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DATE

  • Thursday, July 31, 2025, at 8:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Varun Krishna
  • Chief Financial Officer — Brian Brown

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TAKEAWAYS

Adjusted Revenue: Adjusted revenue reached $1.34 billion in Q2 2025, reflecting 9% year-over-year growth and surpassing the prior guidance range.

Adjusted EBITDA: $172 million, representing a 13% adjusted EBITDA margin.

Adjusted Net Income: Adjusted net income was $75 million.

Adjusted Diluted EPS: Adjusted diluted EPS was $0.04 per share.

Net Rate Lock Volume: Net rate lock volume exceeded $28 billion, up 13% year over year.

Origination Clients: Over 100,000 origination clients were served, a 19% year-over-year increase, driven by home equity loan growth.

Home Equity Loan Volume: Home equity loan volume nearly doubled year over year, achieving a new record for units and volume.

Gain on Sale Margin: Gain on sale margin was 280 basis points, consistent with the trailing 12-month average.

AI-Driven Productivity: Automated refinancing client follow-ups rose by nearly 20%, with AgenTeq AI processing over 80% of earnest money deposit validations, and saving an estimated 20,000 hours annually.

Digital Engagement: Over 80% of clients now continue applications via AI-powered chat, with these users converting at three times higher rates for purchase, and 2.5 times higher for refinance compared to others. More than 10% of leads enter outside standard business hours.

Fully Digital Refinance: Clients can now complete a refinance end-to-end in under 30 minutes online at any time, with further acceleration planned.

Redfin Integration Progress: The “Redfin powered by Rocket” co-brand launched on digital platforms on day one post-closing, with home listings now featuring prequalification buttons, and preferred pricing offers to borrowers.

Redfin Early Results: Since July 1, more than 65 Redfin clients have closed homes with Rocket Mortgage. Nearly 200,000 users have clicked to get prequalified, converting to contactable Rocket leads at a 23% rate, and starting applications at a 12% rate in the first three weeks following the Redfin acquisition close.

Expense Actions: Shutdown of Rocket Mortgage Canada, and wind-down of the credit card business have been initiated, along with G&A restructuring. These actions are expected to yield approximately $80 million in annualized savings, the majority of which will be recognized on a full-quarter run rate basis starting in Q4.

Capital Markets Update: $4 billion in unsecured bonds were issued in June to refinance Mr. Cooper's debt. The transaction was nearly three times oversubscribed, and approximately $250 million of Redfin term debt was repaid after June 30.

Liquidity and Balance Sheet: As of June 30, available cash was $6 billion, and mortgage servicing rights were $7.6 billion, totaling $13.6 billion; total liquidity stood at $9.1 billion, including $5.1 billion in cash, $900 million to self-fund originations, $1.1 billion in undrawn credit, and $2 billion in undrawn MSR facilities.

Q3 Guidance: Adjusted revenue is expected to be between $1.6 billion and $1.75 billion, including Redfin, and $1.325 billion to $1.475 billion on a Rocket stand-alone basis for Q3 2025. Consolidated expenses are anticipated to rise by $335 million versus Q2 2025, including $275 million in Redfin-related, and $90 million in nonrecurring items, while Rocket stand-alone expense is expected to decrease.

Operational Streamlining: G&A reduction, business exits, and automation expected to yield efficiencies on a full quarter run rate basis starting in Q4, separate from merger synergies.

Servicing and MSR Strategy: No change in Rocket's MSR acquisition approach; market described as “muted” for supply, but Rocket remains opportunistic for high-recapture assets, and sees “option value” from combined platforms post-Mr. Cooper acquisition.

SUMMARY

Rocket Companies(RKT 6.81%) reported a quarter marked by adjusted revenue growth above guidance and notable advancements in digital mortgage origination, driven by robust home equity loan volume and AI adoption in Q2 2025. The Redfin acquisition integration delivered rapid execution, with co-branding, prequalification features, and preferred pricing going live immediately following the July 1 close of the transaction. This led to elevated lead conversion rates and new top-of-funnel activation for home financing. Management confirmed disciplined capital deployment through a successful $4 billion bond issuance for Mr. Cooper (COOP 5.70%) financing in June 2025, and outlined $80 million in annualized operating expense reductions from portfolio rationalization and G&A restructuring, with Q4 2025 as the realization runway. Guidance for Q3 2025 anticipates sequential revenue and expense expansion tied to Redfin inclusion, with nonrecurring transaction items and a brand-mix shift impacting the forecasted expense structure.

  • AI investments have directly enabled a scalable loan origination model, with the CEO stating, "I believe we are building a foundation for infinite capacity at Rocket."
  • CFO Brown noted, "Our gain on sale margin in Q2 2025 was healthy at 280 basis points, in line with our average over the past twelve months," highlighting baseline profitability amidst market volatility.
  • Consumer credit engagement outside standard hours has increased, with more than 10% of mortgage leads now entering the funnel at non-traditional times in Q2 2025.
  • Early Redfin integration data from July 2025 reveal a 30% higher likelihood for Rocket-referred clients to secure verified approval letters compared to other channels.
  • The company implemented distinct cost control measures—including discontinuation of Rocket Mortgage Canada, and its credit card program—stating these steps "sharpen our focus and double down on our homeownership platform."
  • Liquidity was bolstered by $6 billion in cash as of June 30, supporting both transaction execution and future self-funding commitments for mortgage origination.
  • Management reaffirmed that Redfin synergy targets remain at $200 million ($140 million expense, $60 million revenue) following the close of the acquisition, with "direct line of sight" on cost targets already achieved within weeks post-close.
  • Mr. Cooper transaction remains targeted for Q4 close, with integration described as the company’s number one priority.

