Good day, and thank you for standing by. Welcome to the Rocket Companies Incorporated First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Sharon Ng. Please go ahead.

Good afternoon, everyone, and thank you for joining us for Rocket Companies' earnings call covering the first quarter of 2021. I'm Sharon Ng, the new Vice President of Investor Relations here at Rocket Companies. With us this afternoon are our CEO, Jay Farner; CFO, Julie Booth; and President and COO, Bob Walters. Before I turn things over to Jay, let me quickly go over our disclaimers. On today's call, we will provide you with information regarding our first quarter 2021 performance as well as our financial outlook. This conference call includes forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions we mentioned today. We encourage you to consider the risk factors contained in our SEC filings for a detailed discussion of these risks and uncertainties. We undertake no obligation to update these statements as a result of new information or further events, except as required by law. This call is being broadcast online and is accessible on our Investor Relations website. The recording of the call will be available later today. Our commentary today will also include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics for our reported results can also be found in our earnings release issued earlier today, as well as in our filings with the SEC. And with that, I'll turn things over to Jay Farner to get us started. Jay?

Good afternoon, and welcome to the Rocket Companies earnings call for the first quarter of 2021. We had an excellent start to the year. Before we dive into the details, I'd like to take a moment to recognize our team members for their efforts and results, many of whom are listening right now. Last month, Rocket Companies was named one of the five best companies to work for in America by Fortune Magazine, joining other tech companies that topped the list, including Salesforce and Cisco. This is the 18th year our company has appeared in Fortune's best workplaces list. We are also proud of another recognition we recently received. Just a couple weeks ago Forbes ranked Rocket Companies number three on its list of the 500 best employers for diversity in America. As a company, we are made better by having increased diversity in thought and experiences, and we have worked very hard to ensure that we're staying true to the DE&I promise we made to our team members and our communities. I want to thank our team members again, not only for their support, but also for the absolutely vital role they play in making our company one of the best, most diverse places to work in the nation. Happy and engaged team members paired with world-class technology and services leads to tremendous success. That's why I'm pleased to share that in the first quarter of 2021, Rocket Companies generated more than $100 billion in closed loan volume, resulting in over $2 billion in EBITDA. Equally impressive, this represents the sixth consecutive quarter that we have at least doubled our closed loan volume year-over-year. On today's call, I'll provide an update on each of the pillars of the Rocket platform: technology, data, brand and the Rocket Cloud Force. I'll finish my remarks by diving into one of the biggest opportunities for Rocket Companies today, transforming the home buying experience. Rocket Companies’ core mission is to create certainty in life's most complex moments. As we all know, getting a mortgage or buying a car are historically painful experiences. At Rocket, we have spent decades focused on developing a platform that removes the friction and pain points in these complex transactions, creating transparency, certainty and competence for our clients. In the ever-changing economic environment, our centralized platform has the flexibility to address diverse client needs across multiple products, from accessing the equity in their home to purchasing their next car. We can also meet clients where they are, either on a direct-to-consumer basis or through our B2B relationships with our professional partners. All executed on a scalable, tech-driven platform. Further differentiating our company is the ability to excel through any environment. Our platform provides us extreme flexibility to shift and meet the needs of our clients in any market. When rates are low, our platform scales to help a large number of refinance clients. When we see rates rise, we're able to flex and drive value for our clients whose needs aren't rate sensitive, like those looking to buy a home, take cash out, or who are managing a life situation. In the current environment, you will see us continue to invest in marketing and our Rocket Cloud Force. While others in our space may pull away from the market, we remain focused on adding new clients to our platform with the knowledge that future transactions with the same client will drive incremental revenue with little to no marginal cost. This is all made possible because our Rocket platform provides unmatched client retention rates at 90-plus percent. As we continue to expand our platform, creating certainty for clients in categories that have historically been challenging, the opportunity for Rocket Companies is gigantic. Consider this: when combined, real estate, automotive sales and financial services—all markets where we're helping to lead the way—account for nearly one third of the US GDP. They're all highly fragmented markets and digital transformation is still in the early innings. We continue to take market share in each one of these segments, and believe we are well positioned to win in the long run. To lead in the largest and most complex markets, it requires developing proprietary technology to deliver a seamless digital experience. Today's consumers demand speed and efficiency and the platform must be able to grow, pivot and flex at scale. We are seeing that in our business today. On our last call I mentioned Rocket Logic, our next generation workflow engine. We created Rocket Logic with the belief that through rich data and machine learning, we can significantly reduce the amount of time it takes to originate and close a mortgage. As we have continued to grow our pilot program in the first quarter, I'm proud to say that Rocket Logic is performing at scale. During the first quarter Rocket Logic processed more than one-third of our loan volume. Improvements in efficiency and speed are clear. Overall turn times declined by more than 30% quarter-over-quarter in Q1. While Rocket Logic is already driving increased efficiency in our mortgage operations today, we're equally excited about the long-term opportunity to extend the underlying automation to all the complex transactions across our platform. As we develop industry-leading technologies that create better outcomes for our clients, we are also continuing to improve and evolve how we leverage the tremendous insights we can glean from our centralized, integrated data lake. This data lake and its 220 million consumer records is a strategic moat for the Rocket platform. Leveraging this resource in the first quarter, we significantly expanded our data marketplace, an internal API platform that allows our teams to develop new applications, run marketing campaigns and even build new business lines, all using common, trusted and secure data assets. Machine learning and AI continues to play an increasingly important role in our organization as well. Every single day, our systems make nearly 8.5 million automated decisions, helping to ensure we are running the business efficiently. Our talented team of nearly 300 data engineers and data scientists is expanding in 2021, including the most recent hiring of a new senior data science leader who will be heading up our Rocket Mortgage Data Intelligence team. While we leverage data to drive client interaction, our company continues to