Rocket Companies, Inc. Q4 FY2024 Earnings Call

Hello, and welcome to the Rocket Companies Inc. Fourth Quarter and Full-Year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. The operator provided instructions on the call. I would now like to turn the conference over to Sharon Ng, Head of Investor Relations. You may begin.

Good afternoon, everyone, and thank you for joining us for Rocket Companies’ earnings call covering the fourth quarter and full-year 2024. With us this afternoon are Rocket Companies CEO, Varun Krishna; and our CFO, Brian Brown. Earlier today, we issued our fourth quarter and full-year earnings release, which is available on our website at rocketcompanies.com under Investor Info. Also available on our website is an investor presentation. Before I turn things over to Varun, let me quickly go over our disclaimers. On today’s call, we provide you with information regarding our fourth quarter and full-year 2024 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. A recording of the call will be posted later today. Our commentary today will also include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics for our reported results can 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 Varun Krishna to get us started. Varun?

Good afternoon, everyone, and welcome to Rocket Companies fourth quarter and full-year 2024 earnings call. Today, I’ll walk through three main topics, our performance over the past quarter and full-year, our key investments and progress, and lastly, I’ll comment a little bit on where we’re headed looking forward. Reflecting on my first full-year as CEO, I joined Rocket for the immense potential to build a legacy, one that’s still unfolding and one that will transform homeownership forever. Over the past year, we kick started this journey by executing a strategic evolution, realigning our resources, and sharpening our focus on homeownership. This transformation is powered by the dedication and passion of our team members. They are our heart, our mind, and our spirit, spearheading change, redefining possibility, and manifesting a better way to serve the homeowners of today and tomorrow. In service to this, we are executing with velocity to realize our ambition of helping everyone home. We see this in our financial results, and I’d like to start by calling out just a few highlights. We closed the year with very strong momentum. In Q4, we generated $1.2 billion in adjusted revenue at the high-end of our guidance range, representing growth of 34% year-over-year. Adjusted EPS was $0.04 a share. Our full-year 2024 results reflect the same strong execution. Adjusted revenue for the year was $4.9 billion, a 30% year-over-year increase. Our focus on efficiency drove significant operating leverage resulting in an 18% adjusted EBITDA margin, up from 2% the year prior, and adjusted EPS came in at $0.23. While our financial results speak for themselves, the true impact lies in the 365,000 clients we’ve helped achieve homeownership or leverage their home equity. Behind every number is a life changing moment. The excitement of a new homeowner opening the door to their first home or a family finding stability. Personally, this — the lasting impact of homeownership — is what truly matters. Our financial performance was driven by profitable market share growth, our North Star metric. Purchase remains our focus for growth with no single player holding more than a single-digit market share. We grew our purchase share year-over-year through focused innovation and execution, improving every part of our business, and we are investing strategically to accelerate this growth. So what lies behind these numbers? It starts with what we call the Rocket Superstack, the platform advantage that fuels our growth and scale. It’s built on four key layers: our end-to-end ecosystem, proprietary AI-driven technology, a seamless multi-channel experience, and the strength of our iconic brand. We continue to make progress on each layer and I’d like to unpack some examples. Our ecosystem is the foundation of what makes Rocket unique and its heart is our origination and servicing flywheel. The scale of both sides feed into and amplifies the other, allowing us to grow in non-linear ways. When we help clients become homeowners, it’s just the beginning of our relationship. Whether it starts with mortgage origination or servicing, every client interaction, whether answering a buyer’s chat inquiry about affordability, or providing immediate assistance after a natural disaster, is a chance to strengthen that relationship. So, we don’t view our servicing portfolio as just a recurring cash flow asset. Each loan represents an opportunity to help a single-mother own her first home or assist a family in paying for their child’s college tuition or a hospital bill. This is what client-first mentality means, and it’s what drives our industry-leading recapture rates with clients returning to us at a rate three times higher than the industry average. In fact, 40% of our servicing clients have completed an origination transaction with us two or more times. Beyond our differentiated client approach, we’ve built a leading origination business with over 40 years of expertise. Scaling in both servicing and mortgage origination requires immense activation energy, not to mention a substantial ongoing investment in operational excellence and the continuous refinement of thousands and thousands of details over time at scale in 50 states. This creates a durable competitive advantage with our origination-servicing flywheel serving as a foundational pillar of our long-term growth strategy. We’ve strategically expanded our servicing portfolio through self-origination, bulk acquisitions, and key partnerships. By the end of 2024, our portfolio reached $593 billion in unpaid principal balance, a 17% increase, while also welcoming 308,000 new servicing clients and bringing our total to 2.8 million. As our servicing capabilities grow, so does our origination business. With housing affordability being the biggest challenge for many first-time buyers, we are committed to innovating and delivering solutions that provide real relief. Our ONE+, 1% down, and Welcome Home RateBreak programs helped us more than double the volume of affordability products in 2024 compared to 2023. Welcome Home RateBreak lowers interest rates for eligible homebuyers by 2% in the first year and 1% in the second. And in February, we expanded the program to offer a 1% rate reduction in year one to an even broader group, making homeownership more accessible and affordable. This month, we launched RocketRentRewards, helping renters turn monthly payments into a path to homeownership. Many of the 44 million renters in the U.S. feel shut out of the housing market, and RocketRentRewards completely changes that. Eligible renters can enjoy a promotional credit of up to 10% of their annual rent, which is a meaningful boost with the average two-bedroom rent at $1,800 per month or $22,000 per year. Both Welcome Home RateBreak and RocketRentRewards are available through our retail bankers and wholesale broker