forma exchange of Class C common stock.
(2)loanDepot, Inc. is subject to federal, state and local income taxes. Adjustments to income tax benefit reflect the effective income tax rates below, and the pro forma assumption that loanDepot, Inc. owns 100% of LD Holdings.
| Three Months Ended | Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30,<br>2023 | Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | |||||||||||
| Statutory U.S. federal income tax rate | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % | |||||
| State and local income taxes (net of federal benefit) | 5.28 | % | 6.28 | % | 5.00 | % | 5.78 | % | 5.00 | % | |||||
| Effective income tax rate | 26.28 | % | 27.28 | % | 26.00 | % | 26.78 | % | 26.00 | % |
(3)Represents the change in the fair value of servicing rights attributable to changes in assumptions, net of hedging gains and losses.
(4)Amounts represent the income tax effect using the aforementioned effective income tax rates, excluding certain discrete tax items. Reporting periods after June 30, 2022 include the income tax effect of excess tax benefits or deficiencies on vested RSUs. Prior periods were adjusted to conform to current presentation.
| Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Outstanding( in thousands except per share data)(Unaudited) | Three Months Ended | Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | |||||||||||
| Net loss attributable to loanDepot, Inc. | $ | (23,443) | $ | (42,908) | $ | (100,928) | $ | (66,350) | $ | (135,669) | ||||
| Adjusted net loss | (34,329) | (60,247) | (168,863) | (94,623) | (250,255) | |||||||||
| Share Data: | ||||||||||||||
| Diluted weighted average shares of Class A and Class D common stock outstanding | 173,908,030 | 170,809,818 | 153,822,380 | 172,358,924 | 146,415,135 | |||||||||
| Assumed pro forma conversion of weighted average Class C shares to Class A common stock | 148,597,745 | 149,210,417 | 165,281,304 | 149,535,576 | 173,245,208 | |||||||||
| Adjusted diluted weighted average shares outstanding | 322,505,775 | 320,020,235 | 319,103,684 | 321,894,500 | 319,660,343 |
All values are in US Dollars.
| Reconciliation of Net Income (Loss) to Adjusted EBITDA (LBITDA)( in thousands)(Unaudited) | Three Months Ended | Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31,<br>2023 | Jun 30,<br>2022 | Jun 30,<br>2023 | Jun 30,<br>2022 | |||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||
| Net loss | $ | (49,759) | $ | (91,721) | $ | (223,822) | $ | (141,480) | $ | (315,141) | ||||
| Interest expense - non-funding debt (1) | 43,026 | 43,090 | 33,140 | 86,116 | 47,533 | |||||||||
| Income tax benefit | (8,556) | (14,862) | (28,196) | (23,418) | (39,823) | |||||||||
| Depreciation and amortization | 10,721 | 10,026 | 11,323 | 20,747 | 21,867 | |||||||||
| Change in fair value of servicing rights, net ofhedging gains and losses(2) | 3,876 | 18,289 | (35,366) | 22,165 | (34,072) | |||||||||
| Stock-based compensation expense | 5,754 | 5,926 | 4,712 | 11,679 | 7,021 | |||||||||
| Loss on disposal of fixed assets | 751 | 261 | — | 1,012 | — | |||||||||
| Goodwill impairment | — | — | 40,736 | — | 40,736 | |||||||||
| Other impairment (recovery) | 686 | (345) | 5,963 | 341 | 5,963 | |||||||||
| Adjusted EBITDA (LBITDA) | $ | 6,499 | $ | (29,336) | $ | (191,510) | $ | (22,838) | $ | (265,916) |
All values are in US Dollars.
(1)Represents other interest expense, which includes gain on extinguishment of debt and amortization of debt issuance costs, in the Company’s consolidated statements of operations.
(2)Represents the change in the fair value of servicing rights attributable to changes in assumptions, net of hedging gains and losses.