find new and unique ways to reach clients and increase engagement with our brand. As we mentioned on our last call, we had the two top-rated ads this year's Super Bowl. Those ads were instrumental in driving consumer interest, which led more than 60 million unique visitors to our digital properties in the first quarter, representing a 72% increase year-over-year. Also, to help drive the recognition of our brand, we recently announced two important sponsorships. The first is a very special one to us, as we look to uplift traditionally underrepresented communities. Rocket Pro TPO, our brand serving mortgage brokers, community banks and credit unions, is proud to be sponsoring the number 16 car in this year's Indianapolis 500. What makes us unique is that the car is woman-owned, woman-driven, and the majority of the pit crew are also women. We are passionate about this partnership and the extensions around it to raise awareness and excitement for how women are transforming industries, both in racing and financial services. This is particularly true in the mortgage broker space, where we are seeing women enter and lead in what has traditionally been a very male-dominated field. The other sponsorship is a PGA Tour superstar and 2020 Rocket Mortgage Classic champion, Bryson DeChambeau. Anyone familiar with him knows he's a long hitter, an innovator and one of the best players on tour. Our sports partnerships do a great job of showcasing our brands to audiences who may not have seen this otherwise. Once those consumers visit our sites to learn more, our Rocket Cloud Force of more than 6,600 highly trained U.S.-based advisors step forward to ensure a seamless process. Our Rocket Cloud Force continues to be a key differentiator in our business. Our team's ability to build rapport with accurate and timely assistance, complementing our unmatched online experience, allows us to deliver the high-touch expert experience our clients want, paired with the efficiency of our digital-first process. The Rocket Cloud Force's impact extends well beyond mortgage transactions. For example, the team members who make up the Rocket Cloud Force are proving instrumental in Rocket Auto's growth. Over the last year, Rocket Auto's Cloud Force has more than doubled. The increase in trained and trusted advisors was valuable in the first quarter, enabling the company to exceed $1 billion in its annual GMV run rate for the first time. To aid in fueling Rocket Auto's explosive growth, I'm proud to announce that the company has just formed a strategic partnership with AutoFi, a leading software provider in the automotive retail industry. This new relationship, paired with Rocket Auto's own proprietary platform, will enable the company to facilitate a full automotive point-of-sale solution, including financing and insurance. Today, AutoFi works with more than 2,000 dealer partners. This relationship is another step in continuing to accelerate Rocket Auto's growth by connecting with dealerships across the country to increase our access to inventory, which is critical in today's high-demand auto market. When all the elements—technology, data, brand and our Rocket Cloud Force—combine and work together, it's a very powerful thing. I want to close my remarks by spending a few minutes talking about our biggest opportunity in the market today: transforming the home buying experience. It is clear that home purchase transactions represent the single largest growth opportunity for Rocket Companies today. We are in the hottest real estate market in more than a decade and demand is accelerating. March and April have been the strongest months of purchase application volume in our company's history. The simple fact is the home buying process is extremely complicated. It involves multiple professionals, including real estate agents, title companies and local mortgage brokers. All of this complexity has led to home buying being one of the last transactions to make the move online. It has also created an extremely fragmented market where no company has been able to grab significant national market share. We were the second largest retail purchase lender in 2020, excluding the secondary market of correspondent lending. And that was with only low single-digit penetration in the purchase market. Today, I am proud to announce that Rocket Mortgage has set a goal to become the number one retail home purchase lender in America over the next 24 months. Said differently, we are poised to transform the entire home buying experience. Only Rocket Companies can combine digital home search and our powerful Rocket Cloud Force, with tens of thousands of relationships with real estate agents and Rocket Pro TPO brokers, while fully integrating mortgage, appraisal, title and digital closing. Core to this growth strategy is Rocket Homes, our home search experience and real estate agent referral network. While others in the market have figured out how to display MLS listings online, we started with the most complicated and profitable steps in the home purchase process: the financing and the title work. From there, we built a full-featured, industry-leading home search product at Rocket Homes. As we built nationwide coverage over the last year, traffic to Rocket Homes' real estate listings platform has increased substantially, growing over 300% year-over-year in the first quarter. Once consumers find their dream home, they are staying within the Rocket Homes ecosystem and connecting with our Rocket Homes partner agent. In fact, connections to Rocket Homes agents were up 50% year-over-year in Q1. Real estate agents play a critical role in the home buying process and we are providing powerful tools to help our agent partners in today's competitive market. Late last year, we launched Rocket Pro Insight, which allows any real estate agent to gain unprecedented access to their clients’ mortgage, with the clients’ permission, of course. This first-of-its-kind solution provides visibility, control and tools for real estate agents to present more competitive offers and close deals faster. The number of real estate agents who've signed up for Rocket Pro Insight has more than tripled in just three months, with more than 45,000 agents using Rocket Pro Insight, up from 14,000 at the end of the year. Another new program that is quickly becoming a favorite of real estate agents and their clients is our overnight underwrite. This program guarantees that if a client submits their paperwork for a purchase application by 7:00 p.m., they will receive a fully verified approval by morning. Local mortgage brokers are another extremely important component of our purchase strategy. We continue to invest in the broker channel and have earmarked tens of millions of dollars in technology investment in 2021. Our continued innovation in the broker space is paying off. In March alone, Rocket Pro TPO signed up hundreds of new partners, marking one of the strongest months of partner growth in our company's history. At Rocket Companies, we've built a flexible platform that can shift to the areas of greatest opportunity, including today's explosive real estate and automotive markets. These markets present an enormous opportunity for us to acquire clients, to drive substantial lifetime value. Our ability to retain clients at a rate exceeding 90% is matched only by some of the best performing subscription business models in the world. We will continue to operate this business with a focus on the long term based on the lifetime value of our clients with the knowledge that once added to our ecosystem, these clients will continue to add revenue in the months, years and decades to come. We are excited about the opportunities ahead of us in the second quarter and beyond, as our team continues to deliver on technology and great service that helps us win today and long into the future. With that, I'll turn things over to Julie.