partners. Next, let’s talk about technology. Technology is the bedrock of our investment strategy, and it’s at the very heart of our organization as well. It’s what allows us to create magic to help our team members work smarter and, in turn, serve our clients and partners better. So let me share a few quick examples. I’ll start by highlighting Navigator, our AI-powered workflow platform, which has become a force multiplier for our team members, streamlining workflows, cutting tasks from hours to seconds, and usage has doubled quarter-over-quarter. We have over a third of our team members now leveraging it. Without writing a single line of code, these teams have built more than 600 custom apps already, enabling fast, efficient development that boosts productivity and enhances client service. Rocket Logic, our AI-powered loan origination system, is transforming both how we serve clients on the front-end and how we underwrite loans on the back-end. Over the past year, we’ve revolutionized the banker experience, equipping them with AI tools that make every client interaction more personalized and impactful. Rocket Logic Assistant automates paperwork, follow ups, and documentation, acting as every banker’s personal AI. And Rocket Logic Synopsis serves as a rich client repository, instantly providing insights so bankers can tailor each and every interaction. Beyond just the client interactions, Rocket Logic is transforming underwriting by replacing tedious manual reviews with AI-powered automation. In 2024, we more than doubled automation rates for appraisal and asset verification, streamlining key steps while maintaining accuracy. Now, we are expanding this automation across both retail and wholesale channels to drive even greater efficiency. The impact is clear. In Q4 2024, our bankers and operations teams served 54% more clients than the year before. Over the year, AI-driven automation and mortgage qualification alone saved one million hours of team member time, driving $40 million in efficiency gains. Building on this momentum, we are expanding Rocket Logic’s capabilities to our wholesale broker partners in the coming months, bringing the power of this AI-driven efficiency to even more of the industry. In our experience layer, we are revolutionizing the American home buying journey through a seamless AI-powered digital experience. We are so proud to introduce the all new Rocket.com and our Rocket mobile apps, offering a homeownership platform that seamlessly integrates home search, financing, and mortgage servicing into a single beautiful experience. We’ve seen more than a seven-fold increase in clients starting mortgage applications directly from home listing pages on Rocket.com compared to the previous Rocket Homes experience already. Now, unlike other home search sites, which cater to more casual browsers, we built Rocket.com meticulously after studying what truly works for serious homebuyers. We’ve streamlined the process with smart filters like commute time and unique photo viewing, allowing effortless exploration with a clean and ad-free design. Rocket.com also features our proprietary AI-powered chat assistant on every page, an always-on expert in local real estate and mortgages, trained on millions of home listings and transcripts, terabytes of housing data, and mortgage regulations across all 50 states. It provides instant data-driven insights to home buyers. So, when buyers ask, is this house priced correctly? They receive immediate meaningful answers backed by real data they can trust. The assistant also connects buyers directly to bankers and agents, even taking mortgage applications and updating approval letters. It effectively put a buy button on every home in America and created a site that is truly alive. Last but certainly not least is unleashing what we believe is the untapped explosive power of our brand. A trusted brand is one of the most powerful drivers of decision making. It creates an emotional connection that makes a lasting impression. And when done right, it speaks not just to logic, but to the heart and to an irrational level of emotion, especially when it comes to something as important as homeownership. Under Jonathan’s leadership, we have deliberately and strategically evolved our approach to marketing and positioning the Rocket brand with a fresh look and a deeper purpose. At this year’s Super Bowl, we introduced “Own the Dream,” our core creative idea through a commercial set to John Denver’s “Take Me Home, Country Roads.” In a historic, never-been-done-before moment, the experience seamlessly transitioned from a television ad to a live stadium as 65,000 fans at the Superdome joined in a full stadium sing along. It was an unforgettable experience proving the power of music and the dream of homeownership and securing Rocket’s place in Super Bowl advertising history. The impact was immediate. Traffic to our digital platform surged, and according to The Harris Poll, Rocket’s brand awareness increased by nine points in familiarity and six points in consideration — the largest lift of any brand measured. Our brand refresh is the first step in an ambitious journey to solidify Rocket as the leader in homeownership and make it one of America’s most culturally relevant brands. This investment has two key objectives. First, we are investing to elevate Rocket into a true household name. While we’re already the most recognized player in mortgage, we believe that Rocket should be a brand that people know, trust, and connect with throughout the homeownership experience, and we are making the investments to make that a reality. Our “Own the Dream” core creative idea reinforces the belief that everyone deserves a shot at the American dream. Designed for longevity, this concept celebrates the modern diverse vision of homeownership while unifying our messaging across all platforms. Second, we have a significant opportunity to expand our reach and connect with key growth audiences. America’s demographics are shifting. The average first-time buyer is now 38, nearly a decade older than just 10 years ago. And by 2030, 56% of first-time buyers will be Hispanic, while single female buyers will outnumber males two to one. So to serve this next generation of homeowners, Rocket’s brand must be inclusive, dynamic, and reflective of today’s ambitious and diverse America. If there’s one message I hope sticks with you today, it is simply this: we are shaping the future of homeownership, modern, personalized, centered around the client. We’re eliminating the hurdles that have made home buying complicated for decades. We are replacing them with a seamless intuitive experience that is unmistakably Rocket. 2024 was a foundational year for the next chapter of Rocket, and we’re carrying that momentum into ’25 with a simple purpose, to help more people achieve homeownership. The opportunity ahead is immense, and we’re investing and executing with urgency to seize it. So, we’re dreaming big. We’re executing bigger, and I couldn’t be prouder of what we’ve built or more excited about what’s ahead. Thank you. And with that, I will turn it over to Brian.

