Rocket Companies, Inc. [RKT] Filings

10-Q 1 rkt-20240630.htm 10-Q rkt-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number: 001-39432

Rocket Companies, Inc.

(Exact name of registrant as specified in its charter)


Delaware						84-4946470
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1050 Woodward Avenue, Detroit, MI						48226
(Address of principal executive offices)						(Zip Code)

(313) 373-7990

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.00001 per share

RKT

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of July 30, 2024, 140,568,742 shares of the registrant's Class A common stock, $0.00001 par value, and 1,848,879,483 shares of the registrant's Class D common stock, $0.00001 par value, were outstanding.

Rocket Companies, Inc.

Form 10-Q

For the period ended June 30, 2024


	Table of Contents

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Changes in Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	55
Item 4.	Controls and Procedures	56

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 5.	Other Information	57
Item 6.	Exhibits	59
Signature		60

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Rocket Companies, Inc.

Condensed Consolidated Balance Sheets

($ In Thousands, Except Per Share Amounts)


	June 30, 2024		December 31, 2023
Assets	(Unaudited)
Cash and cash equivalents	$	1,309,494	$	1,108,466
Restricted cash	27,764		28,366
Mortgage loans held for sale, at fair value	9,486,922		6,542,232
Interest rate lock commitments (“IRLCs”), at fair value	170,381		132,870
Mortgage servicing rights (“MSRs”), at fair value	7,162,690		6,439,787
Notes receivable and due from affiliates	14,325		19,530
Property and equipment, net of accumulated depreciation and amortization of $576,354 and $536,196, respectively	233,257		250,856
Deferred tax asset, net	528,104		550,149
Lease right of use assets	314,683		347,696
Forward commitments, at fair value	13,025		26,614
Loans subject to repurchase right from Ginnie Mae	1,945,022		1,533,387
Goodwill and intangible assets, net	1,239,819		1,236,765
Other assets	1,203,228		1,015,022
Total assets	$	23,648,714	$	19,231,740
Liabilities and equity
Liabilities
Funding facilities	7,022,439		$	3,367,383
Other financing facilities and debt

Senior Notes, net	4,036,187		4,033,448
Early buy out facility	134,615		203,208
Accounts payable	205,949		171,350
Lease liabilities	356,050		393,882
Forward commitments, at fair value	8,508		142,988
Investor reserves	94,362		92,389
Notes payable and due to affiliates	31,743		31,006
Tax receivable agreement liability	584,695		584,695
Loans subject to repurchase right from Ginnie Mae	1,945,022		1,533,387
Other liabilities	415,223		376,294
Total liabilities	$	14,834,793	$	10,930,030
Equity
Class A common stock, $0.00001 par value - 10,000,000,000 shares authorized, 139,963,583 and 135,814,173 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.	$	1	$	1
Class B common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of June 30, 2024 and December 31, 2023.	—		—
Class C common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of June 30, 2024 and December 31, 2023.	—		—
Class D common stock, $0.00001 par value - 6,000,000,000 shares authorized, 1,848,879,483 shares issued and outstanding as of June 30, 2024 and December 31, 2023.	19		19
Additional paid-in capital	357,610		340,532
Retained earnings	300,958		284,296
Accumulated other comprehensive income	85		52
Non-controlling interest	8,155,248		7,676,810
Total equity	8,813,921		8,301,710
Total liabilities and equity	$	23,648,714	$	19,231,740

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

($ In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue
Gain on sale of loans
Gain on sale of loans excluding fair value of originated MSRs, net	$	413,011	$	279,629	$	889,440	$	544,632
Fair value of originated MSRs	345,545		314,840		568,342		519,400
Gain on sale of loans, net	758,556		594,469		1,457,782		1,064,032
Loan servicing income
Servicing fee income	354,677		343,591		700,423		709,976
Change in fair value of MSRs	(112,941)		42,377		(56,433)		(355,902)
Loan servicing income, net	241,736		385,968		643,990		354,074
Interest income
Interest income	112,415		80,757		201,395		147,501
Interest expense on funding facilities	(81,293)		(59,512)		(132,736)		(94,624)
Interest income, net	31,122		21,245		68,659		52,877
Other income	269,308		234,545		514,007		431,312
Total revenue, net	1,300,722		1,236,227		2,684,438		1,902,295
Expenses
Salaries, commissions and team member benefits	553,420		579,139		1,094,516		1,182,914
General and administrative expenses	232,952		200,425		469,617		395,815
Marketing and advertising expenses	210,937		218,843		417,233		400,447
Depreciation and amortization	28,009		25,357		55,026		56,042
Interest and amortization expense on non-funding debt	38,364		38,334		76,729		76,667
Other expenses	44,998		35,759		80,905		68,027
Total expenses	1,108,680		1,097,857		2,194,026		2,179,912
Income (loss) before income taxes	192,042		138,370		490,412		(277,617)
(Provision for) benefit from income taxes	(14,117)		782		(21,773)		5,286
Net income (loss)	177,925		139,152		468,639		(272,331)
Net (income) loss attributable to non-controlling interest	(176,630)		(131,714)		(451,129)		261,246
Net income (loss) attributable to Rocket Companies	$	1,295	$	7,438	$	17,510	$	(11,085)