Thank you, Jay, and good afternoon, everyone. I'm pleased to report another quarter of strong financial results for Rocket Companies. In the first quarter of 2021, Rocket Companies generated $4 billion of adjusted revenue and $2.4 billion of adjusted EBITDA. In discussing our results, I'll highlight some of our key priorities, including continuing to drive volume in today's strengthening economic environment, particularly from clients purchasing homes and cars, as well as those accessing the equity in their homes. I will also share some detail on today's call around the investments we're making to transform the home buying experience, including continuing to grow our partner network. Our first quarter results demonstrate continued growth and performance at scale. We generated $103.5 billion of closed loan volume in Q1, exceeding the high end of our guidance range and marking our sixth consecutive quarter with more than 100% year-over-year closed volume growth. We experienced strong growth across the Rocket Companies platform in Q1 with record gross merchandise value at Rocket Auto, record traffic to Rocket Homes and record title and settlement transactions at Amrock. We continued to drive strong profitability in the quarter with first quarter adjusted EBITDA of $2.4 billion and adjusted net income of $1.8 billion. These results reflect our ability to drive large scale volume on our platform very efficiently with limited incremental cost. Over the last 12 months, Rocket Companies generated $12.6 billion in adjusted EBITDA, demonstrating our ability to scale up and create truly substantial profitability in strong market environments. As we enter the second quarter of 2021, we are seeing a strengthening economic environment. A key advantage of our platform business model is the ability to shift our resources to the area of greatest opportunity in any market environment. In our mortgage business, continuing to drive strong volume in 2021 will require addressing client needs that are less sensitive to interest rates. Demand for these products is driven by factors including: clients wanting to purchase a home; take cash out of their homes; reduce the terms on their mortgages; changes in their life situations; and the demand for investment properties. Although rate-and-term refinancing activity was very high in 2020's low interest rate environment, Rocket has historically had a balanced mix of originations. For example, over the last four years, including 2020, half of our cumulative volume was from these less rate-sensitive products. The strength of today's real estate environment provides multiple tailwinds for our business. With strong demand and limited inventory, home values recently reached record levels and are growing at the strongest pace in 15 years. Home values have increased nationwide at a double-digit year-over-year pace in recent months, according to both the National Association of Realtors and the S&P CoreLogic Case-Shiller index. This trend translates directly into higher transaction values and revenue per unit for Rocket Mortgage and Rocket Homes. With home values increasing, many homeowners are also taking advantage of the equity in their homes to consolidate debt or fund home improvements through cash-out mortgage refinancings. Freddie Mac recently reported that last year, American homeowners tapped into the most home equity in 14 years. We are also seeing strong fundamental tailwinds at Rocket Auto, our automotive retail marketplace. Rocket Auto's year-over-year growth accelerated meaningfully into Q1 to over 60%. We achieved this growth despite inventory constraints from severe weather in the South, among other factors. Rocket Auto facilitated $360 million in gross merchandise value of automotive sales in Q1, passing the $1 billion annual GMV run rate for the first time. Leveraging our new relationship with AutoFi, we expect to further accelerate growth throughout the year as we continue to expand our inventory and onboard additional automotive retail partners. This sets Rocket Auto well on its way toward our stated goal of doubling automotive GMV in 2021. Turning to the home buying opportunity specifically, as you heard from Jay, home purchase transactions represent the single largest growth opportunity for Rocket Companies today. In the first half of 2021, we are seeing strong acceleration in purchase activity at Rocket Mortgage. Q1 represented our strongest first quarter purchase volume in company history. Momentum accelerated throughout the quarter, with March setting a record for purchase application volume. Strong performance carried into the second quarter, with April exceeding March, setting a new record as the single largest month for purchase application volume in the company's history. We expect continued strength into the spring home buying season and we are projecting record quarterly purchase volume in Q2. Today, we shared our objective to become the number one retail purchase lender within the next two years. I'll provide some detail on the strategic initiatives and investments that will drive us to that goal. The investments we're making are focused in two primary areas: digital product development and our B2B partner relationships. On the product development front, we are driving market-leading innovation to transform the digital home buying experience. As you heard from Jay, we continue to build out the Rocket Homes digital home search experience. We are seeing the benefits today with Rocket Homes traffic doubling over the last six months and increasing more