Thank you, Varun, and good afternoon, everyone. On this call, I’ll review our strong fourth quarter and full-year performance, highlight key achievements from 2024, and share our outlook for the first quarter. I’m incredibly proud of our financial results and the exceptional execution by our team. Looking back at 2024, two things stand out: strong top and bottom line growth and disciplined capital allocation across every layer of our Superstack, our key competitive advantage. We are building a company that will shape the future of homeownership. I couldn’t be more excited for what’s ahead. Our strong execution translated into impressive financial performance. For the fourth quarter, adjusted revenue reached $1.2 billion, which was at the high-end of our guidance range. This represents a 34% increase from the same quarter last year and marks our sixth consecutive quarter of year-over-year adjusted revenue growth. We generated $24 billion in net rate lock volume, up 47% year-over-year. We reported adjusted net income of $85 million or $0.04 of adjusted diluted EPS. For the full-year 2024, adjusted revenue grew 30% to $4.9 billion with net rate lock volume increasing 28% to $101 billion. Our gain on sale margin increased to 295 basis points, up 32 basis points from 2023, driven by growth in both the direct-to-consumer and Partner Network channels. We delivered an 18% adjusted EBITDA margin significantly expanding from just 2% the prior year. Adjusted diluted EPS came in at $0.23. This profitability expansion was fueled by revenue growth, disciplined expense management, and AI-driven efficiency gains. Key achievements across origination, servicing, and AI powered our 2024 success. First, origination volume grew nearly 30% year-over-year driven by both purchase and home equity loan growth. Purchase remains our biggest opportunity with no player holding more than single-digit market share. Over the past year, we intensified our focus like never before and grew purchase market share by 8%. Our success was driven by a deliberate strategic approach. We launched innovative home buying products like ONE+ and Welcome Home RateBreak, which resonated with homebuyers in a challenging market. In fact, mortgage volume associated with affordability products doubled year-over-year. We also strengthened our relationships with our Rocket Pro wholesale partners, reinforcing our commitment to their growth. By providing choice, industry-leading products and advanced technology, we are empowering them to thrive while driving our own purchase growth. In the fourth quarter, the strategic focus led to double-digit gains in wholesale market share and broker wallet share year-over-year. Our home equity product continued to shine with volume more than doubling year-over-year, further solidifying our position as the nation’s largest originator of closed-end second mortgages. Homeowners increasingly turn to this solution to tap into record high equity while preserving their low existing rates on their first-lien mortgage. Notably, over half of these home equity clients were new to the Rocket ecosystem, creating a strong pipeline of future refinance opportunities as rates decline. This success highlights the strength of our innovative products, targeted marketing, and capital market expertise reinforced by nine successful securitization deals in 2024. The second major area of growth has been the expansion of our origination-servicing flywheel. By the end of 2024, our servicing portfolio grew to $593 billion in unpaid principal balance, a 17% increase over 2023. This growth was primarily driven by our inorganic strategy, which added $77 billion in UPB. During the year, we generated $1.5 billion in recurring servicing cash revenue. More importantly, we expanded our portfolio to 2.8 million loans, adding 308,000 new clients this year, each representing an opportunity to earn the right to be their lender for life. As Varun outlined, expanding our servicing portfolio is a critical part of our long-term growth strategy. Our industry-leading recapture rates are built on a singular focus, delivering an exceptional client experience at every interaction. No matter how a client enters our ecosystem, our goal is the same: serve them as homeowners for life. Finally, AI is delivering tangible, transformative results across our organization, enhancing our ability to scale and driving operating leverage in our business. For example, Rocket Logic Docs, our intelligent document processing platform, has been crucial in efficiently onboarding servicing portfolios. In December alone, this platform automatically classified over 21 million documents, nearly five times the volume from June, requiring no additional staffing. This proprietary technology positions us for continued growth in our servicing portfolio. In 2024, we unlocked over 1 million team member hours through AI automation with benefits that continue to compound. AI-powered tools enabled bankers and operations team members to serve 54% more clients year-over-year in Q4. AI is fundamentally transforming the experiences of our clients, team members, and partners, and the results are real. Our massive data lake, early adoption, and deep AI expertise have positioned us far ahead of our peers, and we believe the gap will only widen from here. As Varun shared, we are reimagining every task, every process, and every team member role through AI, supercharging efficiency, speed, and accuracy. Our momentum in 2024 lays the foundation for even greater opportunities in 2025. To strengthen our leadership and shape the future of homeownership, we are making strategic investments in three key areas: marketing, servicing, and technology. First, in marketing, we’re making bold moves to elevate the Rocket brand and engage the next generation of