Rocket Cos. returned to profitability in the second quarter even with a Spring home sales market which started off poorly, but has been gaining momentum month-by-month that should continue beyond September, company management said.
During the quarter, the company reported net income of $34 million.
This compared with a first quarter loss of $212 million. For the second quarter last year Rocket had net income of $178 million.
Using the non-GAAP metric of adjusted net income, Rocket earned $75 million. This translated to 4 cents per share, which beat the estimate by 1 cent, according to Seeking Alpha.
What influenced Rocket’s second quarter
“Last quarter, we mentioned a delayed spring home buying season, and that’s exactly what played out,” said Varun Krishna, CEO, on the earnings call. “April was particularly challenging for the industry, and set the tone for a slow forming season.”
He pointed to declining home sales which continued into June. But while this may be the new norm for the market, Krishna pointed to signs of optimism, including softening home prices and increased consumer sentiment since April.
While Rocket’s revenue increased by 4.5% year-over-year, the 280 basis point gain on sale margin was 19 basis points lower.
Origination volume was 18% higher than the same period in 2024, to $29 billion from $24.7 billion.
Direct-to-consumer had sold loan volume of $14.1 billion at a 440 basis margin, compared with $13 billion at a 414 basis point margin.
The partner channel, in which wholesale and other ventures are rolled into, had $13.4 billion of volume, with margins of 90 basis points. This was higher volume than a year ago, when the channel did $11.3 billion, but that was with a 159 basis point margin.
“Purchase volume increased month over month, from April to June, supported by our affordability programs, including One Plus, Rocket Rent Rewards and a host of seasonal promotions,” said Krishna. “We saw particularly strong growth in refinance volume, quarter-over-quarter and year-over-year.”
This refi growth was helped by strong performance in home equity product production, which doubled year-over-year, added Brian Brown, chief financial officer.
The good news for purchase is Rocket’s current approval letter pipeline indicates that the summer home buying season will be extended with strong activity continuing through the third quarter, Brown said.
How did Rocket’s servicing business perform in Q2
Loan servicing income of $202.4 million was inclusive of a $199 million write down in the fair value of mortgage servicing rights. This compared with a loss of $48.5 million in the first quarter (after a $449 million negative adjustment) and $241 million of servicing income (with a $113 million MSR fair value charge one year prior.
Krishna took time on the call to speak about Rocket’s artificial intelligence efforts, including creating a communication platform which handles dialing, texting, follow ups and chat, automating administrative tasks. He also spoke of the company’s use of Agentic AI.
What is creating cost savings at Rocket
Brown on his portion of the call noted the cost savings from these and other efforts, which he addressed as operational efficiencies.
Earlier in July, Rocket “restructured” general and administrative employee teams that support the mortgage business, which he attributed to the AI investments.
“We take a very disciplined approach to expense management and capital allocation, which are foundational to how we operate,” Brown said. “These principles guide every decision we make as we scale and optimize across search, origination and servicing with the customer always front and center.”
This includes the closure of Rocket Mortgage Canada, and the more recent decision to wind down its Visa credit card.
Rocket expects these actions to collectively deliver approximately $80 million in annualized savings, but most will not be recognized until the fourth quarter, Brown said. These are also separate from any synergies gained from its merger activities. Why is Rocket cutting its marketing spend
The company is reducing its marketing spend as it transitions out of the early stage of its rebranding efforts, Brown added.
For the third quarter, Rocket is expecting margins to be consistent with the second quarter. As a result, revenue growth looked at on a stand-alone basis for Rocket will be coming from production and market share gains, Brown said.
What is the state of Rocket’s wholesale business
Rocket has been in a battle with United Wholesale Mortgage for mortgage broker share for the past few years. During the Q&A session, Krishna addressed what Rocket is now doing in this channel.
“Wholesale is a critical part of our purchase engine, this is a space that we’re definitely doubling down on,” Krishna said. “We’re now live on the Arrive platform, we’re seeing great momentum there in terms of wallet share, which is growing quarter over quarter and year over year.”
Krishna said Rocket is coming out with new innovations including more compensation flexibility, better pricing technology and improved processes for pulling and working with more credit options.
Merger updates at Rocket
The purchase of Redfin was completed after the second quarter ended. But during the period, the company reported $35 million of costs for this transaction.
Other than this, Rocket’s results do not include any results from Redfin.
Meanwhile in other merger news, the prospectus for the Rocket-Mr. Cooper transaction has been updated to include notifications that the boards of both companies have approved the transaction.
The next step for the deal is a special meeting of Mr. Cooper shareholders scheduled for Sept. 3.
Rock Holdings, an entity that Rocket founder and chairman Dan Gilbert owns more than three quarters of, holds 79% of Rocket’s common shares. It has delivered a written consent in favor of the deal and a related common stock issuance. As a result, other Rocket shareholders do not need to vote on the transaction.
Mr. Cooper previously reported second quarter results, with net income of $198 million for the period.
