RKT Stock Price Increases Over 5% Pre-Market: Why It Happened

By Amit Chowdhry ● February 26, 2021
  • The stock price of Rocket Companies, Inc. (NYSE:RKT) is trading at over 5% pre-market as of 6:33 AM ET.  This is why it happened.

The stock price of Rocket Companies, Inc. (NYSE:RKT) – a Detroit-based holding company consisting of tech-driven real estate, mortgage, and eCommerce businesses – including Rocket Mortgage, Amrock, Rocket Homes, and Rocket Auto – is trading at over 5% pre-market as of 6:33 AM ET.  Investors are responding to Rocket Companies announcing its revenue increased 144% year-over-year to $4.7 billion in the fourth quarter and a special dividend of $1.11 per Class A share of common stock.

Q4 Highlights

For the fourth quarter of 2020, Rocket Companies reported:

– Grew total revenue, net, for Rocket Companies to $4.7 billion from $1.9 billion in Q4 2019 and Adjusted Revenue to $4.8 billion from $1.8 billion in Q4 2019.

– Grew net income to $2.8 billion from $0.8 billion in Q4 2019 and Adjusted Net Income to $2.3 billion from $0.5 billion in Q4 2019.

– Generated record closed loan origination volume of $107.2 billion and net rate lock volume of $96.0 billion in the fourth quarter of 2020, which represented improvements of 111% and 119%, respectively, as compared to the fourth quarter of 2019.

– Increased gain on sale margin by 100 basis points year-over-year to 4.41%.

– Rocket Auto, the company’s automotive retail marketplace, facilitated the sale of 9,400 auto units, up more than 2,000 units as compared to the fourth quarter of 2019.

– Rocket Homes, the company’s digital platform creating a seamless, integrated home buying and selling experience, assisted clients with nearly $1.6 billion of real estate transactions during the fourth quarter of 2020.

– Increased other income to $549.9 million from $265.7 million in Q4 2019, including record growth from Amrock’s title insurance services, property valuation, and settlement services which increased to $448.2 million in Q4 2020 from $197.9 million in Q4 2019.

Full-Year Highlights

During 2020, Rocket Companies:

– Grew total revenue, net, to $15.7 billion from $5.1 billion in 2019 and Adjusted Revenue to $16.9 billion from $5.9 billion in 2019.

– Increased net income to $9.4 billion from $0.9 billion in 2019 and Adjusted Net Income to $8.2 billion from $1.3 billion in 2019.

– Generated record closed loan origination volume of $320.2 billion and net rate lock volume of $338.7 billion, which represented year-over-year improvements of 121% and 123%, respectively.

– Increased gain on sale margin by 127 basis points year-over-year to 4.46%.

– Rocket Auto, the company’s automotive retail marketplace, facilitated more than $750 million in Gross Merchandise Value (GMV) of automotive e-commerce transactions during 2020. Rocket Auto facilitated the sale of over 32,000 auto units in 2020, representing year-over-year unit growth of 61%.

– Increased other income to $1.8 billion from $0.7 billion in 2019, including record growth from Amrock which increased to $1.3 billion in 2020 from $0.6 billion in 2019.

Other Highlights

– The Rocket Companies’ platform generated 153 million unique visitors in 2020, a 61% increase from 2019. The company’s vast data lake includes proprietary first-party data on more than 58 million consumers and extends to 220 million consumers in total or 85% of the population of adults in the United States. Rocket Companies’ partner relationships include over 25,000 real estate agents, 50,000 mortgage professionals, and 9,000 partners and the internal Rocket Cloud Force includes more than 6,600 professionals.

– Using data science capabilities and leveraging its data lake, the company recently crossed an important milestone, generating more than $75 billion in application volume over the past two years.

– Formed a partnership with Morgan Stanley Private Bank by which Rocket Mortgage will originate and service conforming mortgages for Morgan Stanley and E*Trade clients.

– The company’s 2021 Super Bowl ads, featuring Tracy Morgan, Liza Koshy, Joey Bosa, and Dave Bautista, were ranked #1 and #2 by USA Today’s Ad Meter.

– The company launched a national mortgage broker directory on RocketMortgage.com, further enabling clients to easily start the mortgage process through the Rocket platform in the way that works best for them, whether that is through a self-serving digital experience, interacting with one of the company’s mortgage bankers on the phone or via chat, or connecting with a local mortgage broker. And the directory includes nearly every broker in the United States.

– The net client retention rate was 91% over the 12 months ended December 31, 2020. There is a strong correlation between this metric and client lifetime value and the company believes its net client retention rate is superior to many subscription-based businesses.

Product & Platform Development

– The company’s technology platform continues enabled them to scale profitably and support life’s most complex transactions as reflected in the record levels of clients served and financial results achieved during 2020.