homebuyers. Our previous brand strategy was successful, but as the consumer landscape has evolved, it was time for a refresh. Rocket is the most recognized mortgage brand, yet today, it doesn’t stack up against some of the more prestigious brands outside of our category, leaving room to grow. In fact, our unaided awareness prior to the brand restage was just 12%, and the engagement among mortgage borrowers was only 17%. Even among those familiar with Rocket, many didn’t see us as a brand that represented them. We weren’t fully connecting with the growth audiences driving the future of homeownership: female, Hispanic, and aging first-time homebuyers. Our brand must resonate with their aspirations today and in the years ahead. We launched our brand restage and “Own the Dream” core creative idea at the Super Bowl, one of the biggest stages, alongside the debut of Rocket.com, our all-in-one homeownership platform. These moves are already accelerating brand awareness and expanding our reach. Our “Own the Dream” core creative idea is an asset that we believe stands the test of time, continuously delivering value and forging authentic connections with the next generation of Rocket clients. We’ve made a full-scale shift towards an integrated approach across brand, performance, and product marketing. This investment cements Rocket as America’s homeownership platform with a brand that reflects our vision, mission, and unwavering commitment to helping millions achieve homeownership. Second, we’re accelerating our origination-servicing flywheel, building on 2024 success in bulk acquisitions and strategic partnerships. This is a strategic growth area where Rocket holds a clear advantage, leveraging both our industry-leading recapture rates and our scale across origination and servicing. We will sustain market-leading recapture rates by sticking to what works, delivering exceptional client experience at every touch point. Our approach blends the human touch with AI-driven enhancements, creating frictionless modern experiences on Rocket.com and our digital apps. We will remain highly selective when deploying capital to acquire MSR portfolios, ensuring every investment aligns with our long-term strategic vision. Additionally, we see tremendous potential to expand through partnerships, like our collaboration with Annaly, while using AI and automation to streamline onboarding and operations. Finally, we will continue to double down on AI and automation to supercharge our team members and transform how we operate. This builds on decades of technology investment in our comprehensive data platform. AI is already unlocking business value by enhancing team member efficiency. Empowering 14,000 team members with AI allows us to iterate faster, work smarter, and achieve more with the same resources. Looking ahead, we believe AI will enhance every aspect of Rocket from boosting conversion rates through greater personalization to making mortgage manufacturing more efficient, all while preserving the human touch that defines our client experience. Our technological advantage and our expanded reach across retail, wholesale, enterprise partnerships, and servicing positions us to capture a significantly larger share of the market. From a capacity standpoint, today, we believe we can originate $150 billion in volume while keeping our fixed costs flat. Our investments in marketing, servicing, and AI are setting the foundation for long-term growth and market leadership. Our financial strength allows us to invest aggressively while competitors pull back. We ended the year with $2.9 billion in available cash and $7.6 billion in mortgage servicing rights, a combined $10.5 billion of value on our balance sheet. Our $2.9 billion in available cash includes $1.3 billion on the balance sheet and $1.6 billion in corporate cash used to self-fund loan originations. As of December 31, total liquidity stood at approximately $8.2 billion, including available cash and undrawn lines of credit. This financial flexibility allows us to make bold strategic investments at pivotal moments, something we’ve done consistently throughout our history. With AI transforming our industry, Rocket is positioned to lead the next chapter and sees opportunities ahead. Now, let me turn to our outlook for the first quarter. We expect adjusted revenue to be in the range of $1.175 billion to $1.325 billion. The midpoint of this range represents roughly 7% year-over-year growth and our expectation of continued market share gains. We expect total expenses in the first quarter to increase by $100 million on a year-over-year basis. There are three items driving this. We expect variable cost to increase as a result of higher production year-over-year. Turning to marketing, Rocket Money spent additional advertising dollars to drive record consumer growth in the month of January. And finally, as many of you saw, we launched our brand restage and core creative idea at the Super Bowl. Aside from these three items, we expect our expenses to be relatively flat year-over-year. As always, our forward-looking guidance is based on our current outlook and intra-quarter visibility. As we look ahead, we’re entering a defining moment in Rocket’s journey. Throughout our history, we’ve consistently maintained a strong capital position while making strategic long term investments. This approach has given us the resilience to navigate market cycles and the ability to seize opportunities others simply cannot. Today, we are writing a new chapter, one defined by bold strategic moves. We’re investing decisively in our future, pursuing ambitious goals, and accelerating execution, all while keeping our focus on creating sustainable long-term shareholder value. With that, we’re ready to turn it back over to the operator for questions.

