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Text: 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.
A recording of the call will be available later today.
Our commentary today will also include non-GAAP financial measures.
And with that, I'll turn that over to Jay Farner to get to start.
We had a strong second quarter as we continue to execute on our growth strategy and leverage our platform across real estate, auto, and financial services.
In real estate, revenue was driven in part by record purchase volume.
Putting us on track to reach our goal of becoming the largest retail home purchase lender in the nation by the end of 2023.
Many of the accomplishments that we've achieved are results of our technology and, of course, our people, who bring their best to work each and every day.
This tremendous combination was recently rewarded with Rocket Mortgage, again, being named the No.
The accolade marks the eighth consecutive time our company has earned this honor, and it's our 19th J.D. Power award overall, when you include the 11 straight No.
1 rankings we've received for mortgage origination.
Our servicing team put our clients first, helping them through the difficult and uncertain times during the pandemic.
While clients and other lenders experienced several hour wait times at the onset of pandemic, Rocket Mortgage clients were able to navigate a digital solution complete with educational resources and easily apply for forbearance plans online.
This approach resulted in Rocket's forbearance rate being 41% lower than the industry.
Innovative technology-driven client-first solutions such as these are a testament of our ability to scale and to quickly pivot to meet the demands of unpredictable markets without the need to add headcount and ultimately deliver unmatched client experiences.
As we turn back to the second-quarter results, 2020 accelerated the shift to an all-digital experience, an opportunity that Rocket was primed to capture.
The demand for digital experiences has only expanded, providing true momentum for Rocket Companies across all our core markets, real estate, auto, and financial services.
When we look back at 2019, we have now more than doubled the size of our business from pre-COVID levels.
Rocket Companies generated $84 billion in closed loan volume and $2.8 billion of revenue in the second quarter of 2021.
Both more than double the second quarter of 2019 and more volume than we did the entire year of 2018.
Our Q2 EBITDA of $1.3 billion was more than triple the same period two years ago, demonstrating the sheer power and scalability of the Rocket platform.
As we've shared with you in past calls, the Rocket platform is built to win.
Our mission is to provide certainty in life's most complex moments.
We removed the friction and pain points from major events like buying a home, getting a personal loan, or purchasing a car, all from a scalable centralized platform.
This flexibility allows us to stay nimble and go after the areas of greatest opportunity, optimizing revenue for our companies, and driving value for our investors.
In today's environment, consumer demand is incredibly strong in each of our markets.
In fact, the markets are so hot that there are significant inventory challenges in both real estate and automotive sectors.
Even under these conditions, we achieved records for home purchase volume as well as Rocket Auto gross merchandise value and unit sales.
Based on the strength of demand at the top of our funnel, we believe both record purchase volume and record auto results would have been even higher if not for inventory challenges.
As today's mortgage market shifts toward home purchase in 2021, Rocket is geared to capture more purchase volume, driven by our superior technology-driven client experience, product innovation, and our integrated end-to-end home buying ecosystem.
We mentioned last quarter that our company has set a goal to become the largest retail home purchase lender in the country by 2023.
Continuing to transform the home buying experience is the single biggest opportunity for Rocket Companies today.
We spent years creating a complete end-to-end experience that puts the power of choice back into the hands of the consumer.
From credit monitoring to home search, connections with betted local agents, centralized services, a comprehensive for sale by owner process, and our recently announced iBuying services to provide a backup offer to sellers.
We have the suite of services that allow consumers to create a bespoke process tailored to their individual needs while driving extremely strong conversion rates.
When paired with the power of America's largest mortgage lender in Rocket Mortgage and one of the largest title providers in Amrock, no other company can provide the same level of integrated one-stop services that Rocket delivers.
Our iBuying program facilitated through third-party partner companies will be released over the next several quarters.
Just last month, Rocket Homes announced an important milestone, hosting home listings in all 50 states.
Rocket Companies is now the only residential real estate ecosystem that has mortgage licenses, real estate broker licenses, home search listings, real estate agents, and real estate agent partners spanning all 50 states.
With nationwide coverage, Rocket Homes is performing at scale with traffic growing sixfold year over year to reach nearly 2 million unique monthly visitors in the second quarter.
In addition, Rocket Homes drove a record $2 billion in second-quarter real estate transaction value, representing the value of homes purchased and sold through our real estate agent network.
Rocket Homes is still in the early innings and has a very long runway for growth.
Rocket Homes also drives purchase volume for Rocket Mortgage, and we expect our momentum in purchase to continue.