INDUSTRY GLOSSARY

  • Net Rate Lock Volume: The total monetary value of mortgage loans for which interest rates have been locked and are expected to close, used as a leading indicator of origination volume.
  • Gain on Sale Margin: The percentage of profit earned when originating and selling mortgage loans, calculated as gain on sale divided by total loan production.
  • MSR (Mortgage Servicing Rights): Financial assets representing the contractual right to service a pool of mortgage loans, including collecting payments, managing escrow, and handling delinquencies, often sold or hedged as part of capital management.
  • Recapture Rate: The proportion of prior customers whose subsequent mortgage needs are originated again by the servicing lender, indicating customer loyalty and origination efficiency.
  • Prequalification Button: Digital interface element on a property listing that lets consumers quickly begin the mortgage prequalification process, boosting lead capture and origination funnel conversion.
  • Verified Approval Letter (VAL): A formal pre-approval document confirming a buyer's eligibility for a mortgage after in-depth underwriting, considered a strong indicator of transaction readiness.
  • Home Equity Loan: A secured loan using home equity as collateral, providing liquidity to homeowners without altering the existing primary mortgage.
  • AgenTeq AI: Company-specific AI platform automating manual underwriting, documentation, and client communication tasks across Rocket's mortgage origination operations.

Full Conference Call Transcript

Varun Krishna, and our CFO, Brian Brown. Earlier today, we issued our second-quarter 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. This conference call includes forward-looking statements about, among other matters, expected operating and financial results, strategic initiatives, the recent UpSea collapse, and acquisition of Redfin, and the anticipated acquisition of Mr. Cooper. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and the 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 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 Krishna: Good afternoon, everybody, and thank you for joining our second quarter 2025 earnings call. There is a lot happening at Rocket these days, and today, I'm going to share our progress in a few key areas. First, I will recap our outstanding second-quarter performance and the current market landscape. Next, I'll share a couple of execution wins from the quarter. And finally, I'll update you on the Redfin acquisition post-close and what lies ahead. Let's start with the numbers. This was a very strong quarter for us. We demonstrated rock-solid execution on the business as we closed the Redfin transaction and made progress on the integration of both Redfin and Mr. Cooper.

Adjusted revenue reached $1.34 billion, above the high end of our guidance. Net rate lock volume increased by 13% year over year. We served over 100,000 origination clients, representing a 19% year-over-year increase, with the growth of home equity loans being a key driver. Adjusted EBITDA was $172 million, representing a solid 13% margin and adjusted diluted EPS of 4¢. Given the Redfin transaction closed on July 1, Redfin's financials are not included in these second-quarter results. I'm especially proud that we delivered these results in a tough housing market. Last quarter, we mentioned a delayed spring home-buying season, and that's exactly what played out.

April was particularly challenging for the industry and set the tone for a slow-forming season. June existing home sales came in 2.7% lower than May, at an annualized pace of 3.9 million, more than 20% below pre-pandemic levels. This is a new normal. While affordability remains a key challenge, we see signs of optimism. Consumer sentiment has recovered from the low point in April, home price growth is beginning to slow, and we're seeing prices soften in some areas, all signals that the market is slowly shifting in favor of buyers. With this backdrop, our second-quarter performance was driven by the strength of our team's execution.

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. We saw particularly strong growth in refinance volume quarter over quarter and year over year. During this time, we helped clients take full advantage when the thirty-year mortgage rate dipped briefly to 6.6%. Most notably, home equity loan volume nearly doubled year over year, once again hitting a new record for units and volume. Home equity loans, which help homeowners tap record levels of home equity without impacting their first lien, continue to attract new customers to Rocket, making up nearly half of all home equity loan clients.

In summary, one word to describe the quarter's results: execution. We focus on acquiring clients efficiently, delighting them, recapturing them for their next loan, and earning the right to be their lender for life in line with our core strategy. Next, let's turn to our execution wins. Since I became CEO, I have consistently communicated how AI is transforming our business. This quarter, I'd like to share a few more examples of how our momentum in this space is accelerating. Let's start with our bankers. The greatest value our bankers bring is their empathy, helping clients achieve homeownership and building strong relationships with real estate agents.

To enable our bankers to provide 10-star service to even more clients and agents, we've built an AI-powered communication platform that handles dialing, texting, follow-ups, and chat, which are fully automating administrative tasks. Recent enhancements we've made now dynamically prioritize the client follow-up pipeline for our refinance bankers and offer AI-recommended next steps and text messages to streamline communication. As a result, daily refinance client follow-ups have increased by nearly 20%. On the operations side, AgenTik AI is transforming underwriting beyond traditional automation. AgenTik AI breaks down complex manual processes into actionable steps that AI agents can handle autonomously. We are now launching new solutions in days instead of months.

The Rocket AgenTeq AI is powered by a technology called model context protocol or MCP. MCP turns our tech stack into a dynamic interconnected system. Unlike siloed AI tools, MCP enables intelligent agents to access company-wide data instantly through deep integration with legacy systems in our years of technology investment. An example of AgenTik AI at work is the reviewing of earnest money deposits or EMD. Managing EMDs used to require tedious manual work for tracking, validation, and reconciliation. Today, AgenTeq AI verifies EMD documentation and traces funds automatically, bringing only exceptions to underwriters. This technology now processes EMD for over 80% of purchase agreements and is estimated to save our operations team nearly 20,000 hours annually.