Thank you. The operator provided instructions. Thank you. Your first question comes from Jeff Adelson with Morgan Stanley. Your line is open.

Hey, good evening. Thanks for taking my question. So, I just wanted to unpack the first quarter revenue guide a little bit. Brian, you mentioned the 7% at the midpoint. I know it seems like it’s flat to up 12 sequentially as well. Can you just unpack the drivers of this forecast as it relates to the gain on sale, the origination volumes and other? And then as we think about the rest of 2025, market expectations and forecasts have sort of come in in recent months. I think we’re now looking for 15% growth versus the prior 30%. How are you thinking about your growth outlook for the rest of the year, and what kind of progress do you think you’re going to be able to make on your market share goals? Thank you.

Jeff, thanks for the question. I want to start by maybe unpacking the macro view on the year, and then we’ll jump down into our guide, and I’ll ask Brian to comment on that a little further. I think if I were to use one word just to describe how we feel about the year and our market outlook, the word is optimism. We think ’25 will be better than ’24. I think the big question is just how much better and what the pace of recovery will really look like. There are a few things that I would just explain in terms of the underlying factors. I think first, obviously, you take into consideration inflation, which is running a little bit higher. Obviously, the impact of things like tariffs is still relatively unknown. But if you really click down into the housing industry, you start to see some pretty interesting green shoots. You’re seeing more inventory. You’re seeing more homes selling at or below list. You’re seeing equity at an all-time high at $35 trillion. You’re seeing new listings increase. In fact, in January, that was up 13%. That’s the biggest in three years. So, that’s really good. So, you put all that together, and when you look at the forecast, that leads you to believe that there’s going to be a higher market for the mortgage industry. I believe the forecast expects that 2025 originations will be around $1.9 trillion. And the good news is that’s up 10% to 15% from 2024. And then internally, the biggest thing that we look at is just our own execution. And this past year, I think, is a good example that we can grow our share in any market, and we view that as a source of strength. And if that market is bigger, then, obviously, we like that even more. So, we’re positive on the market. We’re positive on our execution. And in totality, that’s the reason for our optimism for 2025. And with that context, Brian, maybe you can jump in and talk about the quarter, and specifically our guide.

Yes. Sure. Thanks, Varun. Hey, Jeff. Good to hear from you. So, yes, let me start with talking a little bit about the quarter, then I’ll try to unpack the guide. But, if you think about the first quarter, January is always a tough month for mortgages for the industry, and this January was no exception. But here’s the good news. We saw a really nice rebound in February up to the moment in this call. And February has actually started to exceed our expectations, which is great. And then as I look ahead to March, we’re also seeing some positive signs, particularly in the home buying space. As we come into 2025, our own internal purchase pipeline is up 10% over the prior year, so that feels really good. And then if I break that down a little bit further for you, our purchase pipeline is measured in different ways, but one thing we look at is VALs or Verified Approval Letters. Those are fully underwritten clients ready to buy, and those are really high-intent clients. The percentage of VALs of the total pipeline is also up. So some really nice green shoots leading into March. So to your point, Jeff, yes, the guide is about 7% year-over-year at the midpoint and 14% at the high-end. But one thing it’s important to note is that’s really driven by volume increases year-over-year. We expect gain on sale margins in the first quarter to be relatively consistent with gain on sale margins in the fourth quarter, which is also a good sign. But if I take you back to Q1 of last year, we did have some elevated gain on sale margins. I think it was about 311 basis points due to some discrete items. So, it’s a really positive guide because we’re keeping gain on sale margins consistent with Q4, but also foreshadowing that volume will be quite a bit higher. So just in summary from my perspective, it’s a great start to the year. It sets up 2025 for a better year than 2024, both from a top line and profitability perspective.