Earnings (loss) per share of Class A common stock
Basic	$	0.01	$	0.06	$	0.13	$	(0.09)
Diluted	$	0.01	$	0.05	$	0.13	$	(0.11)

Weighted average shares outstanding
Basic	139,647,845		126,740,748		138,319,794		125,742,282
Diluted	139,647,845		1,979,450,651		138,319,794		1,977,148,197

Comprehensive income (loss)
Net income (loss)	$	177,925	$	139,152	$	468,639	$	(272,331)
Cumulative translation adjustment	205		(159)		519		(152)
Unrealized gain on investment securities	—		1,589		—		—
Comprehensive income (loss)	178,130		140,582		469,158		(272,483)
Comprehensive (income) loss attributable to non-controlling interest	(176,822)		(133,052)		(451,614)		261,389
Comprehensive income (loss) attributable to Rocket Companies	$	1,308	$	7,530	$	17,544	$	(11,094)

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Changes in Equity

($ In Thousands)

(Unaudited)


	Class A Common Stock Shares	Class A Common Stock Amount		Class D Common Stock Shares	Class D Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Non-controlling Interest		Total Equity
Balance, December 31, 2022	123,491,606	$	1	1,848,879,483	$	19	$	276,221	$	300,394	$	69	$	7,898,845	$	8,475,549
Net loss	—	—		—	—		—		(18,523)		—		(392,960)		(411,483)
Cumulative translation adjustment	—	—		—	—		—		—		—		7		7
Unrealized loss on investment securities	—	—		—	—		—		—		(101)		(1,488)		(1,589)
Share-based compensation, net	1,390,650	—		—	—		3,217		—		—		47,596		50,813
Distributions for state taxes on behalf of unit holders (members), net of refunds	—	—		—	—		—		(209)		—		326		117
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		23		—		347		370
Taxes withheld on team members' restricted share award vesting	—	—		—	—		(444)		—		—		(6,550)		(6,994)
Issuance of Class A common stock under share-based compensation plans	878,817	—		—	—		456		—		—		6,794		7,250
Change in controlling interest of investment, net	—	—		—	—		15,268		(688)		—		(19,275)		(4,695)
Balance, March 31, 2023	125,761,073	$	1	1,848,879,483	$	19	$	294,718	$	280,997	$	(32)	$	7,533,642	$	8,109,345
Net income	—	—		—	—		—		7,438		—		131,714		139,152
Cumulative translation adjustment	—	—		—	—		—		—		(9)		(150)		(159)
Unrealized gain on investment securities	—	—		—	—		—		—		101		1,488		1,589
Share-based compensation, net	574,094	—		—	—		3,170		—		—		46,221		49,391
Contributions from unit holders (members) to subsidiary investment, net	—	—		—	—		—		—		—		61,378		61,378
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		82		—		1,200		1,282
Taxes withheld on employees' restricted share award vesting	—	—		—	—		(210)		—		—		(3,050)		(3,260)
Issuance of Class A common stock under share-based compensation plans	794,282	—		—	—		465		—		—		6,803		7,268
Change in controlling interest of investment, net	—	—		—	—		3,997		—		—		(5,129)		(1,132)
Balance, June 30, 2023	127,129,449	$	1	1,848,879,483	$	19	$	302,140	$	288,517	$	60	$	7,774,117	$	8,364,854

Rocket Companies, Inc.

Condensed Consolidated Statements of Changes in Equity

($ In Thousands)

(Unaudited)