Forward-Looking Statements
This press release may contain "forward-looking statements," which reflect loanDepot's current views with respect to, among other things, its business strategies, including the Vision 2025 plan, our HELOC product, financial condition and liquidity, competitive position, industry and regulatory environment, potential growth opportunities, the effects of competition, operations and financial performance. You can identify these statements by the use of words such as "outlook," "potential," "continue," "may," "seek," "approximately," "predict," "believe," "expect," "plan," "intend," "estimate," “project,” or "anticipate" and similar expressions or the negative versions of these words or comparable words, as well as future or conditional verbs such as "will," "should," "would" and "could." These forward-looking statements are based on current available operating, financial, economic and other information, and are not guarantees of future performance and are subject to risks, uncertainties and assumptions, including the risks in the "Risk Factors" section of loanDepot, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022 and Quarterly Reports on Form 10-Q as well as any subsequent filings with the Securities and Exchange Commission, which are difficult to predict. Therefore, current plans, anticipated actions, financial results, as well as the anticipated development of the industry, may differ materially from what is expressed or forecasted in any forward-looking statement. loanDepot does not undertake any obligation to publicly update or revise any forward-looking statement to reflect future events or circumstances, except as required by applicable law.
About loanDepot
loanDepot (NYSE: LDI) is a digital commerce company committed to serving its customers throughout the home ownership journey. Since its launch in 2010, loanDepot has revolutionized the mortgage industry with a digital-first approach that makes it easier, faster and less stressful to purchase or refinance a home. Today, as one of the nation's largest non-bank retail mortgage lenders, loanDepot enables customers to achieve the American dream of homeownership through a broad suite of lending and real estate services that simplify one of life's most complex transactions. With headquarters in Southern California and offices nationwide, loanDepot is committed to serving the communities in which its team lives and works through a variety of local, regional and national philanthropic efforts.
Investor Relations Contact:
Gerhard Erdelji
Senior Vice President, Investor Relations
(949) 822-4074
gerdelji@loandepot.com
Media Contact:
Rebecca Anderson
Senior Vice President, Communications & Public Relations
(949) 822-4024
rebeccaanderson@loandepot.com
LDI-IR
12
a2q23investorpresentatio
2Q 2023 INVESTOR PRESENTATION August 8, 2023
DISCLAIMER 2 Forward-Looking Statements and Other Information This presentation may contain "forward-looking statements," which reflect loanDepot's current views with respect to, among other things, its business strategies, including the Vision 2025 plan, our HELOC product, financial condition and liquidity, competitive position, industry and regulatory environment, potential growth opportunities, the effects of competition, operations and financial performance. You can identify these statements by the use of words such as "outlook," "potential," "continue," "may," "seek," "approximately," "predict," "believe," "expect," "plan," "intend," "estimate," “project,” or "anticipate" and similar expressions or the negative versions of these words or comparable words, as well as future or conditional verbs such as "will," "should," "would" and "could." These forward-looking statements are based on current available operating, financial, economic and other information, and are not guarantees of future performance and are subject to risks, uncertainties and assumptions, including the risks in the "Risk Factors" section of loanDepot, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022 and Quarterly Reports on Form 10-Q as well as any subsequent filings with the Securities and Exchange Commission, which are difficult to predict. Therefore, current plans, anticipated actions, financial results, as well as the anticipated development of the industry, may differ materially from what is expressed or forecasted in any forward-looking statement. loanDepot does not undertake any obligation to publicly update or revise any forward-looking statement to reflect future events or circumstances, except as required by applicable law. Non-GAAP Financial Information To provide investors with information in addition to our results as determined by GAAP, we disclose certain non-GAAP measures to assist investors in evaluating our financial results. We believe these non-GAAP measures provide useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. They facilitate company-to-company operating performance comparisons by backing out potential differences caused by variations in hedging strategies, changes in valuations, capital structures (affecting interest expense on non-funding debt), taxation, the age and book depreciation of facilities (affecting relative depreciation expense), and other cost or benefit items which may vary for different companies for reasons unrelated to operating performance. These non-GAAP measures include our Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share (if dilutive), and Adjusted EBITDA (LBITDA). We exclude from these non-GAAP financial measures the change in fair value of MSRs and related hedging gains and losses as they add volatility and are not indicative of the Company’s operating performance or results of operation. We also exclude stock-based compensation expense, which is a non-cash expense, gains or losses on extinguishment of debt and disposal of fixed assets, non-cash goodwill impairment, and other impairment charges to intangible assets and operating lease right-of-use assets as management does not consider these costs to be indicative of our performance or results of operations. Adjusted EBITDA (LBITDA) includes interest expense on funding facilities, which are recorded as a component of “net interest income (expense)”, as these expenses are a direct operating expense driven by loan origination volume. By contrast, interest expense on our non-funding debt is a function of our capital structure and is therefore excluded from Adjusted EBITDA (LBITDA). Adjustments for income taxes are made to reflect historical results of operations on the basis that it was taxed as a corporation under the Internal Revenue Code, and therefore subject to U.S. federal, state and local income taxes. Adjustments to Diluted Weighted Average Shares Outstanding assumes the pro forma conversion of weighted average Class C shares to Class A common stock. These non-GAAP measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for revenue, net income, or any other operating performance measure calculated in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies. Market and Industry Data This presentation also contains information regarding the loanDepot’s market and industry that is derived from third-party research and publications. That information may rely upon a number of assumptions and limitations, and the Company has not independently verified its accuracy or completeness.