I would just add one more point on guidance. Especially when you look at forecasters and potentially many others, typically predicting that the industry, when you look at Q4 to Q1, is actually going to be down anywhere from 20% to 24%. And so when you look at our guide, Q4 to Q1 is actually up. And it just gives you an indication of our resilience and strength and our objective to be able to take share, really in any market.

The next question comes from Ryan McKeveny with Zelman. Your line is open.

Hey, afternoon. Thank you and nice job on the quarter. So Brian, that was really useful color on some of the February and early March dynamics. Another question around the topic of maybe early indicators. I guess with the brand refresh, with the launch of Rocket.com, obviously Rocket Homes, the search piece had been out there and presumably maybe the simplicity of Rocket.com draws more traffic, just integrates better with the brand and the various products. I guess any early indications or signals that you’re seeing from the relaunch specifically, whether it’s in terms of application activity happening through the sites and the connections with the consumer on the site or connections to mortgage brokers, connections to real estate agent partners. Any anything you could share there. I know it’s very early but that would be useful. Thank you.

Yes. Thank you, Ryan. Great to hear from you. I want to start by talking a little bit about the high-level strategy with both our brand restage, marketing in general, and Rocket.com, and then we’ll go into some of the more details of how we’re tracking ROI on an ongoing basis. I think just stepping back, the most important thing to share is that today, ironically, we’re the biggest and most recognizable brand in the space. And despite that, our aided and unaided awareness metrics are nowhere near what a brand could be. And so when you look at a brand that’s at 12% unaided awareness, which is where we are today, we have a lot of opportunity to grow. And that to us really stood out as a big opportunity to increase the efficiency of our full funnel. So, what we’ve done here is very intentional, very strategic. We have a new core creative idea, Own the Dream, and we have a durable approach to marketing that. We have a durable client segmentation. We’ve launched them all in the same month very intentionally, and we’ve launched that with an integration to a product, a digital product, which is Rocket.com. And as we talked about, Rocket.com is a little different. We’re competing for a specific type of traffic, high-intent traffic, a more integrated experience with search, financing, servicing, and that’s obviously seamless, ad-free, and clean. We’ve seen, I would say, very promising early results that have exceeded our expectations. We talked a little bit about the Harris Poll, but it is one of the most reputable surveys out there and it shows that our brand lift rose 30%, which is a solid increase in familiarity and consideration. And when you look at things like Rocket.com, it is significantly exceeding expectations compared to Rocket Homes in terms of things like session length, time on page, and just the ability to connect to the conversion funnel, which it is early days and we’ll continue to report on in the quarters to come. With that said, across both of these assets, we have a very rigorous plan on how we’re going to track ROI, and I would love for Brian to expand on that a little further.

Sure. Thanks, Varun. Even just before I jump into that, I’ll give you one more reason to believe. Ryan, one of the things that’s true for us and many players in the space today is there’s still a decent amount of traffic that comes from what I’ll call affiliated sites or other brands. Think about lead-buy forms like that. And the problem with that is they can be a profitable source of client acquisition, but they’re just not scalable, and they’re tapped out in a lot of ways. They also usually come with a much higher cost of acquisition. And it’s also not the best consumer experience. The best consumer experience is coming and interacting with our digital properties and our brand and our super-powerful loan officers. And if you’re coming through a middleman in that process, it doesn’t usually end up in the best NPS score. So, to Varun’s point, in terms of the measurement and how we’re thinking about it, the first thing I should start with is that no dollar gets a free pass. Every single dollar needs to be accounted for. The question we get a lot is how do you measure the brand spend and how should we think about that? Let me be clear: the North Star is client acquisition costs. But the right question to me is not necessarily how you measure the brand spend. It’s how brand and performance come together to drive positive ROI on your marketing spend. Over the years, I think we’ve proven we’re pretty good at that. Today, I feel even better because we have very robust mixed media models, both internal proprietary models and we also leverage a lot of agency data. We measure everything from traffic to trial to conversion and other attributes. So, I feel better today about the way to measure the ROI on this spend than I ever have and we’ll continue to do that throughout the year and be very diligent.