	Class A Common Stock Shares	Class A Common Stock Amount		Class D Common Stock Shares	Class D Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Non-controlling Interest		Total Equity
Balance, December 31, 2023	135,814,173	$	1	1,848,879,483	$	19	$	340,532	$	284,296	$	52	$	7,676,810	$	8,301,710
Net income	—	—		—	—		—		16,215		—		274,499		290,714
Cumulative translation adjustment	—	—		—	—		—		—		21		293		314
Share-based compensation, net	2,458,761	—		—	—		2,060		—		—		27,722		29,782
Distributions for state taxes on behalf of unit holders (members)	—	—		—	—		—		(19)		—		(255)		(274)
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		2		—		29		31
Taxes withheld on team members' restricted share award vesting	—	—		—	—		(1,152)		—		—		(15,410)		(16,562)
Issuance of Class A common stock under share-based compensation plans	538,683	—		—	—		454		—		—		6,161		6,615
Change in controlling interest of investment, net	—	—		—	—		8,917		—		(1)		(11,795)		(2,879)
Balance, March 31, 2024	138,811,617	$	1	1,848,879,483	$	19	$	350,811	$	300,494	$	72	$	7,958,054	$	8,609,451
Net income	—	$	—	—	$	—	$	—	$	1,295	$	—	$	176,630	$	177,925
Cumulative translation adjustment	—	—		—	—		—		—		13		192		205
Share-based compensation, net	506,140	—		—	—		2,652		—		—		35,095		37,747
Distributions for state taxes on behalf of unit holders (members)	—	—		—	—		—		(6)		—		(86)		(92)
Distributions to unit holders (members) from subsidiary investment, net	—	—		—	—		—		(837)		—		(13,013)		(13,850)
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		12		—		161		173
Taxes withheld on employees' restricted share award vesting	—	—		—	—		(305)		—		—		(4,029)		(4,334)
Issuance of Class A common stock under share-based compensation plans	645,826	—		—	—		554		—		—		7,357		7,911
Change in controlling interest of investment, net	—	—		—	—		3,898		—		—		(5,113)		(1,215)
Balance, June 30, 2024	139,963,583	$	1	1,848,879,483	$	19	$	357,610	$	300,958	$	85	$	8,155,248	$	8,813,921

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Cash Flows

($ In Thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Operating activities
Net income (loss)	$	468,639	$	(272,331)
Adjustments to reconcile Net income (loss) to Net cash used in operating activities:
Depreciation and amortization	55,026		56,042
Provision for (benefit from) deferred income taxes	18,837		(6,342)
Origination of MSRs	(568,342)		(519,400)
Change in fair value of MSRs, net	55,306		353,536
Gain on sale of loans excluding fair value of originated MSRs, net	(889,440)		(544,632)
Disbursements of mortgage loans held for sale	(44,161,571)		(38,990,084)
Disbursements of non-mortgage loans held for sale	(108,031)		(79,339)
Change in fair value of non-mortgage loans held for sale	1,589		753
Proceeds from sale of mortgage loans held for sale	41,925,218		38,390,358
Share-based compensation expense	69,997		102,656
Change in assets and liabilities
Due from affiliates	5,205		(60,996)
Other assets	(69,084)		29,978
Accounts payable	34,600		40,610
Due to affiliates	742		2,245
Other liabilities	26,258		(114,992)
Total adjustments	$	(3,603,690)	$	(1,339,607)
Net cash used in operating activities	$	(3,135,051)	$	(1,611,938)
Investing activities
Net proceeds from sale of MSRs	$	125,505	$	676,001
Net purchase of MSRs	(331,541)		554
Decrease in mortgage loans held for investment	10,059		4,309
Purchases of investment securities, available for sale	—		(5,472)
Sales of investment securities, available for sale	—		6,479
Purchase and other additions of property and equipment, net of disposals	(30,048)		(40,131)
Net cash (used in) provided by investing activities	$	(226,025)	$	641,740
Financing activities
Net borrowings on funding facilities	$	3,655,056	$	1,340,537

Net payments on early buy out facility	(68,593)		(311,675)
Net (payments) borrowings on notes payable from unconsolidated affiliates	(5)		353
Stock issuance	12,063		12,249

Taxes withheld on team members' restricted share award vesting	(20,896)		(10,254)
(Distributions to) contributions from other unit holders (members of Holdings)	(16,642)		67,827
Net cash provided by financing activities	$	3,560,983	$	1,099,037
Effects of exchange rate changes on cash and cash equivalents	519		(151)
Net increase in cash and cash equivalents and restricted cash	200,426		128,688
Cash and cash equivalents and restricted cash, beginning of period	1,136,832		789,099
Cash and cash equivalents and restricted cash, end of period	$	1,337,258	$	917,787
Non-cash activities
Loans transferred to other real estate owned	$	1,914	$	1,469
Supplemental disclosures
Cash paid for interest on related party borrowings	$	858	$	853

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

1. Business, Basis of Presentation and Accounting Policies

Rocket Companies, Inc. (the “Company”, and together with its consolidated subsidiaries, “Rocket Companies”, “we”, “us”, “our”) was incorporated in Delaware on February 26, 2020 as a wholly owned subsidiary of Rock Holdings Inc. (“RHI”) for the purpose of facilitating an initial public offering (“IPO”) of its Class A common stock, $0.00001 par value (the “Class A common stock”) and other related transactions in order to carry on the business of Rocket, LLC dba RKT Holdings (“Holdings”) and its wholly owned subsidiaries.

We are a Detroit‑based fintech company including mortgage, real estate and personal finance business. We are committed to delivering industry-best client experiences through our AI-fueled homeownership strategy. Our full suite of products empowers our clients across financial wellness, personal loans, home search, mortgage finance, title and closing. We believe our widely recognized “Rocket” brand is synonymous with simple, fast, and trusted digital experiences. Through these businesses, we seek to deliver innovative client solutions leveraging our Rocket platform. Our business operations are organized into the following two segments: (1) Direct to Consumer and (2) Partner Network, refer to Note 11, Segments.

