loanDepot, Inc. (NYSE: LDI), (together with its subsidiaries, “loanDepot” or the “Company”), today announced results for the second quarter ended June 30, 2023.
“loanDepot continues to make significant progress against the strategic imperatives laid out in our Vision 2025 plan,” said President and Chief Executive Officer Frank Martell. “We delivered our second successive quarter of strong top line growth and margin expansion on a sequential basis, and at the same time, continued to drive cost productivity and operating leverage. Importantly, we reduced our sequential quarterly net loss by $66.0 million in the first quarter of 2023 and by $42 million in the second quarter.
“While we continue the work of resetting our cost structure to align with generationally low unit volumes, we are also focused on the other pillars of Vision 2025, including capturing opportunities inherent in our strategy to expand purpose-driven lending that supports first-time homebuyers and diverse communities. During 2022, loanDepot ranked as the country’s third largest mortgage lender for all minorities1. Home ownership is a bedrock of the American Dream and plays a vital role in helping to build strong, stable communities, and further deepening our support for diverse and first-time homebuyers is a critical component of our Vision 2025 plan,” Martell added.
“As we move forward in the second half of 2023, we plan to continue maintaining a strong liquidity position and aggressively reduce our costs,” said Chief Financial Officer, David Hayes. “Importantly, we are also investing in critical operating platforms, which we expect will deliver higher levels of automation and operating leverage and position us for additional growth and margin expansion in 2024.”
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1 Based on 2022 Home Mortgage Disclosure Act (HMDA) data collected by the Consumer Financial Protection Bureau (CFPB).
Second Quarter Highlights: | |||||||||||||||||||
Financial Summary | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
($ in thousands except per share data) (Unaudited) | Jun 30,
| Mar 31,
| Jun 30,
| Jun 30,
| Jun 30,
| ||||||||||||||
Rate lock volume | $ | 8,973,666 | $ | 8,468,435 | $ | 19,596,763 | $ | 17,442,101 | $ | 49,588,215 | |||||||||
Pull through weighted lock volume(1) | 6,057,179 | 5,325,488 | 12,412,894 | 11,382,667 | 32,212,939 | ||||||||||||||
Loan origination volume | 6,273,543 | 4,944,337 | 15,995,055 | 11,217,880 | 37,545,786 | ||||||||||||||
Gain on sale margin(2) | 2.75 | % | 2.43 | % | 1.16 | % | 2.61 | % | 1.62 | % | |||||||||
Pull through weighted gain on sale margin(3) | 2.85 | % | 2.26 | % | 1.50 | % | 2.57 | % | 1.89 | % | |||||||||
Financial Results | |||||||||||||||||||
Total revenue | $ | 271,833 | $ | 207,901 | $ | 308,639 | $ | 479,734 | $ | 811,949 | |||||||||
Total expense | 330,148 | 314,484 | 560,657 | 644,632 | 1,166,913 | ||||||||||||||
Net loss | (49,759 | ) | (91,721 | ) | (223,822 | ) | (141,480 | ) | (315,141 | ) | |||||||||
Diluted loss per share | $ | (0.13 | ) | $ | (0.25 | ) | $ | (0.66 | ) | $ | (0.38 | ) | $ | (0.93 | ) | ||||
Non-GAAP Financial Measures(4) | |||||||||||||||||||
Adjusted total revenue | $ | 275,709 | $ | 226,190 | $ | 273,273 | $ | 501,899 | $ | 777,877 | |||||||||
Adjusted net loss | (34,329 | ) | (60,247 | ) | (168,863 | ) | (94,623 | ) | (250,255 | ) | |||||||||
Adjusted EBITDA (LBITDA) | 6,499 | (29,336 | ) | (191,510 | ) | (22,838 | ) | (265,916 | ) | ||||||||||
| (1) | Pull through weighted rate lock volume is the principal balance of loans subject to interest rate lock commitments, net of a pull-through factor for the loan funding probability. | |
| (2) | Gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by loan origination volume during period. | |
| (3) | Pull through weighted gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by the pull through weighted rate lock volume. | |
| (4) | See “Non-GAAP Financial Measures” for a discussion of Non-GAAP Financial Measures and a reconciliation of these metrics to their closest GAAP measure. |
Operational Highlights
- Quarterly non-volume related expenses increased $2.2 million since the first quarter of 2023, primarily due to higher Vision 2025 related expenses and legal accruals.
- Incurred expenses related to the Vision 2025 plan of $6.8 million during the quarter, including $4.5 million of personnel related expenses and $2.3 million of lease and other asset impairment charges. Vision 2025 expenses totaled $2.6 million in the first quarter of 2023.
- Accrued $7.5 million of legal expenses related to the settlement of outstanding litigation.
- Pull through weighted lock volume of $6.1 billion for the three months ended June 30, 2023, an increase of $0.7 billion or 14% from the first quarter of 2023, resulting in quarterly total revenue of $271.8 million, an increase of $63.9 million, or 31%, over the same period.