The key result is that clients move through the process faster with fewer delays. Let's turn to our clients. AI-powered chat and fully digital refinance what it means to have a seamless and fully digital experience. Our AgenTic chat capabilities continue to be up-leveled. The power of chat lies in its ability to meet clients where they are, providing an experience they love, enabling us to scale efficiently, and operating around the clock. This approach is reshaping client engagement. More than 80% of clients now choose to continue their application through chat, with over 10% of leads arriving outside traditional business hours.

What's more, clients who begin their journey in AI chat convert at three times higher rates for purchase applications and 2.5 times higher for refinance applications compared to those who don't use chat. We've expanded AgenTic Chat's capabilities to collect essential income, property, asset, and credit information upfront. This accelerates client qualification and enables seamless handoffs to our bankers, with AI supplying complete context and handling the administrative work behind the scenes. We've taken a big step forward by launching a fully digital refinance experience. Clients are now able to complete a digital refinance from application to rate lock in under thirty minutes entirely online at any time of day, even outside of traditional business hours.

From pulling credit and selecting a product and rate, to completing the application, receiving automated approval updates, uploading documents, e-signing, and even scheduling the closing, now all happen seamlessly online. And if clients need support, a banker is just one click away. Looking ahead, we're focused on making the process even faster and more frictionless, aiming for completion in under ten minutes, and making refinancing as simple as pressing a refi button on any mortgage we service. All of these examples show how AI has led to higher team member productivity and expanded capacity while elevating client experiences. We put our AI-powered capacity to the test when we run seasonal promotions that spike daily volume two to three times.

We manage the surge without adding a single team member, demonstrating our ability to flex and scale operations in response to market activities such as rate drops while maintaining efficiency and client satisfaction. I believe we are building a foundation for infinite capacity at Rocket, where our growth is supercharged by AI and human capacity is no longer a limiting factor. Okay. Now let's turn to Redfin. Rocket and Redfin together represent a redefinition of the category. Redfin gives Rocket a new foothold in purchase and takes our presence in local markets to another level.

Relationships with 50 million consumers every month reflect a deep connection with demand right at the top of the funnel and create new purchase opportunities from both directions, from Redfin to Rocket and Rocket to Redfin. Despite the early days, integration has moved at a rapid pace. Within our first month, we executed a comprehensive brand update designed to bring a unified look to our digital presence. Today, Redfin's digital pages carry the unified Redfin powered by Rocket co-brand. We also made home buying easier by introducing prequalification buttons on every home listing, allowing clients to take action seamlessly.

In addition, we introduced Rocket preferred pricing, giving qualified clients who finance with Rocket Mortgage and work with a Redfin agent a one-point rate reduction in their first year or up to $6,000 in closing credits. This delivers meaningful dollars to buyers and helps make homeownership more attainable. On the product side, we expanded our lending portfolio to address more specialized needs. Super jumbo loans and nonqualified mortgage products are now available, supporting clients with unique financial profiles. These solutions extend not just to Redfin clients, but to our retail bankers and our mortgage broker partners as well, empowering more professionals to serve a much wider array of buyers.

Additionally, we added nearly 150 Bay Equity loan officers to our retail banking force this quarter, further expanding our presence in local markets. Our momentum is strong, and our team remains focused on execution. We're already seeing some exciting early results. Our very first Redfin client closed on a home in Colorado in just ten days. And since July 1, we've seen over 65 Redfin clients close on their dream home with Rocket Mortgage. Plus, in the first three weeks, there's been a nice jump at the top of the funnel. Nearly 200,000 people have clicked on the get prequalified button within Redfin, indicating interest in home financing.

Of those users with a Redfin account, 23% became a contactable lead at Rocket, and 12% of all users who enter the funnel go on to start an application, taking a significant step toward homeownership. Now I have spent most of my career working on consumer fintech conversion funnels, and seeing such a positive response for a v1 that's not optimized is very promising. In addition, 7,000 agent referrals have been sent to Rocket Mortgage. What's even better is that clients referred from Rocket to Redfin are 30% more likely than those from other channels to upgrade to verified approval letters, which is the strongest sign that they're moving toward closing.

These results, while early, highlight the art of the possible when the Redfin and Rocket platforms are fully connected. Together, meeting our clients at their moment of intent and providing a seamless experience from home search to financing, fundamentally changing the way homes are bought, sold, and financed. In summary, we had a very productive quarter balancing short and long-term execution, and I also want to thank our teams for their speed, discipline, and heart. A huge shout-out also to our servicing team for winning our eleventh JD Power award for servicing earlier this month. This recognition is a testament to our enduring commitment to loving, protecting, and amazing our clients.

It is this dedication that underpins our industry-leading recapture rate and will be force-multiplied with Mr. Cooper. Looking ahead, our teams are fully engaged in the integration work needed to realize the full potential of our integrated homeownership platform. We are delivering on our milestones and remain on track to close the Mr. Cooper transaction in Q4. At Rocket, we live by an ism: You'll see it when you believe it. As we bring Rocket, Redfin, and soon Mr. Cooper together under one roof, we are building a homeownership experience that is simpler, faster, and more affordable. And we're building a stronger company with an all-weather business model that thrives in any market and interest rate environment.

We are positioning Rocket to be in a category of its own. A business with a significantly larger lead funnel, a massive data lake, and AI-powered capacity with a client acquisition cost to lifetime value model unseen in this industry. All designed to eliminate waste from the system, lower cost for consumers, and create a more frictionless experience. The pieces are coming together, and we are working to make this vision a reality. We believe. Thank you. And with that, I'll turn it over to Brian.