Rocket Companies, Inc. is a holding company. Its primary material asset is the equity interest in Holdings which, including through its direct and indirect subsidiaries, conducts a majority of the Company's operations. Holdings is a Michigan limited liability company and wholly owns the following entities, with each entity's subsidiaries identified in parentheses: Rocket Mortgage, LLC, Amrock Holdings, LLC (“Amrock”), Amrock Title Insurance Company (“ATI”), LMB HoldCo LLC (“Core Digital Media”), RCRA Holdings LLC (Rock Connections LLC dba “Rocket Connections”), Rocket Homes Real Estate LLC (“Rocket Homes”), RockLoans Holdings LLC (“Rocket Loans”), Rocket Money, Inc. (“Rocket Money”), Rocket Worldwide Holdings Inc. (EFB Holdings Inc. (“Rocket Mortgage Canada”) and Lendesk Canada Holdings Inc. (“Lendesk Technologies”)), Woodward Capital Management LLC, and Rocket Card, LLC. As used herein, “Rocket Mortgage” refers to either the Rocket Mortgage brand or platform, or the Rocket Mortgage business, as the context allows.

Effective April 1, 2024, Rock Central LLC dba Rocket Central merged into RKT Holdings, LLC.

Effective June 15, 2024, RKT Holdings, LLC amended its name to Rocket, LLC.

Basis of Presentation and Consolidation

As the sole managing member of Holdings, the Company operates and controls all of the business affairs of Holdings, and through Holdings and its subsidiaries, conducts its business. Holdings is considered a variable interest entity (“VIE”) and we consolidate the financial results of Holdings under the guidance of ASC 810, Consolidation. A portion of our Net income (loss) is allocated to Net (income) loss attributable to non-controlling interest. For further details, refer below to Variable Interest Entities and Note 12, Non-controlling Interest.

All significant intercompany transactions and accounts between the businesses comprising the Company have been eliminated in the accompanying condensed consolidated financial statements.

The Company's derivatives, IRLCs, MSRs, mortgage and non-mortgage loans held for sale, and trading investment securities are measured at fair value on a recurring basis. Additionally, other assets may be required to be measured at fair value in the condensed consolidated financial statements on a nonrecurring basis. For further details of the Company's transactions refer to Note 2, Fair Value Measurements.

All transactions and accounts between RHI and other related parties with the Company have a history of settlement or will be settled for cash and are reflected as related party transactions. For further details of the Company’s related party transactions refer to Note 6, Transactions with Related Parties.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Our condensed consolidated financial statements are unaudited and presented in U.S. dollars. They have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC. In our opinion, these condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair statement of our results of operations, financial position and cash flows for the periods presented. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. However, our results of operations for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Management Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management is not aware of any factors that would significantly change its estimates and assumptions, actual results may differ from these estimates, as of June 30, 2024.

Subsequent Events

In preparing these condensed consolidated financial statements, the Company evaluated events and transactions for potential recognition or disclosure through the date these condensed consolidated financial statements were issued. Refer to Item 5. Other Information and Note 5, Borrowings for disclosures on changes to the Company's debt agreements that occurred subsequent to June 30, 2024.

Revenue Recognition

Gain on sale of loans, net — includes all components related to the origination and sale of mortgage loans, including (1) net gain on sale of loans, which represents the premium we receive in excess of the loan principal amount and certain fees charged by investors upon sale of loans into the secondary market, (2) loan origination fees (credits), points and certain costs, (3) provision for or benefit from investor reserves, (4) the change in fair value of interest rate locks and loans held for sale, (5) the gain or loss on forward commitments hedging loans held for sale and interest rate lock commitments (IRLCs), and (6) the fair value of originated MSRs. An estimate of the Gain on sale of loans, net is recognized at the time an IRLC is issued, net of a pull-through factor. Subsequent changes in the fair value of IRLCs and mortgage loans held for sale are recognized in current period earnings. When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings in Gain on sale of loans, net. Included in Gain on sale of loans, net is the Fair value of originated MSRs, which represents the estimated fair value of MSRs related to loans which we have sold and retained the right to service.

Loan servicing income, net — includes income from servicing, sub-servicing and ancillary fees, and is recorded to income as earned, which is upon collection of payments from borrowers. This amount also includes the Change in fair value of MSRs, which is the adjustment for the fair value measurement of the MSR asset as of the respective balance sheet date. Refer to Note 3, Mortgage Servicing Rights for information related to the gain/(loss) on changes in the fair value of MSRs.

Interest income, net — includes interest earned on mortgage loans held for sale and mortgage loans held for investment net of the interest expense paid on our loan funding facilities. Interest income is recorded as earned and interest expense is recorded as incurred. Interest income is accrued and credited to income daily based on the unpaid principal balance (“UPB”) outstanding. The accrual of interest income is generally discontinued when a loan becomes 90 days past due.