- Loan origination volume for the second quarter of 2023 was $6.3 billion, an increase of $1.3 billion or 27% from the first quarter of 2023.
- Purchase volume increased to 73% of total loans originated during the second quarter, up from 71% of total loans originated during the first quarter of 2023 and up from 59% of total loans originated during the second quarter of 2022.
- For the three months ended June 30, 2023, our preliminary organic refinance consumer direct recapture rate2 increased to 69% from the first quarter’s refinance rate of 67%. This highlights the efficacy of our marketing efforts, the strength of our customer relationships, and the value of our servicing portfolio for adjacent and complementary revenue opportunities.
- Net loss for the second quarter of 2023 of $49.8 million as compared to net loss of $91.7 million in the first quarter of 2023. Net loss decreased quarter over quarter primarily due to an increase in revenues and operating efficiency benefits.
- Adjusted EBITDA for the second quarter of 2023 was positive $6.5 million as compared to adjusted LBITDA of negative $29.3 million for the first quarter of 2023. Adjusted EBITDA (LBITDA) excludes the impact of interest expense on non-funding debt, fair value changes of our mortgage servicing rights, net of hedging results, impairment charges, and other operating expenses.
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2 We define organic refinance consumer direct recapture rate as the total unpaid principal balance (“UPB”) of loans in our servicing portfolio that are paid in full for purposes of refinancing the loan on the same property, with the Company acting as lender on both the existing and new loan, divided by the UPB of all loans in our servicing portfolio that paid in full for the purpose of refinancing the loan on the same property. The recapture rate is finalized following the publication date of this release when external data becomes available.
Outlook for the third quarter of 2023
- Origination volume of between $5 billion and $7 billion.
- Pull-through weighted rate lock volume of between $5.5 billion and $7.5 billion.
- Pull-through weighted gain on sale margin of between 245 basis points and 285 basis points.
Servicing | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
Servicing Revenue Data: ($ in thousands) (Unaudited) | Jun 30,
| Mar 31,
| Jun 30,
| Jun 30,
| Jun 30,
| |||||||||||||||
Due to changes in valuation inputs or assumptions | $ | 26,138 | $ | (21,368 | ) | $ | 98,795 | $ | 4,771 | $ | 297,792 | |||||||||
Due to collection/realization of cash flows | (41,619 | ) | (34,657 | ) | (66,380 | ) | (76,276 | ) | (143,502 | ) | ||||||||||
Realized gains (losses) on sales of servicing rights | 7,021 | 140 | (2,493 | ) | 7,161 | 7,540 | ||||||||||||||
Net (loss) gain from derivatives hedging servicing rights | (30,014 | ) | 3,079 | (63,429 | ) | (26,936 | ) | (263,720 | ) | |||||||||||
Changes in fair value of servicing rights, net | $ | (38,474 | ) | $ | (52,806 | ) | $ | (33,507 | ) | $ | (91,280 | ) | $ | (101,890 | ) | |||||
Servicing fee income | $ | 117,737 | $ | 118,961 | $ | 117,326 | $ | 236,699 | $ | 228,385 | ||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
Servicing Rights, at Fair Value: ($ in thousands) (Unaudited) | Jun 30,
| Mar 31,
| Jun 30,
| Jun 30,
| Jun 30,
| |||||||||||||||
Balance at beginning of period | $ | 2,016,568 | $ | 2,025,136 | $ | 2,078,187 | $ | 2,025,136 | $ | 1,999,402 | ||||||||||
Additions | 75,866 | 59,295 | 180,455 | 135,161 | 450,215 | |||||||||||||||
Sales proceeds, net | (78,191 | ) | (11,838 | ) | (86,464 | ) | (90,030 | ) | (399,314 | ) | ||||||||||
Changes in fair value: | ||||||||||||||||||||
Due to changes in valuation inputs or assumptions | 26,138 | (21,368 | ) | 98,795 | 4,771 | 297,792 | ||||||||||||||
Due to collection/realization of cash flows | (41,619 | ) | (34,657 | ) | (66,380 | ) | (76,276 | ) | (143,502 | ) | ||||||||||
Balance at end of period (1) | $ | 1,998,762 | $ | 2,016,568 | $ | 2,204,593 | $ | 1,998,762 | $ | 2,204,593 | ||||||||||
| (1) | Balances are net of $13.3 million, $12.2 million, and $9.1 million of servicing rights liability as of June 30, 2023, March 31, 2023, and June 30, 2022, respectively. |
% Change | |||||||||||||||||
Servicing Portfolio Data: ($ in thousands) (Unaudited) | Jun 30,
| Mar 31,
| Jun 30,
| Jun-23 vs Mar-23 | Jun-23
| ||||||||||||
Servicing portfolio (unpaid principal balance) | $ | 142,479,870 | $ | 141,673,464 | $ | 155,217,012 | 0.6 | % | (8.2 | )% | |||||||