Brian Brown: Thank you, Varun, and good afternoon, everyone. It's been a really busy and productive quarter, to say the least. We drove strong execution while taking steps to integrate transformative acquisitions and balance short and long-term objectives. We pride ourselves on allocating our resources with financial discipline and concurrently making bold investments in our future. We clearly demonstrated this in the second quarter. Today, I will highlight our second-quarter performance, provide an update on the integration planning with Redfin and Mr. Cooper, and discuss the cost actions we took to drive higher operational leverage. I'll conclude with our outlook for the third quarter. Let's start with our financial performance.

First, I want to echo Varun's remarks about how proud we are of the team's performance in the second quarter. We demonstrated strong execution in a volatile quarter that got off to a really slow start. All the while, we closed the Redfin transaction on July 1 and are working very hard towards the close of the Mr. Cooper transaction in Q4 of this year. This quarter's execution was truly a team effort. From a top-line standpoint, adjusted revenue reached $1.34 billion, beating the high end of our guidance range and achieving 9% year-over-year growth. Net rate lock volume exceeded $28 billion, an increase of 13% over the same period.

Our gain on sale margin for Q2 was healthy at 280 basis points, in line with our average over the past twelve months. On an adjusted EBITDA basis, we delivered $172 million or a 13% adjusted EBITDA margin. We reported adjusted net income of $75 million and adjusted diluted EPS came in at 4¢. We delivered these results despite ongoing market headwinds. As we noted last quarter, extreme volatility in April delayed the start of the spring home-buying season. While purchase season was indeed slow-forming, and the market conditions remain challenging, we were right alongside our clients, supporting them with our affordability solutions like OnePlus and Rocket Rent Rewards.

As a result, our purchase volume grew sequentially from April to June. Refinance volume was also a bright spot, with home equity loans doubling year over year. The market is gradually rebalancing in favor of homebuyers. In 11 of the 50 largest US metro areas, including several in Texas, Florida, and California, home prices are softening, and the income needed to purchase a home is declining. Home price growth is moderating. Inventory is expanding by double digits year over year, and affordability is improving, albeit with elevated thirty-year fixed mortgage rates. After years of constrained supply and rising prices, buyers are finally starting to gain more leverage in the market. Now let's turn to Redfin.

The acquisition is already enhancing our platform and expanding our reach and strengthening our position in the purchase market. Redfin brings direct access to 50 million monthly consumers and deep relationships with real estate agents across the country. Together, we're significantly growing our top of funnel and fueling purchase lead generation from both brands. Our combined 14 petabyte data lake also enhances our AI capabilities, enabling more personalized experiences at scale. As I shared when we announced the acquisition of Redfin in March, we expect $200 million in total synergies. That's $140 million on the expense side and $60 million in revenue. On revenue synergies, it's early, but we are encouraged by the results we're seeing so far.

Varun highlighted the surge in leads and higher conversion rates we're already seeing from Rocket and Redfin's cross-pollination of leads, agent referrals, and mortgage applications. This early momentum is exciting and points to tremendous growth ahead. On the expense side, we have line of sight into the target synergies and have already started to take actions in the first four weeks since closing. We'll plan to provide more details in future quarters. Regarding Mr. Cooper, the integration planning is in full force, and our teams are meeting and collaborating closely. We remain on track to close the Mr. Cooper transaction in Q4. Now let's cover our capital position.

It provides a competitive advantage, a robust funding profile, and the flexibility to invest in our business over the short and long term. In June, we successfully issued $4 billion in unsecured bonds to refinance Mr. Cooper's debt upon change of control. This transaction was nearly three times oversubscribed with strong participation from a diverse investor base, including significant demand from investment-grade funds, signaling confidence in our credit profile. If in the unlikely case, the Mr. Cooper transaction does not close, the debt is extinguished, and the cash is returned to investors.

Additionally, subsequent to June 30, we repaid approximately $250 million of the Redfin term loan debt in connection with the change of control provisions, an outcome that also enabled us to further streamline our capital structure. Taken together, these actions position us well for a successful close in integration with Mr. Cooper in Q4. As of June 30, inclusive of the $4 billion in unsecured bonds related to Mr. Cooper, we held $6 billion in available cash and $7.6 billion in mortgage servicing rights, totaling $13.6 billion in balance sheet value.

Total liquidity stood at $9.1 billion, including $5.1 billion of cash on the balance sheet, $900 million in corporate cash to self-fund originations, $1.1 billion in undrawn lines of credit, and $2 billion in undrawn MSR credit facilities. Before I discuss our third quarter outlook, I'd like to take a moment to focus on a very important topic: operational efficiency. We take a very disciplined approach to expense management and capital allocation, which are foundational to how we operate. These principles guide every decision we make as we scale and optimize across search, origination, and servicing with the customer always front and center. We recently took further actions to streamline our operations.

In the second quarter, we completed the shutdown of Rocket Mortgage Canada. Also in July, we initiated the wind-down of the Rocket Visa signature card program. While there will be a financial benefit from these decisions, our primary objective is to sharpen our focus and double down on our homeownership platform and our mission to help everyone home. Beyond discontinuing these two business lines, earlier this month, we restructured G&A teams that support the mortgage origination business. These changes were a result of our investments in AI and automation, which have allowed us to reduce redundant roles and retire legacy workflows.

We expect these actions to collectively deliver approximately $80 million in annualized savings, the majority of which will be recognized on a full quarter run rate basis starting in Q4. It's also worth emphasizing that these efficiencies are separate from the synergies previously announced as part of the Redfin and Mr. Cooper transactions. As we look ahead to the third quarter, we're cautiously optimistic about the summer home-buying season as the market continues to shift in favor of buyers.