than 300% year-over-year in Q1. We see significant opportunity to further deepen the integration between Rocket Homes and Rocket Mortgage, with Rocket Homes content now being embedded throughout the home buying process. We're also delivering first-to-market solutions like Rocket Pro Insight, verified approval letters from Rocket Mortgage and overnight underwrite, all of which help our clients and partners compete in today's highly competitive real estate market. Our B2B relationships with professional partners form another important driver of our home purchase strategy. We've invested for several years to deepen our partnerships with real estate agents, tax professionals, mortgage brokers and insurance agents whose service are trusted touch points working with our clients on a daily basis, especially during the home buying process. Partners are an important driver of our overall growth. Over the last 12 months, our partner network generated $142 billion of closed loan volume, representing growth of 7.5 times since 2018. Our partners drive incremental volume on the Rocket platform. They also help us capture more purchase transactions and contribute a higher purchase mix than the overall company average. The partner network also drives incremental profit dollars for our business. Gain on sale margins in this channel reflect the partial sharing of economics with our partners. Because partner revenue is incremental to our platform and requires limited direct costs, we are comfortable investing in partner network margins when we see strategic opportunities in the marketplace, while still driving incremental profit dollars to Rocket Companies. We've made these investments successfully in the past, including when we initially ramped our partner network volume, and we see similar opportunities today. As a reminder, we are in the early stages of ramping a new partnership with Morgan Stanley and E-Trade. In addition, we are seeing a significant opportunity today within the independent mortgage broker community. We are driving particularly strong growth among brokers as we extend Rocket Pro technology and the Rocket Pro TPO brand in this market. We are investing in the mortgage broker channel and we are winning. Hundreds of broker partners joined our network during the first quarter, and our partner volume has continued to be strong into the second quarter. As Jay outlined, we plan to invest tens of millions of dollars this year in technology to support our broker partners. Our near-term priority in this channel is to drive volume and incremental profits. Turning to our guidance for the second quarter. We expect strong closed loan volume of between $82.5 billion and $87.5 billion and rate-lock volume between $81.5 billion and $88.5 billion. Each of these metrics represents over 100% growth relative to the same period in 2019. We are encouraged by our ability to continue driving strong volume, and we expect non-rate-sensitive products to exceed 40% of our total volume in the second quarter, approaching our longer term historical averages. We expect second quarter gain on sale margin between 2.65% and 2.95%. We expect second quarter gain on sale margin in our direct-to-consumer channel to remain above 400 basis points, consistent with our long-term track record of superior margins in our direct-to-consumer channel. We expect partner network margins to be around 100 basis points. Margins in both channels are consistent with historical levels prior to 2020. Our combined second quarter gain on sale margin guidance of between 2.65% and 2.95% reflects changes in channel and product mix, including continued strong growth in our partner network, which drives attractive incremental profits. I would like to make one note regarding comparisons to prior periods. 2020 was a highly unusual year as a result of the COVID-19 pandemic and record low interest rates. Rocket Companies delivered remarkable performance through this unprecedented period, with $12.6 billion in adjusted EBITDA over the last 12 months. As an organization, we remain extremely focused on long-term growth. As a result, you will hear us reference longer-term comparisons, particularly comparing our performance in 2021 to 2019 levels, which we believe demonstrates our ability to grow through the economic cycle. As Jay mentioned, increasing the lifetime value of our clients is a core component of our growth strategy. We will continue to increase the lifetime value of our clients as we expand our platform to address more and more of the important transactions in their lives. We exited the first quarter with an extremely strong balance sheet. I'd like to draw your attention to the substantial cash resources that we have in the business today, which totaled $5.6 billion as of March 31st. When considering our current ownership structure, this means we had $2.79 available cash per share at the end of Q1. Available cash includes $2.9 billion of cash on hand and an additional $2.7 billion of corporate cash used to self-fund loan originations, which could be transferred to funding facilities at our option. Our total liquidity, which includes available cash plus undrawn lines of credit and undrawn MSR lines, stood at $8.7 billion at quarter end. As a reminder, our quarter end liquidity is after the special dividend we paid during the first quarter of $1.11 per Class A common share, funded by an equity distribution of $2.2 billion. We remain authorized to repurchase up to $1 billion of our shares. With that, we are ready to turn it back to the operator for questions.