3 SECOND QUARTER FACT SHEET Financial Operational • Originations: $6.3 billion in funded volume, in line with second quarter 2023 guidance • Total Revenue: $271.8 million on $6.1 billion of pull-through weighted lock volume • Total Expenses: Increased by $15.7 million, or 5% from the first quarter of 2023, primarily due higher expenses attributed to an increase in volume and Vision 2025 related restructuring costs, partially offset by cost productivity gains • Liquidity: Unrestricted cash and equivalents of $719.1 million and undrawn borrowing capacity totaling $1.6 million at quarter-end • Servicing: Increased UPB slightly to $142.5 billion at end of quarter, compared to $141.7 billion in Q1 ’23 • Continued progress towards our Vision 2025 strategy to address current and anticipated market conditions and position company for long-term value creation o Reduced headcount to 4,683 from 8,540 at the end of the second quarter 2022 o Ranked as third largest mortgage lender in America by number of funded loans (1) o During 2022, loanDepot ranked as the country’s third largest mortgage lender for all minorities (1) • Purchase Mix: 73% of total Originations compared to 71% in first quarter 2023 • Organic Refinance Consumer Direct Recapture Rate: Increased to 69% for the quarter compared to 67% in first quarter 2023 (1) Based on 2022 Home Mortgage Disclosure Act data collected by the Consumer Financial Protection Bureau. Data for single family originations and exclude correspondent loans
4 VISION 2025 PLAN • Purpose-driven organization, increasing purchase transactions and serving diverse communities across the country • Named by The Wall Street Journal as the “Best Mortgage Lender for First-Time Buyers,” validating our mission of purpose-driven lending to the increasingly diverse communities comprising first-time homebuyers • Recently announced partnership with Habitat for Humanity • Increase our focus on addressing persistent gaps in equitable housing, advancing the goal of growing our share of lending for purchase transactions while maintaining responsible management of credit risk • #3 lender overall for all minorities(1) • Quarterly non-volume related expenses increased $2.2 million, since the first quarter of 2023 (Includes Vision 2025 related charges of $6.8 million and litigation settlement accrual of $7.5 million incurred during the quarter) • Company continues to position itself for a market size totaling $1.5 trillion • Launch of home equity line of credit (HELOC) giving efficient access to record levels of home equity in as little as seven days • Continued investment in our in-house servicing business to complement our origination strategy and serve customers through the entire mortgage journey • 47 Retail LOs were named to the Scotsman Guide for Top Originators • Capture additional revenue by leveraging marketing and customer acquisition expenses • Ranked as the third largest mortgage lender in America by units of funded loans(1) • Streamline organizational structure to better position the company for the rapidly evolving mortgage market and enhance quality and effectiveness • Increase share of lending for purchase transactions, while achieving top-quartile quality, increasing automation, and achieving operating leverage Focus on Purchase Transactions and Serving Diverse Communities Execute Growth Generating Initiatives Aggressively Right-Size Cost Structure Optimize Organizational Structure VISION 2025 (1) Based on 2022 Home Mortgage Disclosure Act data collected by the Consumer Financial Protection Bureau. Data for single family originations and exclude correspondent loans