While we know that the home-buying season typically slows around Labor Day, as kids return to school and families settle down, our current approval letter pipeline indicates that the summer home-buying season will be extended, with strong activity continuing through the third quarter. This trend is reflected in our sequential month-over-month growth in approval letters over the past couple of months, bucking the typical seasonal slowdown we see this time of year. This is the first quarter that we'll be incorporating Redfin into our guidance. For the third quarter, inclusive of Redfin, we expect adjusted revenue to be between $1.6 billion and $1.75 billion.

On a Rocket stand-alone basis, we expect adjusted revenue to be in the range of $1.325 billion to $1.475 billion. With regard to expenses, let me walk you through a couple of the key cost drivers expected in the third quarter. On a consolidated basis, including Redfin and nonrecurring items, we expect total expenses to increase by approximately $335 million compared to the second quarter. Importantly, this projected increase is based on revenue at the midpoint of our guidance. It reflects $275 million in Redfin-related costs and $90 million in nonrecurring items, partially offset by a reduction in Rocket's stand-alone expenses.

The decline in Rocket's stand-alone expense reflects the planned step down in brand marketing, as we transition out of the upfront investment phase of our brand restage. We are now operating in a more optimized run rate while continuing to build on the elevated brand awareness established early this year. The $90 million increase in nonrecurring items relates to the Redfin and Mr. Cooper transactions. Of that, $30 million reflects severance and transaction costs, which will be classified as one-time expenses. The remaining $60 million reflects interest expense incurred from refinancing Mr. Cooper's debt ahead of closing. Post-close, the newly issued bonds will substitute Mr. Cooper's existing debt and the associated interest expense.

Last, to reiterate, the internal cost actions, including the reduction in headcount at Rocket, paired with the wind-down of the Rocket Mortgage Canada and credit card businesses, are expected to yield $80 million in annualized savings. Due to the timing of these actions, there will only be minimal impact in the third quarter, and the full run rate savings are expected to be realized in the fourth quarter. In summary, our results in the second quarter show the impact of our execution and focus as we continue to deliver value for our clients, team members, and stakeholders. We're even more excited by what we can achieve going forward with the combined strength of Rocket, Redfin, and soon Mr. Cooper.

We are building an integrated homeownership platform the industry has never seen. One that delivers modern, seamless, and more affordable homeownership experiences and one with an all-weather business that is both resilient and thrives across market conditions. We will continue to prioritize operational efficiency, move with speed and agility, and execute with focus on our mission, to help everyone home.

Tiffany: Operator?

Brian Brown: Now ready to open it up for questions.

Tiffany: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press 1 again. We kindly ask that questions are limited to one for today's call. We will pause for just a moment to compile the Q&A roster. Your first question comes from Lucas Julian Haimes with Goldman Sachs. Please go ahead.

Lucas Julian Haimes: Good evening, Varun. Good evening, Brian. I wanted to ask about your outlook for 3Q and the rest of 2025. On costs, what do you view as the core run rate from here? In 3Q and beyond, and how are you thinking about the pacing of revenue growth and expenses from here?

Varun Krishna: Hey, Lucas. I'm going to start by just talking a little bit about the outlook. And then I think, Brian, you can jump in on anything related to cost in our guide. So let me start by just taking you back to our last quarter. You know, we were on the same call. We were talking about the home-buying season. And what we shared was at that point, it was going to be a slower forming season. That momentum would build up over time. So, ultimately, you know, that basically leads to a longer spring home-buying season. That's pretty much what we've seen play out this quarter. April was pretty abnormal. There's a lot of volatility.

You had tariffs. You had rates dipping and climbing. You had consumer sentiment dropping. And so in general, affordability was a little bit challenged. And so in terms of the start of the season, it was a little bit laggy. But as we look ahead, we're definitely seeing signals that suggest momentum. And I'll, you know, I'll give you two interesting stats that actually come from Redfin. The first one is around nationwide home price growth. And that's actually been cut in half year over year. So it gone from 6.9% to about 3.4%. The other thing is that in about 11 major markets, Redfin has actually seen home prices come down.

And so the good news is that the market is starting to shift in favor of buyers, and that's a great signal that the purchase season will extend. So it's a great opportunity for buyers who've been on the sidelines, and we expect that demand to extend. We expect it to carry through the traditional Labor Day drop-off. And, again, that gives us optimism. And you see that optimism in confidence reflected in our outlook and our guide, and our guide is up 6% year over year. And so maybe, Brian, you can unpack a little further in terms of guide and expense.

Brian Brown: Yeah. Sure. Thanks, Lucas. Appreciate the question. You know, first, just to start, I want to double down that Q2 was a really strong performance quarter. Very proud of the team. As Varun said, it got off to a very choppy start. But the good news is the start of the third quarter really picked up where we ended the second quarter. So that momentum is continuing. And when we look at the preapproval pipeline on the purchase side, as we said in our prepared remarks, it's our belief that the home-buying season is going to continue on. It was slow forming to Varun's point, and it likely will continue past the traditional September Labor Day holiday.

And so that's all baked into the guidance. And then, you know, just a reminder for the group that this guide does include Redfin for the first time, and we talked about the $270 million that's baked in there. So if I take a step back and I look at the guide for the quarter, I see $1.6 billion to $1.75 billion. $270 million of that's Redfin. So to Varun's point, if I take out Redfin, we're up 6% year over year and 4% quarter over quarter. You know, if I look at the MBA forecast quarter over quarter, they're looking at flat, for example. So we think that it's a really strong guide.