We will now begin the question-and-answer session. Our first question comes from the line of Arren Cyganovich with Citi.

The gain on sale margin guidance that you have coming down, I was wondering if you could talk a little bit about the trends that you're seeing both from the direct-to-consumer side and on the partner network as well.

Julie talked about some of the gain-on-sale in her remarks, in particular, how strong our direct-to-consumer gain-on-sale remains. As we think about Q1, one of the great things that happened for our business is we saw the 10-year Treasury go from about 90 basis points up to a high of 170 basis points. So what was expected to take over a year or two to occur kind of all happened in about a 90-day period. Adjustments have to be made, but that's where our platform really kicks in. And as Julie touched on, we're almost back to where we traditionally have been where 50% of our originations are not rate-sensitive. The acceleration in those things so quickly was incredibly exciting. And we're watching our retention climb as well, north of 90%, now 91%. So you're going to see us be strategic around gain-on-sale. We talk about this a lot: the margins, although moving back to more historical averages, are incredibly strong. But what we think about is not just that margin for the first transaction; what we're thinking about is the lifetime value of every client that we acquire. If you hear us talk about the massive growth in Rocket Homes, Rocket Auto and as we continue to add additional fulfillment businesses to our platform, the value of that acquired client will continue to grow as well. So it's much like the discussions we had during the IPO process when we were talking about setting a strategy over the course of two or three years, really arriving at what the true lifetime value of the client is and then continuing to execute on those strategies to bring those clients into our servicing book, so we can monetize them for years to come. So our big focus—and I'm really proud of the growth we had in Q1 compared to Q1 of '20 and Q1 of '19—over $100 billion of closed loan volume, that's all coming into the top of the funnel, and we'll monetize that over time. I'll let Julie go a bit more into specifics. But it's important to understand how we're thinking about that: it's profitable right now to bring those clients into our platform. But it's even more profitable than it looks on paper because of the lifetime value that we ascribe to each one of those clients. Julie?

I think it's important to take just a minute to break down our gain-on-sale margin guidance a bit further. We are expecting overall gain-on-sale margins to be between 2.65% and 2.95% in the second quarter. But to break this down by channel, we expect to see our direct-to-consumer margins above 400 basis points, which is consistent with our long-term track record of consistent margins in this core DTC channel. If you look back over time, you'll see that consistency in those margins. And then we're expecting partner network margins around 100 basis points. These levels are also roughly consistent with historical levels prior to 2020. If we look at that quarter-over-quarter change in the gain-on-sale margin guidance, it's really being driven roughly by three equal factors: first, changes in loan pricing and particularly our investments to drive the growth in the partner network channel; second, we did see the primary-secondary spread compress at the end of Q1 and into Q2; and third, the channel and the product mix. We're seeing an increase in the partner network and in jumbo loans as a percentage of our total originations, both of which drive attractive incremental profit for us. So in looking at our second quarter guidance overall, we feel very good about our ability to drive volume, which is more than double 2019 levels, with gain-on-sale margins roughly consistent with historical levels.