Rocket Homes draws in-process clients into the Rocket ecosystem even earlier in the funnel and regularly engages with our pool of nearly 2.4 million servicing clients, representing $0.5 trillion in servicing value.
This significantly increases our lifetime value and recurring revenue with potential and existing clients.
From the beginning of the year, roughly 70% of Rocket Homes' transactions involve both an agent and the Rocket Homes real estate agent network and in Rocket Mortgage, representing an attach rate among the highest in the industry.
We also have a high attach rate between Rocket Mortgage and Amrock.
In fact, Amrock serves as the appraisal management company for approximately 65% of appraisals ordered for our direct-to-consumer mortgages, illustrating the power of our ecosystem.
We are also extending our value proposition of creating simple seamless experiences to now include residential solar.
Solar energy adoption is at a growth inflection point.
According to third-party research, the current solar energy market is expected to quadruple by 2030, with roughly one in eight homes adopting solar power.
Our dedicated, highly trained group of team members from the Rocket Cloud force will serve as rocket solar advisors to our clients.
The team will help plans determine its solar panels are the best for their home and connect homeowners to our simple digital financing application.
Once financing is complete, the Rocket Cloud force will facilitate the installation of a new solar solution.
We will also be well-positioned to help consumers who may not have started with Rocket Solar, consolidate their solar loan and mortgage for significant cost savings.
We launched Rocket Solar with a rate interim finance product in late July and expect to be operating at scale in 2022.
Looking at Rocket Auto, the company drove record performance in the second quarter with both auto unit sales growth of 140% and in gross merchandise value more than tripling year over year.
When considering the auto inventory shortages facing the industry, we are particularly proud of these results.
Rocket Auto continues to add new partners who are interested in connecting their inventory with our new prospective buyers.
During the quarter, one of the largest online sellers of used cars joined Rocket Auto's partnership network, giving Rocket Auto access to tens of thousands of additional used cars to sell through its constantly expanding platform and providing significant more fuel to Rocket Auto's growth story.
Technology and data are the cornerstones of our platform from the use of data science to optimize every aspect of our client marketing funnel, the use of ethical AI to aid in client service, to sophisticated pricing models, just to name a few.
Technology and data fundamentally drive our business by enhancing client experience through speed and personalization, increasing efficiency through streamlined workflows and decisioning and improving our pull-through and lead conversion.
During 2021, intelligent client targeting models were deployed to more than 80% of our client contacts, ensuring that our Rocket Cloud force is reaching out to clients at the exact moment they're most ready to engage with us.
By tailoring the experience to the client, we have lifted conversion resulting in approximately $4 billion in incremental application volumes so far this year.
The beauty of our platform is its flexibility to meet clients where they are and scale across multiple products and verticals, regardless of the market environment.
While our company started as the direct consumer mortgage lender, Rocket Companies is increasingly a multiproduct, multichannel platform.
In addition to consumers, the Rocket platform works closely with three important B2B constituents: Real estate agents; mortgage brokers; and premier enterprise partners.
Each of these audiences play a crucial role as trusted advisors, leveraging the tailored products and tools that Rocket has developed to help deliver additional value to empower their clients and to reach their goals.
Real estate agents, they play a critical role in the home buying process, and we are empowering agents in our network with new leads, products, and tools to win in today's competitive environment through innovative tools like our verified approval process, which fully underwrite fires and allows them to make offers that compete with cash buyers to our overnight underwrite, which ensures purchase loans are underwritten in near hours, we arm real estate professionals and our clients with the tools to ensure that they win.
Another Rocket Mortgage innovation that's proven popular with realtors is Rocket Pro Insight, which we unveiled last year to help real estate agents create pre-approval letters for our offers, track the status of their clients' mortgage and receive real-time updates.
The number of real estate agents leveraging Rocket Pro insights more than tripled to 50,000, up from just 14,000 two quarters ago.
For the thousands of mortgage brokers and our Rocket Pro TPO network, we arm them with the industry knowledge and tools to work smarter and grow their business.
In the second quarter, we began our revamp of our broker partner portal, starting with our newly enhanced pricing calculation, providing greater ease of use for our partners to run different scenarios for their clients.
Over the past month, more than 20,000 unique mortgage professionals relied on our interactive broker tools to move mortgage applications to the finish line and their clients to the closing table.
Our Pathfinder tool that we created in partnership with Google, provide simple answers to even the most complicated mortgage qualification and underwriting questions and has become one of the top resources for mortgage brokers.