DIVERSE & EXPERIENCED MANAGEMENT TEAM WITH UNIQUE SKILLSETS President and CEO Jeff WalshDavid Hayes Dan Binowitz Jeff DerGurahian Chief Administrative Officer President, LDI Mortgage Town & Country Credit Corp. Chief Investment Officer and Head Economist TJ Freeborn Chief Information Officer George Brady Frank Martell Managing Director Operations & Servicing 5 Gregg Smallwood Chief Legal Officer, Corporate Secretary Joe Grassi Chief Risk Officer Darren Graeler Chief Accounting Officer Melanie Graper Chief Human Resources Officer Chief Financial Officer
loanDepot Historical Mortgage Origination Volume SCALED ORIGINATOR DELIVERING CUSTOMERS A COMPLETE SOLUTION Inception to LTM Q2’23 Origination CAGR: 26%(1) loanDepot Originations loanDepot Market Share $1.7 $2.3 $4.1 Total market volume ($ trillion) $4.0 $2.2 (1) CAGR includes annualized volume for 2010 Source: Historical market share based on MBA industry volume as of 7/20/2023 and historical loanDepot origination volume ($ in billions) The loanDepot Ecosystem Established Scalable Infrastructure 2010 to 2012 Diversification & Expansion 2013 to 2015 Brand, Technology & Operational Transformation 2016 to 2021 Vision 2025 & Beyond 2022 + • Launched with the goal of disrupting mortgage • Created scalable platform and infrastructure • Expanded in-market retail reach through acquisitions • Leveraged infrastructure to launch LD Wholesale • Strategic decision to begin retaining servicing • Launched proprietary mello® technology • Grew servicing book with long-term relationships to a half million loanDepot customers • Launched mellohome and melloInsurance • Acquired leading title insurance company • Formed mello® focused on mortgage adjacent, digital-first products and services • Repositioning the Company for long term value creation • Purpose driven sustainable lending • Simplifying operational structure and increasing operating leverage • Maintaining strong balance sheet liquidity • Additions to executive team to position company for next era • Launch of HELOC $1.8 6 Title Insurance Escrow Services Homeowners Insurance First Mortgage HELOC $1.7 $35 $33 $45 $101 $137 $54 $27 2.0% 2.0% 2.0% 2.5% 3.4% 2.4% 1.6% – 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 0 20 40 60 80 100 120 140 2017 2018 2019 2020 2021 2022 LTM Q2'23
ORIGINATION GROWTH RELATIVE TO INDUSTRY (1) MBA as of 7/20/2023 Note: Pull through weighted rate lock volume is the unpaid principal balance of loans subject to interest rate lock commitments, net of a pull-through factor for the loan funding probability 7 Purchase Mix % : 26% 31% 26% ($ in billions) Total Market Share (%) 2.1% 2.4% 2.8% 3.8% 19% 3.3% 30% 34% 3.4% 3.3% 34% 37% 3.1% 59% 2.4% 2.2% 70% 1.6% 76% 1.5% 71% 1.4% 73% $25 $36 $36 $33 $30 $30 $23 $20 $12 $9 $4 $5 $6 $21 $27 $37 $41 $34 $32 $29 $22 $16 $10 $6 $5 $6 447 372 346 369 264 299 281 213 150 203 221 226 285 - 50 100 150 200 250 300 350 400 450 500 $0 $10 $20 $30 $40 $50 $60 $70 $80 Q2 2020A Q3 2020A Q4 2020A Q1 2021A Q2 2021A Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Pull-Through Weighted (PTW) Lock Volume Origination Volume PTW GOS Margin, bps