And then I guess just secondly, on Rocket Homes and the new initiative to be the number one purchase lender in two years. Is this an investment that will drive any additional revenue streams through Rocket Homes, or is it really just a focus on getting those customers right in the process of choosing their home?

We've been investing in this ecosystem for quite a few years now. The reason we've set the goal for the next 24 months is that all of those important components and the millions of dollars of tech spend are really starting to pay off. On our Rocket Homes platform, which is an incredibly robust MLS listings platform, we now are covering 49 to 50 states and I think we'll be into Hawaii in a matter of days or weeks. That growth year-over-year is up 300%, and that matters because what do you do with that? Well, it drives mortgage volume, but it's also driving real estate volume. Our agent connections—taking those clients that are interested in finding homes and aligning them with an agent—were up 50% year-over-year, and we're making significant investments in that process and technology to keep accelerating that. So what does that do? It allows us to capture revenue on the real estate side, on the mortgage side, and on the title side. Not only are you getting those additional revenue streams, but it's also driving up conversion. Especially in a market like we're experiencing right now where inventory is so light, we've got to make those connection points where our client comes in at the top of the funnel, finds a house, gets connected with an agent, gets a verified approval. In our case now we're offering our overnight underwrite, so the agent can write an offer at 6:00 p.m. on a Tuesday and wake up Wednesday morning with the client fully approved. So our clients can be cash buyers. We can drive up those conversion rates and grab that volume. That's additional volume we'll be adding to the platform as we continue to invest now in marketing all the purchase services that we've got. I mentioned the 45,000 agents we now have on the Rocket Pro Insight platform. All of those things will bring additional revenue, but also increased conversion. And then the last component: as Julie mentioned, we have partnerships like Morgan Stanley, E-Trade and our Realtor.com partnership. As that conversion rises, our ability to lean in and participate in the purchase, lead and advertising markets grows. We can spend more than others can spend because our conversion rates are far greater than the industry average. So that's a virtuous flywheel that we are building now that will play a very important role as we go through 2021 and into 2022.

Our next question comes from the line of Ryan Nash with Goldman Sachs.

I wanted to follow up on a question that Arren asked on gain-on-sale margins. Do you foresee that we're at the bottom by channel? I know others have talked about industry underpricing loans. Can you speak to that combined with the competitive dynamics in the wholesale channel that's causing these competitive pressures? And Jay, how do you think about long-term customer lifetime value versus trading off some of the near-term economics?

Maybe I'll start with the margin piece, and Julie can jump in as well. We're kind of back to some of the historical longer-term margins that we've experienced, which on our platform are still very profitable, number one, on the first transaction. But again, to some of the other comments I made, it's also the additional lifetime value. There have been some changes in particular in the broker market that are very interesting. Our focus here is to solve the problem of our client. If a client needs to buy a house, how can we develop technology and service to assist them? If a broker wants to grow their business, how can we provide technology, marketing, et cetera, to assist them? Others have focused on solving their own problems versus the brokers' problems. Through that, our partnership with brokers has strengthened, and the volumes that they're sending us are increasing. If you think about the lifetime value, in the direct-to-consumer channel that's well understood. In the broker channel, as choice gets eliminated and our partnership with that broker gets stronger, our ability to monetize and work with that broker partner in the years to come to drive more lifetime value increases as well. So we're excited about what we're seeing in the broker channel and in the direct-to-consumer channel. We spend our time thinking about the lifetime value more than the day-to-day margin that we might experience on the first loan. I referenced this before: we saw growth in auto up 60% to 65% from Q1 of last year to Q1 of this year, and that's with very tight inventory. We're in a unique spot. There's an article every day written about how there's no auto inventory, yet we're growing. We saw growth in the homes channel. We're seeing growth in our loans channel. All of that has to be factored into our lifetime value decision. We'll keep doing that, because once we capture that base and continue to add these fulfillment engines to the bottom of our funnel, we're fully building out the platform we've been on a mission to build for years. That doesn't mean we won't be thoughtful about the margin day to day, and I think that's evidenced by where we are right now—we're north of 400 basis points on our DTC. But it's critical that we think about the future and the millions of clients we're adding to our platform and how they are going to stay with us. That's the long game we're playing.

If we look at our direct-to-consumer margins over time, they tend to be more consistent and we've seen that quarter-over-quarter. There may be some times when they are slightly lower, but you'll see that they tend to hold around those levels. Opportunities like what we saw present a great chance for us to take some additional margin. On the partner network side of things, we're going to be strategic and thoughtful about growing that business long term. There may be some opportunities to take advantage of leading into that margin, and we'll consider that from time to time. But we will be thoughtful about the near term, while absolutely focused on the long-term value of those clients that we're acquiring.