Other income — is derived primarily from deposit income, personal finance subscription revenue, closing fees, net appraisal revenue, net title insurance fees, personal loans business, real estate network referral fees, and professional service fees.

The following significant revenue streams fall within the scope of ASC Topic 606 — Revenue from Contracts with Customers and are disaggregated hereunder. The remaining revenue streams within the scope of ASC 606 are immaterial, both individually and in aggregate.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Rocket Money subscription revenue — The Company recognizes subscription revenue ratably over the contract term beginning on the commencement date of each contract. We have determined that subscriptions represent a stand-ready obligation to perform over the subscription term. These performance obligations are satisfied over time as the customer simultaneously receives and consumes the benefits. Contracts are one month to one year in length. Subscription revenues were $65,578 and $42,994 for the three months ended June 30, 2024 and 2023, respectively and $126,169 and $82,179 for the six months ended June 30, 2024 and 2023, respectively.

Amrock closing fees — The Company recognizes closing fees for non-recurring services provided in connection with the origination of the loan. These fees are recognized at the time of loan closing for purchase transactions or at the end of a client's three-day rescission period for refinance transactions, which represents the point in time the loan closing services performance obligation is satisfied. The consideration received for closing services is a fixed fee per loan that varies by state and loan type. Closing fees were $24,314 and $20,810 for the three months ended June 30, 2024 and 2023, respectively and $45,826 and $38,298 for the six months ended June 30, 2024 and 2023, respectively.

Amrock appraisal revenue, net — The Company recognizes appraisal revenue when the appraisal service is completed. The Company may choose to deliver appraisal services directly to its client or subcontract such services to a third-party licensed and/or certified appraiser. In instances where the Company performs the appraisal, revenue is recognized as the gross amount of consideration received at a fixed price per appraisal. The Company is an agent in instances where a third-party appraiser is involved in the delivery of appraisal services and revenue is recognized net of third-party appraisal expenses. Appraisal revenue, net of intercompany eliminations, was $9,473 and $12,953 for the three months ended June 30, 2024 and 2023, respectively and $18,330 and $24,819 for the six months ended June 30, 2024 and 2023, respectively.

Rocket Homes real estate network referral fees — The Company recognizes real estate network referral fee revenue based on arrangements with partner agencies contingent on the closing of a transaction. As this revenue stream is variable, and is contingent on the successful transaction close, the revenue is constrained until the occurrence of the transaction. At this point, the constraint on recognizing revenue is deemed to have been lifted and revenue is recognized for the consideration expected to be received. Real estate network referral fees, net of intercompany eliminations, were $15,424 and $13,776 for the three months ended June 30, 2024 and 2023, respectively and $26,294 and $20,747 for the six months ended June 30, 2024 and 2023, respectively.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. We maintain our bank accounts with a relatively small number of high-quality financial institutions.

Restricted cash as of June 30, 2024 and 2023 consisted of cash on deposit for a repurchase facility and client application deposits, title premiums collected from the insured that are due to the underwritten, and principal and interest received in collection accounts for purchased assets.


	June 30,
	2024		2023
Cash and cash equivalents	$	1,309,494	$	882,783
Restricted cash	27,764		35,004
Total cash, cash equivalents, and restricted cash in the statement of cash flows	$	1,337,258	$	917,787

Loans subject to repurchase right from Ginnie Mae

For certain loans sold to Ginnie Mae, the Company as the servicer has the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets defined criteria, including being delinquent more than 90 days. Once the Company has the unilateral right to repurchase the delinquent loan, the Company has effectively regained control over the loan and must re-recognize the loan on the Condensed Consolidated Balance Sheets and establish a corresponding finance liability regardless of the Company's intention to repurchase the loan. The asset and corresponding liability are recorded at the unpaid principal balance of the loan, which approximates its fair value.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Variable Interest Entities

Rocket Companies, Inc. is the managing member of Holdings with 100% of the management and voting power in Holdings. In its capacity as managing member, Rocket Companies, Inc. has the sole authority to make decisions on behalf of Holdings and bind Holdings to signed agreements. Further, Holdings maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights. Accordingly, management concluded that Holdings is a limited partnership or similar legal entity as contemplated in ASC 810, Consolidation.

Management concluded that Rocket Companies, Inc. is Holdings’ primary beneficiary. As the primary beneficiary, Rocket Companies, Inc. consolidates the results and operations of Holdings for financial reporting purposes under the variable interest consolidation model guidance in ASC 810.

Rocket Companies, Inc.’s relationship with Holdings results in no recourse to the general credit of Rocket Companies, Inc. Holdings and its consolidated subsidiaries represents Rocket Companies, Inc.’s sole investment. Rocket Companies, Inc. shares in the income and losses of Holdings in direct proportion to Rocket Companies, Inc.'s ownership percentage. Rocket Companies, Inc. has no contractual requirement to provide financial support to Holdings.