Historical expenses in bps of funded mortgage volume HISTORICAL COST STRUCTURE COMPARISON 8 338 bps 295 bps 428 bps Total Revenue (bps funded volume): Pre-tax Net Income (bps funded volume): (31) bps 7 bps 200 bps Salary Expense Marketing and Advertising Expense Direct Origination Expense (incl. Investor Fees) Servicing Expense Other G&A 272 bps 49 bps Commission Expense 234 bps (128) bps 2Q23 YTD Expenses to Note: • $5.4 million of personnel- related payments • $3.1 million of lease and other asset impairment charges • $0.9 million of Vision 2025 related professional services fees • $7.5 million of accruals for legal settlements • YTD of $16.9 million (~27 bps) 428 bps (147) bps 129 96 78 72 125 191 78 73 74 68 66 75 58 41 26 34 44 63 25 21 12 14 22 31 15 9 8 7 10 9 64 48 29 27 94 205 369 bps 288 bps 228 bps 223 bps 362 bps 575 2018 2019 2020 2021 2022 YTD '23
HISTORICAL SERVICING PORTFOLIO TREND 9 ($ in billions) Retention %(2) : Recapture %(1) : (1) Recapture rate is defined as the total unpaid principal balance (“UPB”) of loans in our servicing portfolio that are paid in full for purposes of refinancing the loan on the same property, with the Company acting as lender on both the existing and new loan, divided by the UPB of loans in our servicing portfolio that paid in full for the purpose of refinancing the loan on the same property. (2) Portion of loan origination volume that was sold servicing retained in the period divided by total sold volume in the period. (3) At time of origination. Total Serv Exp$ to Avg. UPB $, bps: 59% 72% 2.0 56% 69% 2.4 61% 65% 2.0 Portfolio @ 6/30/23 W.A. Coupon 3.30% W.A. FICO (3) 736 W.A. LTV 71% W.A. Life (Mths) 23.4 DQ Rate 60D+ 0.8% 90D+ 0.7% Composition GSE 65.8% Gov’t/EBO 27.1% Other 7.1% 61% 67% 1.7 $155 $140 $141 $142 $142 142 144 143 142 140 - 20 40 60 80 100 120 140 $- $20 $40 $60 $80 $100 $120 $140 $160 $180 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Q2 '23 UPB $ MSR FV, bps 65% 69% 1.7
$955 $1,144 $864 $798 $719 $29 $7 $29 $4 $2 $984 $1,151 $893 $802 $721 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Q2 '23 Unrestricted Cash Unused Lines STRONG LIQUIDITY AND BALANCE SHEET Note: Please see Appendix for Non-GAAP Reconciliation 10 Liquidity Overview ($M) Non-Funding Debt / Tangible Net Worth MSR FV / Tangible Net Worth 2.0x 2.1x 2.5x 2.7x 2.8x Q2 '22 Q3 '22 Q4 '22 Q1 '23 Q2 '23 1.8x 1.9x 2.2x 2.4x 2.5x Q2 '22 Q3 '22 Q4 '22 Q1 '23 Q2 '23 Liquidity / Total Assets