Jay, you referenced a couple of times that 50% of the originations are not rate-sensitive. Can you flesh out how much of that is purchase versus cash-out refinance and what else may be included, so we can understand those pieces? And second, you talked a lot about leveraging the ecosystem to drive growth in the new channels. Can you talk about your vision for how you see these scaling over the coming years, what it can mean for the growth of your company and how the investments in tech have better positioned you versus other players?

We don't break down the specifics here, but I'll give context. Debt consolidation falls into a couple of buckets and we're watching it increase substantially in 2021. Spending is very strong in a variety of areas and that's causing debt to be accumulated—credit card debt, second mortgage debt, HELOCs—all things we can consolidate. With the rise in home prices, we've seen one of the greatest increases in home equity in 15 to 20 years. That's a strong positive combination for us. We're well positioned, and this goes back to our data science team. We have 220 million records. We talk to millions of people a month, understanding their debt load. We can model where they were a year ago and where they will be in the future, creating opportunities to balance home equity with accumulated debt and help them consolidate. That's a huge piece of our business which we've executed on for years. As Julie referenced, we'll be seeing that come back to levels seen in years prior. We called out purchase because we're the second largest retail purchase lender in the country. You can use those numbers to triangulate where we're at, and our goal is to be number one. How we'll get there is by combining all of these disparate experiences—from MLS to realtors, to mortgage brokers, to title and appraisal. All that work on the tech platform behind the scenes is starting to come together. The exciting part is taking that data and merging it together so we can watch and learn every step of the process: where are the falloff points, where can we increase conversion, how do we modify our process. The tech platform is in the early innings compared to where it will eventually be with that data sharing across all of the different fulfillment businesses we're building. Our mission is to be able to target every American with a specific message and value about how we can help them improve their home, save money, buy a car, or help with a real estate transaction. When you put those things together, that's roughly 30% of US GDP. That's our vision and the platform we're building to play a major role in that portion of the economy. The AutoFi partnership is critical as it helps grow inventory and our reach into dealerships, which is important as we open up the auto business further. We're connecting financing between dealer and consumer and can be the marketplace. We're excited about that as well. Lastly, we have a multibillion-dollar brand with high client service ratings, so people know Rocket delivers a high-quality experience. As we add services, conversion rates should be high because clients are already conditioned to use our services.

Our next question comes from the line of Doug Harter with Crédit Suisse.

Julie, you highlighted the strong liquidity cash position you currently have. Can you talk about how you're thinking of the level you need to hold and how you would be thinking about future potential return of capital given future cash flow?

We do have substantial liquidity in the business today. As we think about the level in the business, first and foremost, investing back in the business is the first place we'll look to deploy that capital—whether that comes from investments in brand, technology, or potential acquisitions that are additive to our business, tech platform or reach. We'll continue to look at those opportunities. If those opportunities are not present in the near term, we would potentially look to return some capital to shareholders, either through dividends like the special dividend we paid or potentially through share buybacks. That's how we'll keep looking at managing our cash going forward.

While volumes are remaining elevated, they are down sequentially next quarter. What does that do to liquidity needs to run the business?

On the volume question, when we came out of Q1 with over $100 billion and provided guidance for Q2, keep in mind we have thousands of approved homebuyers. As more inventory opens up, that will accelerate some of the purchase transactions currently in waiting mode. We feel very good about where we are for Q2 and looking forward into the future seeing volumes in a very similar range. We had a huge year last year and I expect to have a very good year this year from a volume perspective. You can keep that in mind as you think about our capital needs as we get through the rest of the year.

As we continue to generate cash flow, we'll think about the same investments and that doesn't change the way we'll make decisions going forward. We'll continue to manage our capital in the same way and expect continued strong cash flow in the second quarter.

Our next question comes from the line of Dennis McGill with Zelman.

Exciting to hear all the different opportunities you have ahead of you on the purchase side. I wanted to tie back to data that would imply that there was a little bit of share loss in the purchase channel in 2020. Is that a good example of last year being a year where profitability was most attractive in the refi side and you shifted product mix to go after the more profitable part of the business? Thinking about that moving forward, if purchase is a more attractive area, is that where you lean and is that how we should think about year-to-year fluctuations versus smoothing over multiple years?

There are a couple ways to view that. The flexibility of our platform allows us to move to the most profitable loans we can originate while thinking about lifetime value. You'll see us adjust levers accordingly. Also consider the investments we're making long term in purchase—Rocket Homes, the listing site, the realtor network, additional services for sellers and buyers, and the insights network that now has over 45,000 real estate agents. The technology we invest in to give agents visibility, communication and transparency into the loan are significant investments into purchase. While we'll keep adjusting to maximize opportunity, you'll see us continue to press on purchase because we're making substantial investments now to grow that channel.