We think that it shows another quarter of growth. And just I'll leave you with just a little bit of commentary on volume and margins. We believe that margins will be relatively consistent with Q2. So that means that the revenue growth on the Rocket stand-alone basis is really coming from production and coming from share gains. On the expense side of the house, look. You know, operational excellence, financial rigor, that's what we do. That's in our DNA. And I think this quarter was a really nice example of that execution. You know, looking forward, remember that this is to this quarter, it also includes Redfin on the expense side of the house.

So and we said in the prepared remarks, on the consolidated basis, we expect Q3 expenses to be up about $335 million. That includes that $275 million of estimated Redfin expenses. I think there's a couple other things I want to point out. One, it also includes an estimate of $30 million less in the Rocket Mortgage marketing, and that's due to the brand spend, the brand restage that we talked a lot about in the first half of the year starting to work and roll off, and the brand spend starting to more traditional levels. I talked a lot about that last quarter. And then we got to think through the one-time cost too.

So we're estimating about $120 million of nonrecurring expenses in Q3. That's $90 million more than last quarter. And as I said in the prepared remarks, that's about $30 million in severance and one-time costs associated with the Cooper and Redfin transactions, the UpSea collapse. And then there's about $60 million of estimated interest expense, and that's associated with that $4 billion bond issuance that we did, which will be used to pay down Cooper debt upon close. But finally, as I said in my prepared remarks, we also did take significant actions during the quarter to streamline our business and narrow our focus.

And that included a headcount reduction in July across some of our G&A teams and the Rocket Companies proper. And the wind down of two businesses, which was Rocket Mortgage Canada and the credit card business. And the combined impact of those two wind downs as well as the headcount reduction is about $80 million on an annualized basis. We won't fully realize that to the fourth quarter, but I did want to point it out here. And, you know, the last point, you may be thinking about the Rocket Mortgage Canada business and the credit card wind-down. There is a small financial benefit from winding down those businesses as they were operating at a slight loss.

But, really, the most important reason is the lack of product market fit and the fact that we're just obsessing about narrowing our focus and doubling down on the homeownership platform.

Lucas Julian Haimes: Great. Thank you for the color.

Tiffany: Your next question comes from Bose Thomas George with KBW. Please go ahead.

Bose Thomas George: Hey. Good afternoon. Actually, historically, you guys obviously didn't hedge your MSR given, you know, the very high recapture rates. But just given that the recapture rates on the Cooper MSR will be lower just, you know, given that a lot of that is acquired, etcetera. Just what are your thoughts about the hedge strategy on a combined basis going forward?

Varun Krishna: Yeah. Thanks for the question, Bose. So as it relates first, I'll start with your answer your question directly on the Cooper side, but I do want to talk a little bit about just the Rocket proper side and the hedge there too. So as it relates to the Cooper side, you know, the plan is to continue hedging the combined portfolios. Cooper does a really nice job of that. I think they target around 60-70% coverage. So if you're thinking about, hey, it's the day after close, I don't expect any change there. And the reason for that is because we have to prove to ourselves that these recapture synergies are coming in.

And as we start having more data and real information, we will continue to reevaluate that. Because to your point, there's a real natural hedge between the MSR value fluctuations and the recapture business. But on the Rocket side, you know, we have hedged. I want to point that out, and we've primarily hedged the MSR assets that we plan to sell. So it's been more of a temporary health hedge. But as we continue to evaluate our strategy, we did layer on a hedge during the quarter really around that flow assumption. And that's to preserve the float earnings component of the MSR value, particularly on those lower note rates that are unlikely to pay off anytime soon.

So you'll see that in the financials when we file the queue. We're being very thoughtful about it, but that float earnings assumption which is based on the short-term side of the curve, we did put a hedge on to try to preserve that.

Bose Thomas George: Okay. Great. Thanks for the detail.

Tiffany: Your next question comes from Mark Christian DeVries with Deutsche Bank. Please go ahead.

Mark Christian DeVries: Thanks. Appreciate all the comments you made on Redfin. Just wondering if there are any other thoughts you'd want to share about what you've learned post-closing of that deal and how you're feeling about the synergy guidance.

Varun Krishna: Yeah. Absolutely. And I'll start by just sharing what we're seeing and some context around why we're so excited about the deal, and then Brian, maybe you can comment further as well. Let me just start with why Redfin. And I think it's important just to really internalize that this is all about our strategy around purchase. And purchase is something that we have declared as a company-level imperative. We think purchase is a durable bet for the long-term growth of the company. And what's interesting about purchase is that there are a few things around the purchase funnel that really make it interesting and complex. You know, the lead flow is expensive.

It takes a long time to nurture relationships with a client. You need deep relationships with clients. You need relationships with realtors. You also have this kind of local dynamic where every market is a little bit different. And this is really why the connection with Redfin is so powerful because Redfin essentially solves all of those channels. This is a company with relationships with 50 million consumers at the top of the funnel. Most of those consumers are daily active users that use a mobile app. Redfin is incredibly connected, right, with the local ecosystem, thousands of local agents.

And what's also interesting is of all of the US homebuyers that are purchasing a home this coming year, nearly one in four at some point are going to touch the Redfin platform during their search and real estate journey. The other thing is that Redfin is just beloved. Right? It's a very trusted brand with high awareness, high affinity. And so are the reasons that we love this integration, and we love this company. In terms of the actual integration, I do want to share that I am so proud of just the amount of work that was completed before and after close. Leading us to just be integration-ready on day one. I'm super proud of the team.

On day one, we had co-branding. Redfin powered by Rocket. On day one, we had launched prequalification buttons on every home listing page. On day one, we launched a preferred pricing bundle, saving consumers money. On day one, we had the ability for realtors to refer to Rocket, as well as the ability to create demand from Rocket to Redfin as well. And we're seeing some awesome early data. We're seeing that the quality of traffic is very high. In fact, clients that we're actually referring from Rocket to Redfin are 30% more likely to upgrade to what we call a VAL or a verified approval letter.