11 Q3 2023 OUTLOOK Metric Low High Pull-through Weighted Rate Lock Volume ($bn) $5.5 $7.5 Origination Volume ($bn) $5.0 $7.0 Pull-through Weighted GOS Margin, bps 245 285 Current Market Conditions • Higher interest rates adversely impacts home affordability • Limited supply of new and resale homes adversely impacts homebuying activity • Homeowner equity levels drives demand for cash-out refinance and HELOC products • Higher interest rates resulting in little incentive for rate and term refinance • Sharper focus on industry consolidation, driven primarily by headcount reductions and competitor exits to shed excess capacity given lower industry volume expectations Q3 2023 outlook reflects current interest rate environment, seasonality, and competitive pressures
APPENDIX: FINANCIALS
BALANCE SHEET & SERVICING PORTFOLIO HIGHLIGHTS 13 $ in MM except units and % 2Q ‘23 1Q ‘23 2Q ’22 2Q’23 vs 1Q’23 2Q’23 vs 2Q’22 Cash and cash equivalents $719.1 $798.1 $954.9 (9.9%) (24.7%) Loans held for sale, at fair value 2,256.6 2,039.4 4,656.3 10.6% (51.5%) Servicing rights, at fair value 2,012.0 2,028.8 2,213.7 (0.8%) (9.1%) Total assets 6,203.5 6,190.8 9,195.2 0.2% (32.5%) Warehouse and other lines of credit 2,046.2 1,830.3 4,265.3 11.8% (52.0%) Total liabilities 5,406.2 5,349.6 7,981.3 1.1% (32.3%) Total equity 797.3 841.2 1,213.9 (5.2%) (34.3%) Servicing portfolio (unpaid principal balance) $142,479.9 $141,673.5 $155,217.0 0.6% (8.2%) Total servicing portfolio (units) 482,266 475,765 507,231 1.4% (4.9%) 60+ days delinquent ($) $1,192.4 $1,282.4 $1,511.9 (7.0%) (21.1%) 60+ days delinquent (%) 0.8% 0.9% 1.0% N/A N/A Servicing rights, net to UPB 1.4% 1.4% 1.4% N/A N/A
NON-GAAP FINANCIAL RECONCILIATION 14 ($MM) 2Q ’23 1Q ’23 2Q ’22 Adjusted Revenue Total Net Revenue $271.8 $207.9 $308.6 Change in FV of Servicing Rights, Net of Hedge 3.9 18.3 (35.4) Adjusted Total Revenue $275.7 $226.2 $273.3 Adjusted (LBITDA) EBITDA Net (Loss) Income ($49.8) ($91.7) ($223.8) Interest Expense - Non-Funding Debt 43.0 43.1 33.1 Income Tax (Benefit) Expense (8.6) (14.9) (28.2) Depreciation and Amortization 10.7 10.0 11.3 Change in FV of Servicing Rights, Net of Hedge 3.9 18.3 (35.4) Stock-Based Compensation Expense 5.8 5.9 4.7 Goodwill Impairment 0.0 0.0 40.7 Loss on Disposal of Fixed Assets & Other Impairments (Recovery) 1.4 (0.1) 6.0 Adjusted (LBITDA) EBITDA $6.5 ($29.3) ($191.5)
NON-GAAP FINANCIAL RECONCILIATION (CONT’D) 15 ($MM) 2Q ‘23 1Q ’23 2Q ‘22 Adjusted Net (Loss) Income Net (Loss) Income ($49.8) ($91.7) ($223.8) Adjustments to Income Taxes 6.9 13.3 32.0 Tax-Effected Net (Loss) Income (42.8) ($78.4) (191.9) Change in FV of Servicing Rights, Net of Hedge 3.9 18.3 (35.4) Stock-Based Compensation Expense 5.8 5.9 4.7 Loss on Disposal of Fixed Assets 0.8 0.3 0.0 Gain on Extinguishment of Debt (0.0) 0.0 0.0 Goodwill & Other Impairment (Recovery) 0.7 (0.3) 46.7 Tax Effect of Adjustments (2.5) (6.0) 7.0 Adjusted Net (Loss) Income ($34.3) ($60.2) ($168.9)
NON-GAAP FINANCIAL RECONCILIATION (CONT’D) 16 ($MM) 2Q ’23 1Q ‘23 4Q ‘22 3Q ’22 2Q ’22 1Q ’22 4Q’21 Tangible Net Worth Total Equity $797.3 $841.2 $921.5 $1,078.5 $1,213.9 $1,511.2 $1,629.4 Less: Goodwill 0.0 0.0 0.0 0.0 0.0 (40.7) (40.7) Less: Intangibles 0.0 0.0 0.0 0.0 0.0 (1.5) (1.6) Tangible Net Worth $797.3 $841.2 $921.5 $1,078.5 $1,213.9 $1,469.0 $1,587.0 Non-Funding Debt Total Debt, net $2,239.8 $2,303.7 $2,289.3 $2,283.7 $2,427.1 $1,947.6 $1,628.2 Less: Securitization Debt, net 0.0 0.0 0.0 0.0 0.0 (421.3) 0.0 Non-Funding Debt $2,239.8 $2,303.7 $2,289.3 $2,283.7 $2,427.1 $1,526.3 $1,628.2