Separately, as it relates to changes by the agencies on second home and investment home limitations, can you share any impact you're seeing in the market from that and whether there are non-agency channels opening up for sales of those loans?

There have been a few adjustments in the last month or so. We are in a great position and Bob Walters can add, but a recent example is our smart jumbo that we rolled out about 30 to 45 days ago and the securitization there. Our capital markets group is incredibly sophisticated. Their ability to execute on those securitizations has given us opportunity to move into other products—second homes, vacation homes—where the agencies may be putting limits. We can jump in and continue to grow those channels with high-quality products and deliver them in the secondary market. Bob, do you have additional comments?

We've seen the agency changes around investment property and second homes disrupt a number of players in the market. We got ahead of that and our ability to securitize off our own shelf gives us a lot of latitude and flexibility. That has not disrupted us from a volume standpoint; in fact, we've had some opportunities to take advantage of that.

Our next question comes from the line of Mark DeVries with Barclays.

Historically, originators with a more centralized model have struggled to have deep penetration in the purchase market. You have created an interesting ecosystem that may crack that nut. How are you managing the gray area of RESPA risk that sits between the different linkages in the ecosystem you're creating?

These companies are separate entities and we have a team of experienced attorneys ensuring everything we do is at proper arm's length. Clients have choice every step of the way. With all the services and technology we provide, it's understandable that their choice is to work with a company that can bring these things together. We feel good about our footing regarding RESPA and our ability to navigate that while growing this channel. Real estate agents want certainty; they've worked hard and want loans to close. I don't believe the success is about the location of the lender—centralized or decentralized—it is about the certainty the lender can provide. With thousands of third-party brokers and our broker partners, if an agent prefers a local broker, we publish that broker on our website, provide great technology to that broker, and are happy for the agent to work with them. If an agent prefers to work with Rocket Mortgage's centralized platform, that's great too. That's why we're investing heavily in communication, visibility and transparency, such as the overnight underwrite, to bring certainty to agents so they have confidence we'll close loans. That's why we take a long-term view. Rates will go up and down. You cannot get distracted by day-to-day movements in the 10-year Treasury. You need a plan for growing market share by bringing real value to the consumer—broker, agent and end client—and executing on that plan. We're doing that and will continue, which is why we believe we can become the largest purchase lender in the country in the next 24 months.

Do you see a role for M&A to add local retail presence, or do you think through broker partners and your centralized model you can serve the entire market?

We're active in the M&A space and always looking for bolt-on opportunities that help grow our platform. The real mission is what's best for the consumer and what experience gives them the most certainty. If there's an acquisition that fits into our platform and solves a problem for the consumer that we currently can't solve, we would consider it. We're almost origination-agnostic—it's whatever is best for the consumer that we'll do to bring them into our platform, get the lifetime value of that consumer and make sure they have a great experience.

Our last question comes from the line of Mihir Bhatia with Bank of America.

First, I wanted to check: the volume guidance for next quarter is down quarter-over-quarter. I think I heard you say April was a record for application volume. Do you expect a meaningful slowdown in May and June or did I mishear?

We had substantial purchase application volume in Q1 and have thousands of approved homebuyers out looking for homes. Our guidance reflects current application volume and some inventory constraints that exist in the market today. We feel great about the Q2 guidance and it tees us up for what should be an outstanding year on the heels of record purchase volume in the first quarter. We noted that April set a new record for purchase applications, and Q1 was the most purchase application volume we've ever had as a company.

One other question on Rocket Auto: how much of that activity is related to existing mortgage customers? I'm trying to understand the lifetime value metric and where we can see cross-sell specifics.

Directionally, it's exciting. As we started Rocket Auto, we did not focus initially on our Rocket Mortgage client base. The vast majority of cars we're selling now are not Rocket Mortgage clients; they are lower-converting leads. The reason we did this is we wanted to construct a business with appropriate profitability metrics before leaning into our client base. We've tested conversion rates with our client base and understand what it would mean as we open up to it. We've just started to scratch the surface in marketing to our client base. That's why we're adding inventory and why the AutoFi partnership is important: as we increase lead flow, we need a more robust inventory platform to provide the services clients deserve. We're moving from phase one to phase two, which will add positive growth as we open the client base further.

There are no further questions at this time. Turning it back to the presenters for closing remarks.

We appreciate everyone joining us today, and thank you to all of our team members listening. We certainly appreciate everything you are doing. I hope everyone has a great rest of the evening and take care.

Goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.