And that really matters, and what's important is that verified approvals are the strongest indicators of conversion and purchase. So it is early days, but I would say that we're very pleased with the integration. The last thing I would say before I ask Brian if there's anything he would want to add is that it's all about culture. You know, Brian and I actually were out in Seattle last week with our leadership team. We were meeting with Glenn Kelman and his leadership team. And just the energy and momentum of these companies is so inspiring. You know, you can see the soul. You can see the culture of the company that's already becoming very deeply connected.

And what I look at as a very healthy sign is that you just can't see where one company ends and the other company begins. So this is just the beginning, but we're very excited about the progress. Brian, is there anything you would add in terms of synergies or financial standpoint?

Brian Brown: Sure, Mark. Well, it's good to hear from you. So just as a reminder for the group, we set up an announcement that we expect $200 million in synergies, $60 million of that was revenue, $140 million of it was expense. And to Varun's point, it's early days. We're only four weeks in, but I agree it's exceeding our expectation, particularly on the demand and the lead creation side. So I'll probably reserve the right to comment more on revenue over the next couple quarters since it's early days. And then on the expense side, look. We have direct line of sight into the $140 million. We've already started taking significant actions in July.

And those actions are completely separate and distinct from the other things I mentioned at Rocket. So, if I had to summarize it, we feel really good about achieving and, dare I say, even exceeding our expectations on both the revenue and expense side of the synergy house.

Mark Christian DeVries: Great. Thank you.

Tiffany: Your next question comes from Ryan McKeveny with Zelman. Please go ahead.

Ryan McKeveny: Hey, thanks, Varun and Brian. Congrats on the quarter. Thanks for all the detail as always. On the purchase side and also a bit of a tangential follow-up on the Redfin topic, you know, really encouraging commentary on the initial traction with the preapproval button. You called out the expansion of the local market presence. I guess one thing we've seen over time in the residential broker space is that the number of real estate agents really influences market share at a brokerage.

So with Redfin sitting at about 2,200 agents, I'm curious, as you and the team with Glenn strategize on the business, should we expect the agent count side of Redfin to potentially meaningfully expand or at least directionally continue expanding as it has been over the last year? And then secondarily and kind of bigger picture on purchase, we're about a year removed from Investor Day. So I'm just curious if you can kind of refresh on conviction levels in the multiyear purchase market share targets that you laid out at that time? Thank you very much.

Varun Krishna: Thank you so much for the question. You know, I would just start maybe with the second part of the question and just frame up our holistic purchase strategy. So purchase, obviously, is a major strategic area of focus for us as a company. It's a massive market. It's incredibly inefficient. You know, it's fragmented. It's expensive. And it's full of friction. And so for us, you know, it's imperative that we fix it. Right? We really want to represent that as a future platform for growth. And we think there's a huge opportunity for transformation here. And so just want to recap our building blocks that are ultimately focused on building a durable strategy around purchase.

The first piece of that is we've already talked about is Redfin. You know, Redfin essentially provides an incredibly efficient high-quality, top-of-funnel experience. Will connect us to more consumers, more realtors, and it really will allow us to build an efficient lead-nurturing pipeline for purchase. The second is servicing. In particular, what we call recapture. And as we know, Rocket already has leading recapture rates. That's because we deliver an amazing servicing experience. And so when you think about the addition of Mr.

Cooper, it essentially supercharges our recapture flywheel, which is essential to our purchase growth strategy because it will allow us to serve more purchase clients by essentially becoming their lender for life through servicing, then recapturing their next loan and creating a great Rocket experience. The third thing I would also call out is our wholesale strategy with respect to broker. I mean, wholesale is a critical part of our purchase engine. This is a space that we're definitely doubling down on. 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.

And we're also launching a lot of new innovation in the broker space. We have more compensation, we have better pricing technology, and we have improved processes for pulling and working with more credit options. So those are the key building blocks for us to grow and scale and purchase. In terms of the agent piece, you know, two things that I would highlight are one is Redfin has an in-house agent network that also has an extensive partner network of thousands of agents. The second thing that I would highlight is that we're bringing together the Rocket Homes agent network together with the Redfin agent network as well. And so that allows us to achieve more synthetic scale.

Then the third thing I would highlight is that the key thing that we also have with the Redfin experience is really the traffic. It's the relationships with 50 million consumers at the top of the funnel, the ability to connect directly with those consumers, in addition to having the agent network as well. And those are the reasons that we really believe that we have a scalable strategy around purchase. And, you know, we are on track to hit our goals, and we're feeling great about the progress.

Ryan McKeveny: That's very helpful. Thank you.

Tiffany: Your next question comes from Jeffrey David Adelson with Morgan Stanley. Please go ahead.

Jeffrey David Adelson: Hey. Good evening, Varun. Good evening, Brian. Thank you for taking my questions. I was hoping we could maybe just talk quickly about Mr. Cooper. I know the deal is still not closed yet, but now that another several months has gone by, I'm just curious whether you still think those synergies are on track. And maybe you could comment a little bit on if you've done any more work or incremental work into, you know, whether you think that 65% recapture rate assumption could be considered the correct number, etcetera. Thank you.