Rocket Companies, Inc.’s financial position, performance and cash flows effectively represent those of Holdings and its subsidiaries as of and for the period ended June 30, 2024.

Recently Adopted Accounting Standards

In March 2023, the FASB issued ASU 2023-01: Leases (Topic 842) – Common Control Arrangements. The new guidance requires all lessees in a lease with a lessor under common control to amortize leasehold improvements over the useful life of the common control group and provides new guidance for recognizing a transfer of assets between entities under common control as an adjustment to equity when the lessee no longer controls the use of the underlying asset. This guidance is effective for fiscal years beginning after December 15, 2023. There was no impact to the Company’s Consolidated Financial Statements and related disclosures upon adoption in January of 2024.

Accounting Standards Issued but Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07: Improvements to Reportable Segment Disclosures. The new guidance requires additional disclosures around significant segment expenses and the chief operating decision maker. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the requirements of the update, which is expected to result in expanded disclosures upon adoption.

In December 2023, the FASB issued ASU 2023-09: Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. The new guidance requires additional disclosures relating to the tax rate reconciliation and the income taxes paid information. The guidance is effective for fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the requirements of the update, which is expected to result in expanded disclosures upon adoption.

2. Fair Value Measurements

Fair value is the price that would be received if an asset were sold or the price that would be paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. Required disclosures include classification of fair value measurements within a three-level hierarchy (Level 1, Level 2, and Level 3). Classification of a fair value measurement within the hierarchy is dependent on the classification and significance of the inputs used to determine the fair value measurement. Observable inputs are those that are observed, implied from, or corroborated with externally available market information. Unobservable inputs represent the Company’s estimates of market participants’ assumptions.

Fair value measurements are classified in the following manner:

Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities at the measurement date.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Level 2—Valuation is based on either observable prices for identical assets or liabilities in inactive markets, observable prices for similar assets or liabilities, or other inputs that are derived directly from, or through correlation to, observable market data at the measurement date.

Level 3—Valuation is based on the Company’s internal models using assumptions at the measurement date that a market participant would use.

In determining fair value measurement, the Company uses observable inputs whenever possible. The level of a fair value measurement within the hierarchy is dependent on the lowest level of input that has a significant impact on the measurement as a whole. If quoted market prices are available at the measurement date or are available for similar instruments, such prices are used in the measurements. If observable market data is not available at the measurement date, judgment is required to measure fair value.

The following is a description of measurement techniques for items recorded at fair value on a recurring basis. There were no material items recorded at fair value on a nonrecurring basis as of June 30, 2024 or December 31, 2023.

Mortgage loans held for sale: Loans held for sale that trade in active secondary markets are valued using Level 2 measurements derived from observable market data, including market prices of securities backed by similar mortgage loans adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk. Loans held for sale for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon dealer price quotes and internal models.

IRLCs: The fair value of IRLCs is based on current market prices of securities backed by similar mortgage loans (as determined above under mortgage loans held for sale), net of costs to close the loans, subject to the estimated loan funding probability, or “pull-through factor”. Given the significant and unobservable nature of the pull-through factor, IRLCs are classified as Level 3.

MSRs: The fair value of MSRs is determined using an internal valuation model that calculates the present value of estimated net future cash flows. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, and contractual servicing fee income, among others. MSRs are classified as Level 3.

Forward commitments: The Company’s forward commitments are valued based on quoted prices for similar assets in an active market with inputs that are observable and are classified within Level 2 of the valuation hierarchy.

Investment securities: Investment securities are trading debt securities that are recorded at fair value using observable market prices for similar securities or identical securities that are traded in less active markets, which are classified as Level 2 and include highly rated municipal, government, and corporate bonds. As of March 31, 2023, the investment securities were classified as available for sale. The investments securities were subsequently transferred to the trading classification during 2023 due to the intent and frequency of purchases and sales.

Non-mortgage loans held for sale: Non-mortgage loans held for sale are personal loans, including solar loans. The fair value of non-mortgage loans is determined using an internal valuation model that calculates the present value of estimated net future cash flows. Non-mortgage loans are classified as Level 3.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below shows a summary of financial statement items that are measured at estimated fair value on a recurring basis, including assets measured under the fair value option. There were no material transfers of assets or liabilities recorded at fair value on a recurring basis between Levels 1, 2 or 3 during the six months ended June 30, 2024 or the year ended December 31, 2023.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)