We continue to add new premier enterprise partners to our network and we deepened our integration with our existing partners.
We recently launched our new integration with Credit Karma, allowing their 110 million users to apply for our Rocket Mortgage directly inside their app.
We also continue to grow and expand our relationship with partners, including MIT, Charles Schwab, and realtor.com, just to name a few.
We are excited to serve a broader range of clients through deep integrations with our partners and deliver the trusted high-quality experiences their customers expect.
It's also my pleasure to announce a new relationship with MassMutual.
This new relationship will allow the company's 9,000-plus agents to originate home loans through Rocket Mortgage.
Turning to our community.
From the beginning, we have operated with a more than profit philosophy.
Along with Rocket Community Fund, our philanthropic partner company, we have executed numerous data-driven investments and initiatives to serve and support Detroiters and revitalize Detroit, our hometown, and where we are the largest employer.
At the end of June, we sponsored our flagship with the Rocket Mortgage Classic PGA tournament event Health in Detroit.
Rocket Morgage Classic showcases the best talent in golf while raising funds to help bridge the digital divide and bring broadband connectivity to all Detroiters.
As we continue to grow Detroit, it's critical that Detroiters have an equitable opportunity to grow with us.
In closing, we are entering the third quarter with tremendous momentum across our entire platform, and we are poised to have a record year across our platform from Rocket Mortgage to Amrock, Rocket Homes, and Rocket Auto.
I'd like to think about this.
Over the past several years, Rocket Mortgage has grown volume and taken market share consistently.
In 2018, we originated $83 billion in mortgage volume.
In 2019, that grew to $145 billion, and we ended 2020 with $320 billion in mortgage value.
While industry forecasters expect a smaller market in 2021, we expect to grow volume from our 2020 record levels.
We're going to gain market share and achieve record origination volume this year.
In addition, we expect our servicing local grow more than 30% this year to over $600 billion, driving a recurring cash revenue stream of more than $1 billion.
Rocket portfolio companies reinforce our ecosystem and contribute to our intended business retention rate, expanding client lifetime value.
This year, we are building on momentum from 2020.
I'm beyond proud of what our team has accomplished, and I'm even more excited about what's ahead.
With that, I will turn things over to Julie to go deeper into the numbers.
I'm pleased to report another quarter of strong financial results for Rocket Companies.
This continued success demonstrates our ability to leverage our flexible platform.
I will be sharing some detail around the investments we're making to drive growth and provide insights into trends we are seeing heading into the third quarter.
2020 was an unusual year for the economy, with the combination of historically low interest rates, and constrained mortgage industry capacity.
Under these market conditions, Rocket exhibited the scalability of our platform, with our loan origination volume growing 121% in 2020 year over year, while our expenses grew only 47%.
Given the unusual year 2020 represented, it is important to look at our growth and profitability relative to pre-COVID results.
We were successful in gaining market share in last year's environment, and we continue to grow our business as we head into 2021.
During the second quarter of 2021, Rocket Companies generated $2.8 billion of adjusted revenue, which represents a 110% increase from Q2 2019 and $1.3 billion of adjusted EBITDA, up more than 220% compared to Q2 2019, representing a 46% adjusted EBITDA margin.
We generated net income of $1 billion, which exceeded full-year 2019 net income, and we generated adjusted net income of $920 million in Q2 '21, which was more than triple Q2 of 2019 levels, representing a 33% adjusted net income margin.
Our adjusted earnings per share was $0.46 for the quarter.
Rocket Mortgage generated $84 billion of closed loan origination volume during the quarter, up more than 160% from $32 billion in Q2 2019 and in line with the midpoint of our Q2 guidance.
Less interest rate-sensitive products, which include home purchases, term reductions, and cash-out refinances represented more than half our closed loan volume in the second quarter.
Turning to home purchase, in particular, purchase volume nearly doubled year over year, and we set a new company record in the second quarter.
We estimate that the largest retail purchase lender did $60 billion of purchase origination volume in 2020, excluding correspondent volume.
With the success we have had during the first half of 2021 and the momentum we have going into the third quarter, we expect that our full-year 2021 purchase volume will exceed $60 billion.
This growth, in combination with the recently announced Rocket Homes initiatives are bringing us closer to our goal of becoming the No.
1 retail purchase lender by 2023.
For the quarter, our rate lot gain on sale margin was 278 basis points, which is in line with our expectations at the midpoint of our guidance and substantially higher than most multi-channel mortgage originators.
Our strong results extend across the Rocket Companies' platform.