Varun Krishna: Yeah. Thanks for the question, Jeff. You know, I'll start just by talking about the context and progress that we're making on the deal. And then I'll ask Brian to jump in as well. But let me just start by talking about why Mr. Cooper and Rocket makes sense. You know, at the heart of it is just our ability to build lifetime value, long-term relationships with clients, and that's essentially what servicing represents. Right? It's the ability to serve a client for the entirety of their loan experience. And our thesis is that if we do a good job with that, we earn the right to recapture them for a new loan. It's core to our strategy.

And, ultimately, if we do that right, we end up reducing the cost of acquisition, which allows us to pass on more value, more savings directly to the client. Now I would say in terms of our progress toward closing, we're very pleased with the progress. We are on track for a Q4 close. We've received HSR approval. We're advancing with state-level regulators, with the GSEs, and, of course, with FHFA. It is a large complex transaction, but the process is moving as expected. And the teams from both organizations are collaborating very closely. It is our number one priority across the company. Brian, is there anything you would want to add?

Brian Brown: Yeah. Thanks, Jeff. The only thing I would add is, you know, every day that we've made progress since the last update, we just keep building on the conviction around the synergy numbers. You know, this is similar to the Redfin update other than the fact we're not closed here. I would say the line of sight on the expense side makes us feel really good, the work that we're doing in terms of tearing apart the recapture only gives us more conviction. So as we sit here today, the only way I can probably answer that question is conviction continues to increase, and we're very confident in the numbers.

Jeffrey David Adelson: Okay. Great. And if I could just circle back on the Redfin, I appreciate all the color and numbers you've provided thus far. I was just curious. Do you have any early line of sight into how the attach rates that you highlighted in 2024 for Redfin? You know, you mentioned the 27% on mortgage, 61% on title and escrow. Have any sort of update on how that's trended or, you know, how you performed on that since the deal closed?

Brian Brown: Yeah. Of course. I can give you an update on that. I mean, I'll kind of take a step back. And if I look at Redfin's business model again, to your point, it's early days, but we've seen a couple really positive things. One has been an increase in traffic. You know, obviously, this is an exciting time of year for homebuyers, and you're expecting to see activity, but some of the Redfin brand and performance marketing is clearly paying off, and we're starting to see some nice returns there. So traffic's actually up, which is good.

And then the second thing you mentioned, which is true, is that we are starting to see some exciting green shoots on the attach rate side. You know, we had to take the time to get the loan officers transitioned over, and that was really important. And we're happy to report we were successfully able to do that with the vast majority of the Bay Equity Loan officers coming over to Rocket. And since that, and to Varun's point, we had a really good preplanning exercise, so we were able to do a lot of it on day one.

We've seen the recapture rates actually improve from the historical Redfin recapture rates, which is obviously really good news for achieving those revenue synergies.

Jeffrey David Adelson: Okay. Great. Thank you, guys.

Tiffany: Your final question comes from Douglas Michael Harter with UBS. Please go ahead.

Douglas Michael Harter: Thanks. One of the pillars for market share growth that you laid out at Investor Day was MSR acquisitions, obviously, a big part of the Cooper transaction. But can you talk about your appetite to continue to acquire MSRs both while waiting for the deal to close and after it closes?

Brian Brown: Yeah. Thanks, Doug. Let me jump in there. So just a little market color. If I kind of look at the 30% last time I checked. So it's been more of a muted market. There's no question there on the supply side. On the demand side, of course, it's still high. It's quite high. So it's competitive, I guess, is a short way to say that. So if I think about, you know, our bidding strategy at Rocket, which we've talked about many times, the nice part for us is to the extent we see assets with high recapture potential, very interesting to us, and we'll continue to be active in that market.

And then as I think about the two companies, Rocket and Cooper, coming together, I'm also really excited, one, because it does put together a really competitive bid process, obviously, with our capital levels and our recapture abilities. It's also nice because we have option value. And that option value really comes from the combined entities having a really good fulfillment engine for the servicing book through the Rocket organic growth, having a wholesale channel, a retail channel, a correspondent channel, even a co-issue channel. So said differently, we don't have to be active in the bulk.

It allows us to be opportunistic and stick to, you know, really high expected return that if we can meet them, we'll be active, and we'll bid at those levels. And if we can't, we don't have to be. So far this year, a bit muted just in terms of the general activity and what's coming to market, but no changes in the Rocket bid strategy. Just maybe a little bit of change and less supply coming to the market.

Douglas Michael Harter: I appreciate that. And then you highlighted some of the benefits of AI replacing legacy workflow. You know, can you talk about, you know, how much more is potential is there, you know, how you're thinking about, you know, how those impacts might impact the capacity of origination volumes and just how we should think about the trajectory, the longer-term trajectory of, you know, scoring core Rocket expenses.

Varun Krishna: Yeah. Thanks, Doug. I mean, I would say that I expect the longer-term trajectory to geometrically accelerate. You know, we are building a platform where scale is basically no longer constrained by people or cost. You know, today, we easily handle $150 billion in originations without really any increase in fixed expenses. And, like, that's not theoretical. It's happening. The results are measurable. You can see it in our operations with the thousands of hours saved. You see it in our communication platform and telephony. You see it in the client experience with now more and more fully digital flows from start to finish. So I don't view this as just kind of automation.

I view it as a structural advantage. And it's a better experience. It's changing the shape of our business model. We're very excited about it. We think that this foundation is a foundation for infinite capacity. You know, it's not sort of a pipe dream. It's very real. And we're just getting started. So you know, I expect that our progress will accelerate geometrically.

Douglas Michael Harter: Great. Appreciate that, Varun.

Tiffany: That concludes our question and answer session. I will now turn the call back over to Varun Krishna for closing remarks.

Varun Krishna: Thank you, everyone, for attending the call, and we look forward to seeing you next.

Tiffany: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.