	Level 1		Level 2		Level 3		Total
Balance at June 30, 2024
Assets:
Mortgage loans held for sale (1)	$	—	$	9,135,069	$	351,853	$	9,486,922
IRLCs	—		—		170,381		170,381
MSRs	—		—		7,162,690		7,162,690
Forward commitments	—		13,025		—		13,025
Investment securities (2)	—		39,836		—		39,836
Non-mortgage loans held for sale (2)	—		—		269,460		269,460
Total assets	$	—	$	9,187,930	$	7,954,384	$	17,142,314
Liabilities:
Forward commitments	$	—	$	8,508	$	—	$	8,508
Total liabilities	$	—	$	8,508	$	—	$	8,508

Balance at December 31, 2023
Assets:
Mortgage loans held for sale (1)	$	—	$	6,103,714	$	438,518	$	6,542,232
IRLCs	—		—		132,870		132,870
MSRs	—		—		6,439,787		6,439,787
Forward commitments	—		26,614		—		26,614
Investment securities (2)	—		39,518		—		39,518
Non-mortgage loans held for sale (2)	—		—		163,018		163,018
Total assets	$	—	$	6,169,846	$	7,174,193	$	13,344,039
Liabilities:
Forward commitments	$	—	$	142,988	$	—	$	142,988
Total liabilities	$	—	$	142,988	$	—	$	142,988

(1) As of June 30, 2024 and December 31, 2023, $157.8 million and $195.6 million of unpaid principal balance of the level 3 mortgage loans held for sale were 90 days or more delinquent and were considered in non-accrual status.

(2) These are included in Other assets on the Condensed Consolidated Balance Sheets.

The following tables present the quantitative information about recurring Level 3 fair value financial instruments and the fair value measurements as of:


	June 30, 2024			December 31, 2023
Unobservable Input	Range	Weighted Average		Range	Weighted Average
Mortgage loans held for sale
Model pricing	69% - 102%	89	%	68% - 100%	87	%
IRLCs
Pull-through probability	0% - 100%	75	%	0% - 100%	72	%
MSRs
Discount rate	9.5% - 12.5%	9.9	%	9.5% - 12.5%	9.9	%
Conditional prepayment rate	6.7% - 28.8%	7.4	%	6.6% - 37.0%	7.5	%
Non-mortgage loans held for sale
Discount rate	8.5% - 9.3%	8.6	%	8.5% - 9.3%	8.6	%

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The table below presents a reconciliation of Level 3 assets measured at fair value on a recurring basis for the three and six months ended June 30, 2024 and 2023. Mortgage servicing rights are also classified as a Level 3 asset measured at fair value on a recurring basis and its reconciliation is found in Note 3, Mortgage Servicing Rights.


	Mortgage Loans Held for Sale		IRLCs		Non-Mortgage Loans Held for Sale
Balance at March 31, 2024	$	385,786	$	202,873	$	197,661
Transfers in (1)	108,566		—		104,143
Transfers out/principal reductions (1)	(139,822)		—		(32,711)
Net transfers and revaluation losses	—		(32,492)		—
Total (losses) gains included in Net income (loss) for assets held at the end of the reporting date	(2,677)		—		367
Balance at June 30, 2024	$	351,853	$	170,381	$	269,460

Balance at March 31, 2023	$	763,761	$	182,112	$	32,490
Transfers in (1)	197,709		—		46,405
Transfers out/principal reductions (1)	(363,072)		—		—
Net transfers and revaluation losses	—		(54,422)		—
Total gains (losses) included in Net income (loss) for assets held at the end of the reporting date	33,980		—		(405)
Balance at June 30, 2023	$	632,378	$	127,690	$	78,490

Balance at December 31, 2023	$	438,518	$	132,870	$	163,018
Transfers in (1)	217,736		—		164,439
Transfers out/principal reductions (1)	(295,537)		—		(56,408)
Net transfers and revaluation gains	—		37,511		—
Total losses included in Net income (loss) for assets held at the end of the reporting date	(8,864)		—		(1,589)
Balance at June 30, 2024	$	351,853	$	170,381	$	269,460

Balance at December 31, 2022	$	1,082,730	$	90,635	$	—
Transfers in (1)	408,767		—		79,243
Transfers out/principal reductions (1)	(963,525)		—		—
Net transfers and revaluation gains	—		37,055		—
Total gains (losses) included in Net income (loss) for assets held at the end of the reporting date	104,406		—		(753)
Balance at June 30, 2023	$	632,378	$	127,690	$	78,490

(1) Transfers in represent loans repurchased from investors or loans originated for which an active market currently does not exist. Transfers out primarily represent loans sold to third parties and loans paid in full.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Fair Value Option

The following is the estimated fair value and UPB of mortgage and non-mortgage loans held for sale that have contractual principal amounts and for which the Company has elected the fair value option. The fair value option was elected for mortgage and non-mortgage loans held for sale as the Company believes fair value best reflects their expected future economic performance:


	Fair Value		Principal Amount Due Upon Maturity		Difference (1)
Balance at June 30, 2024
Mortgage loans held for sale	$	9,486,923	$	9,319,342	$	167,581
Non-mortgage loans held for sale	$	269,460	$	276,604	$	(7,144)

Balance at December 31, 2023
Mortgage loans held for sale	$	6,542,232	$	6,418,082	$	124,150
Non-mortgage loans held for sale	$	163,018	$	168,573	$	(5,555)

(1) Represents the amount of gains (losses) included in Gain on sale of loans, net for Mortgage loans held for sale and Other income for Non-mortgage loans held for sale on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), due to changes in fair value of items accounted for using the fair value option.