That’s very helpful. Thank you, guys. And I guess as a follow-up question, on the expense side of things, I heard you on the commentary on Q1 and some of the kind of one-timers to think about. But if we look backward at the fourth quarter, I believe the guidance was to be flattish and it came in about $50 million roughly better than that. So, I’m curious what drove the outperformance in Q4 and whether there is anything on the AI or tech efficiencies that maybe drove some of that outperformance? This might be topics to think about in the year ahead.

Yes. Happy to answer. So yes, thanks for the callout on Q4. One of the things Varun mentioned in his prepared remarks, which is so important as we compare Q4 to Q4, is we were really 54% more efficient. Volume was up about 47% and headcount was down a bit year-over-year. And that really, to your point, Ryan, is the power of AI at work and the operating leverage that’s in this business. If I take you back to our goal, what we’ve been talking about since the beginning is look, top line growth and market share are absolutely what we believe we will achieve this year. Varun mentioned the market size being larger, so now we just need to execute. But we want to do that by keeping our fixed cost structure flat, and we want to drive operating leverage. We want to superpower our team members to use cutting edge technology and AI to be more efficient and gain capacity and you could see that in 2024. Now, of course, that comes with optionality. If we’re building that capacity every single day and the market cooperates, we have opportunity to react. But as I look ahead to ’25, I don’t expect anything to be different. We’ll be very disciplined on the expense side of the P&L. You mentioned the one-timers in Q1, so I’ll touch on them while I have you here. The first thing you have to consider is that if I take you back to the revenue guide, it’s up quite substantially year-over-year, and it’s up on a gain on sale margin that’s going to be more consistent with the fourth quarter. So you have more volume and more variable costs that are going to come through. The other thing that’s worth noting is Rocket Money had a record January, and that’s a big time for them — New Year’s resolutions and people getting their financial house in order. There was about $10 million to $15 million of profitable marketing this year that they didn’t have last year. That acquisition has worked out extremely nicely. And then finally, there’s the $50 million in the brand restage that we talked about as well.

The next question comes from Ryan Nash of Goldman Sachs. Your line is open.

Hey. Good afternoon, guys. Maybe just to follow-up a little bit on the cost and to put a finer point on it. Brian, you’re talking about stable fixed cost, which makes sense and you outlined some of those buckets. Two-part question: How much of these $100 million do you expect to have as recurring over the course of the year? Do you expect there to be incremental costs related to this? And if I look at the Q1 guide, obviously one quarter doesn’t make a trend, but revenue is up 7% and cost up in the high single-digits. How do we think about what is going to drive operating leverage over the course of the year? Thank you.

Thanks, Ryan. Let me talk about the one-time items. There is the variable cost with the higher production year-over-year, so I wouldn’t consider that one-time. That’s just the cost of originating more loans. The Rocket Money cost is really just taking advantage of some lower media cost in the month of January, which they actually refer to as their Q5. It’s when they have their biggest growth month. It’s happening because they seized the opportunity, and that growth is profitable. I think where you’re probably heading is the brand restage, which is the $50 million left in that. Let me talk about what makes that up. You have a few things. You have one, the Super Bowl commercial and its media placement and the creative content. But anytime you’re going to do a brand restage, you have to achieve a sustained media plan and amplification. You don’t do a Super Bowl commercial and then not continue your buy after that because you have to get your message across in a big way over multiple channels. For us, it’s even more than that. Because when the Super Bowl is, it’s the perfect time to kick off purchase season itself. So, when I think about our marketing spend and the brand side in general, it’s almost always front loaded to the first half of the year. And what we spent this year covers doing the brand restage in the Super Bowl, which we don’t do every year, getting ready for product marketing rollouts like Rent Rewards and things we would be doing anyway aside from the brand restage, and then the additional capacity that we have. We talked about the $150 billion capacity we can originate today. That gives us a lot of optionality and flexibility in the cost structure.

Got it. And maybe as my follow-up, and I did watch the Super Bowl and see it, but as a diehard Giants fan, it was painful to watch.

I don’t want to bring up the game, Ryan. I wasn’t going to bring it up.

I’ll focus on the purchase side of the question because that’s where a lot of our strategic focus is. We grew purchase market share by 8% in 2024, and that really came from two big vectors: we expanded our reach and we simplified the process. Looking back, what drove success were our rebrand, ONE+, and Welcome Home RateBreak. We doubled the number of affordability product volume in 2024. We also focused on many internal optimizations: ramping AI automation, serving more clients, building a more bespoke funnel, dedicating resources, focusing on specific segments, and tweaking our conversion flow. For 2025, we have several building blocks to accelerate growth: top-of-funnel expansion with front-loaded marketing investments targeted for ROI throughout the year; optimizing purchase models with AI automation, targeted engagement, and better lead nurturing to drive higher lead-to-close conversion; doubling down on wholesale by extending API capabilities of Rocket Logic to enable over 25,000 brokers to integrate with our platform, which should materially cut loan processing times; and purchase recapture from our expanded servicing portfolio, which grew 17% as we added 300,000 new clients. These investments and capabilities give us confidence to accelerate share growth across all channels.