Despite a relatively low level of auto inventory impacting the industry, Rocket Auto continued to accelerate its growth.
Generating $484 million of gross merchandise value during the second quarter, up nearly 35% as compared to Q1 2021.
Through the first half of 2021, we have generated $844 million of GMV, and are on track to more than double 2020 levels.
With onboarding of new inventory partnerships, including just recently, one of the largest online sellers of used cars, we expect to further accelerate growth in the second half of 2021.
Rocket Homes faced similar inventory constraints.
However, we're successful in generating record real estate transaction value of $2 billion, which represents the value of homes purchased and sold through our real estate agent network during the second quarter.
We also saw record traffic to rockethomes.com during the second quarter or nearly 2 million monthly unique visitors, expanding an important top-of-the-marketing funnel.
The Rocket Company's flywheel is based on leveraging our profitability advantages to constantly reinvest in our business, further strengthen our competitive position, expand into new areas of growth, and client lifetime value.
With the opportunities we see ahead and to fully realize the potential of our platform and unique real estate ecosystem, we will continue to invest for the long term, particularly in technology, marketing, and our most valuable resource, our team members.
We plan to grow our technology, product strategy, and data intelligence teams.
Within Rocket, we have more than 3,000 team members dedicated to building proprietary technology.
Key priorities for investment are continuing to deliver break line experiences, driving operational efficiency, and extending our platform to partners.
Increasing the lifetime value of our clients is another core component of our growth strategy.
Our business is profitable on the first transaction with the client.
We then maintain ongoing loan servicing relationships with 2.4 million clients, representing over $500 billion in outstanding loan principal.
Mortgage servicing drives a recurring cash revenue stream for Rocket Companies that now exceeds $1 billion on an annual basis with service unpaid principal balance of 34% in the last 12 months, and net retention north of 90%.
Based on our strong relationships with clients, we continue to expand our platform to address more of the important transactions in their lives.
Whether that's real estate, auto, personal loans, or new products like residential solar, incremental products on our platform position us to increase the lifetime value of our client relationships.
Looking ahead to Q3, we are seeing strong fundamental tailwinds for our business.
The housing market remains active, homeowners are sitting on the highest levels of home equity in more than a decade, and the investments we have been making are gaining traction across the platform.
Our pipeline for both purchase and refinance remains robust.
As Jay mentioned, we expect to set a new company record with full-year 2021 closed loan origination volume on pace to exceed the previous record achieved in 2020.
While the Mortgage Bankers Association and other public industry forecasts, predicted overall mortgage volumes will decrease as compared to last year, we expect to drive growth and market share gains in 2021.
For the third quarter, we currently expect closed loan volume in the range of $82 billion to $87 billion and rate lock volume between 83 billion and $90 billion.
We expect third-quarter gain on sale margin to be in the range of 270 to 300 basis points.
At this time, we believe the run rate of operating expenses for the first and second quarters of 2021 is a good reference for the third quarter with expenses roughly flat even as we are growing mortgage origination.
We exited the second quarter with $2 billion of cash on the balance sheet, and an additional $2.4 billion of corporate cash used to self-fund loan originations for a total available cash of $4.4 billion.
Total liquidity stood at $7.8 billion as of June 30th, including available cash plus undrawn lines of credit and undrawn MSR lines.
Our business is capital light and our balance sheet is extremely strong.
This year, we expect to generate more than $320 billion in closed loan volume, exceeding last year's record.
Keep in mind, even at these origination levels, we need less than $1 billion of cash on hand to properly operate our business.
With $7.8 billion in available liquidity, the $4.4 billion in total cash is largely held for investments, dividends, and share buybacks.
As we've said before, our capital priorities always start with proper capitalization and reinvesting in the business.
We continue to look for acquisitions that would be additive to our platform by bringing new clients into our ecosystem, enhancing operational efficiencies, or enhancing our product offerings.
Beyond that, we look to return capital to shareholders.
At current price levels, we believe our stock is undervalued.
Over the past 24 months, we have generated $16.3 billion in adjusted EBITDA.
Our MSR portfolio has a fair value of $4.6 billion, and our balance sheet has total equity of $8.2 billion.
With our current levels of capital, we have the opportunity to repurchase shares and return capital to shareholders via dividends as we've done in the past, while still being able to invest in the business and consider acquisition opportunities.
We will deploy our capital in a strategic and disciplined manner to generate long-term shareholder value.

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qtrly adjusted diluted earnings per share $0.46.

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