Disclosures of the fair value of certain financial instruments are required when it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.

The following table presents the carrying amounts and estimated fair value of financial liabilities that are not recorded at fair value on a recurring or nonrecurring basis. This table excludes cash and cash equivalents, restricted cash, warehouse borrowings, and line of credit borrowing facilities as these financial instruments are highly liquid or short-term in nature and as a result, their carrying amounts approximate fair value:


	June 30, 2024				December 31, 2023
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior Notes, due 10/15/2026	$	1,144,858	$	1,074,813	$	1,143,716	$	1,064,520
Senior Notes, due 1/15/2028	61,530		60,403		61,463		60,469
Senior Notes, due 3/1/2029	745,321		680,362		744,819		679,455
Senior Notes, due 3/1/2031	1,240,987		1,088,938		1,240,311		1,105,088
Senior Notes, due 10/15/2033	843,491		714,247		843,139		725,458
Total Senior Notes, net	$	4,036,187	$	3,618,763	$	4,033,448	$	3,634,990

The fair value of Senior Notes was calculated using the observable bond price at June 30, 2024 and December 31, 2023, respectively. The Senior Notes are classified as Level 2 in the fair value hierarchy.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

3. Mortgage Servicing Rights

Mortgage servicing rights are recognized as assets on the Condensed Consolidated Balance Sheets when loans are sold, and the associated servicing rights are retained. The Company maintains one class of MSRs asset and has elected the fair value option. These MSRs are recorded at fair value, which is determined using an internal valuation model that calculates the present value of estimated future net servicing fee income. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, and contractual servicing fee income, among others.

The following table summarizes changes to the MSR assets:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Fair value, beginning of period	$	6,691,341	$	6,669,939	$	6,439,787	$	6,946,940
MSRs originated	345,545		314,840		568,342		519,400
MSRs sales	(74,395)		(594,463)		(125,739)		(676,001)
MSRs purchases	314,543		—		331,238		—
Changes in fair value (1):
Due to changes in valuation model inputs or assumptions	74,988		245,495		302,357		27,693
Due to collection/realization of cash flows	(189,332)		(192,179)		(353,295)		(374,400)
Total changes in fair value	(114,344)		53,316		(50,938)		(346,707)
Fair value, end of period	$	7,162,690	$	6,443,632	$	7,162,690	$	6,443,632

(1) Reflects changes in market interest rates and assumptions, including discount rates and prepayment speeds, and the effects of contractual prepayment protection associated with sales or purchases of MSRs. It does not include the change in fair value of derivatives that economically hedge MSRs identified for sale or the effects of contractual prepayment protection resulting from sales or purchases of MSRs.

The Company retains the right to service a majority of these loans upon sale through ownership of servicing rights. The total UPB of mortgage loans serviced, excluding subserviced loans, at June 30, 2024 and December 31, 2023 was $492,361,763 and $468,237,971, respectively. The portfolio primarily consists of high-quality performing agency and government (FHA and VA) loans. As of June 30, 2024 and December 31, 2023, delinquent loans (defined as 60-plus days past-due) were 1.26% and 1.23%, respectively, of our total portfolio. During the three and six months ended June 30, 2023, the Company sold excess servicing cash flows on certain agency loans for total proceeds of $246,778.

The following is a summary of the weighted average discount rate and prepayment speed assumptions used to determine the fair value of MSRs as well as the expected life of the loans in the servicing portfolio:


	June 30, 2024		December 31, 2023
Discount rate	9.9	%	9.9	%
Prepayment speeds	7.4	%	7.5	%
Life (in years)	7.86		7.83

The key assumptions used to estimate the fair value of MSRs are prepayment speeds and the discount rate. Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore, the estimated life of the MSRs and related cash flows decrease. Decreases in prepayment speeds generally have a positive effect on the value of MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease and therefore, the estimated life of the MSRs and related cash flows increase. Increases in the discount rate result in a lower MSRs value and decreases in the discount rate result in a higher MSRs value. MSRs uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties.

Rocket Companies, Inc. [RKT] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-07]
10-K	[2024-02-27]
10-Q	[2023-11-09]
10-Q	[2023-08-09]
10-Q	[2023-05-10]
10-K	[2023-03-01]
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-09]
10-Q	[2021-08-13]
10-Q	[2021-05-14]
10-K	[2021-03-24]
10-Q	[2020-11-12]
10-Q	[2020-09-02]
S-1	[2020-07-07]