The next question comes from Mark DeVries with Deutsche Bank. Your line is open.

Yes, thank you. One more follow-up on the market share questions around purchase. Can you give us an indication of where you’re seeing more of the market share gains, whether that’s in direct-to-consumer or in the partner channels?

Sure. It came from both channels, which is probably the best answer we could hope for. The retail channel benefited from top-of-funnel growth and conversion as well as better retention from the servicing book on the purchase side. On the third-party originator side, we continue to take share and also increase wallet share with our existing brokers. So we are both adding new partners and increasing the share of wallet of our existing partners.

I would add that our cross-channel strategy is a strength. Having multiple channels helps accelerate growth because the technology and capabilities we develop for one channel extend to the others, creating a force multiplier effect. As we lean into AI, that effect will compound and help us grow further.

Got it. Next question: could you discuss your preparedness to transition from closed-end second marketing to more of a cash-out first-lien refi if rates fall enough? And any feel for how much you need to see rates fall from here before that becomes a more viable option?

Let me start. The closed-end second product has quite an extended life on it — it depends on the consumer’s note rate. If you’re sitting on a 3.5% note rate, the closed-end second is attractive for many years; if you’re sitting on 6.5% or 7%, maybe not so much. So to be clear, we don’t plan on slowing down on the marketing front for closed-end seconds. We’ve doubled the volume year-over-year and the most exciting part is 50% of that volume comes from new clients, which allows us to onboard them to our servicing book and create future opportunities for consolidation of first and second liens. We’ll continue to evaluate market dynamics and allocate capital where appropriate, but closed-end seconds remain an important part of our product mix.

The next question comes from Derek Sommers of Jefferies. Your line is open.

Hey. Good afternoon, everyone. How should we be framing the AI investments? Should we think about it as more of a way to improve expense efficiency through back-office automation or more of a productivity driver for mortgage bankers to drive top-line growth? And should we be mindful of any timeline for these benefits to be realized?

Thank you for the question. The clear answer is AI impacts both top-line growth and bottom-line efficiency, and for that reason it is our most strategic imperative. To win in an AI world you must invest in data, have the best technology, and be able to deploy it at scale. We’ve focused on those areas for the past five years and invested over $500 million in creating that infrastructure, and it’s starting to pay off. Examples include scaling document processing, enabling client experiences, creating more capacity, and automating underwriting processes. One specific example: in December 2024, with Rocket Logic Synopsis, we developed a fence-sitter model that identified about 2,000 clients who had expressed price sensitivity. The model triggered a reengagement by our mortgage banking team and added $27 million in lock volume that would have been lost. Rocket Logic Docs classified 21 million documents in December alone, nearly five times the volume from June, and we saved one million team member hours in 2024. AI is changing how we work and is improving both top and bottom line. We expect benefits to continue to compound and for AI to enhance efficiency, velocity, and experience at scale.

Got it. Thank you for that color. One more follow-up: how is transaction activity in the bulk MSR market shaping up to start the year, and how much of a priority will capital allocation to acquiring these packages be for Rocket?

If we look back at 2024, MSR trade volume in the market was down a bit from the previous three years, and we still acquired north of $70 billion. Some of that was from subservicing relationships, but a big chunk — over $50 billion — was bulk MSR acquisitions. We’re bullish on the MSR market and it’s one of our biggest priorities and one of the best uses of capital we can deploy. The question is how much will trade next year — no one can predict that perfectly. We would love to see trade volume come back to more historical levels because we want to be selective and meet our expected return targets. But in terms of our activity and willingness to be out in the market, I expect it to be very high again.

Your final question comes from Doug Harter with UBS. Your line is open.

Sticking with the MSR strategy, I was wondering if you could share how the acquired pools performed in the September/October mini-refi wave in terms of recapture compared to loans that came in through Rocket.com.

Thanks, Doug. You have to look at the ’in-the-money-ness’ of the pool when you evaluate how well it performed. For loans acquired during that refi boom, for those that were in the money, performance was at or slightly better than our expectations given that rate environment. Our retention rates are very high and we’ve talked about the difference between organic clients and purchased ones. What excites us about being in the market and purchasing is that we continue to outperform expectations on inorganic acquisitions.

This concludes the question-and-answer session. I’ll turn the call to CEO, Varun Krishna, for closing remarks.

Thank you everyone for listening to our call, and we look forward to seeing you next quarter.

This concludes today’s conference call. Thank you for joining. You may now disconnect.