– Rocket Companies deployed nearly 4,500 new product features during 2020, implementing improvements to the company’s digital products and platform infrastructure every 28 minutes on average throughout the year.

– Over 25,000 real estate agents have signed up for Rocket Pro Insight (RPI) following its launch in October 2020. RPI is the company’s newly launched digital platform providing real estate agents with real-time updates on the status of their clients’ mortgages and the ability to assist in the mortgage process.

– During the fourth quarter, the company generated a record level of purchase closed loan volume through its self-serve digital experience; throughout 2020 the digital experience has been its fastest-growing channel.

– The company recently launched an initial pilot of Rocket Logic, a next-generation workflow management platform. And the new platform guides users through the next best action, resulting in faster, more accurate workflows. To date, transactions flowing through Rocket Logic are processed 20% faster than transactions outside of this workflow management platform.

– Rocket Companies continues to drive automation in the company’s operational workflows, expanding the company’s ethical AI and robotic process automation solutions to automate decisions and manual processes. The company tripled the volume of documents that can be processed automatically through machine learning and advanced optical character recognition (OCR) approaches, driving operational scale and efficiency while reducing time to close for clients.

– Nexsys Technologies, a subsidiary company that provides a suite of digital closing solutions, released Clear HOI, a groundbreaking homeowners insurance verification tool, to all mortgage lenders. Clear HOI digitizes and automates the communication between mortgage lenders and homeowners insurance companies enabling this step to be completed in a matter of minutes. Historically this process has required manual confirmation and could take days to complete.

Supporting Communities

In November, the company launched a second national marketing campaign to raise awareness around Built for Zero – a national movement to end veteran and chronic homelessness. Through support of Built for Zero, Rocket Mortgage has partnered with more than 80 communities to connect people with permanent supportive housing. And 12 communities already ended veteran homelessness, five communities have ended chronic homelessness, and three have ended both. In Rocket’s home city of Detroit, the company’s efforts have contributed to a 40% decrease in veteran homelessness in the three years since the launch of Built for Zero in our community.

Earlier this month, Rocket announced an expansion of our partnership with HomeFree-USA, which will continue financial education and career preparation through its flagship education initiative, The Center for Financial Advancement at six historically Black colleges and universities (HBCUs). And through this partnership, Rocket Companies is developing a pipeline to bring diverse new talent to Rocket Companies by investing in career preparation that will allow HBCU students to access fields where they are traditionally underrepresented.

Plus Rocket Companies has been selected by the City of Detroit to manage all logistics for the city’s COVID vaccination program for residents.

Special Dividend

Rocket Companies’ Board of Directors declared a special dividend of $1.11 per share payable on March 23, 2021 to holders of our Class A common stock of record at the close of business on March 9, 2021. And during the year, the company achieved significant growth and generated capital at a rate where we were able to fully re-invest in our business and have excess funds available to distribute to our shareholders. The company is going to fund the special dividend from cash distributions of approximately $2.2 billion.

First Quarter 2021 Outlook

Rocket Companies expects the following ranges in Q1 2021:

– Closed loan volume of between $98 billion and $103 billion, or an increase of 90% to 99% compared to $51.7 billion in the first quarter of 2020.

– Net rate lock volume of between $88 billion and $95 billion, which would represent an increase of 57% to 70% compared to $56.0 billion in the first quarter of 2020.

– Gain on sale margins of 3.60% to 3.90%, which would be an improvement of 35 to 65 basis points compared to 3.25% in the first quarter of 2020.

Balance Sheet and Liquidity

The company remains in a strong liquidity position with total liquidity of $7.7 billion, which includes $2.0 billion of cash on-hand, $2.8 billion of undrawn lines of credit, $0.3 billion of undrawn MSR lines, and $2.6 billion of corporate cash used to self-fund loan originations, a portion of which could be transferred to funding facilities (warehouse lines) at our option. And during the quarter, the company repaid the $1.25 billion of 5.750% senior notes due 2025 with funds received from the $750 million of 3.625% senior notes due 2029, and the $1.25 billion of 3.875% senior notes due 2031, issued on September 14, 2020. And the remaining net proceeds from the senior notes are expected to be used for general corporate purposes.

KEY QUOTES:

“Rocket Companies’ record-breaking fourth quarter and full year 2020 results demonstrate the sheer power of the technology platform we have built and refined for more than two decades. In the midst of a pandemic, we successfully drove growth in every segment of our business, while never losing focus on meeting the needs of our team members, clients and communities. As a result of our highly profitable and capital light business model, I’m excited to announce that the Board of Directors has approved a significant special dividend of $1.11 per share. We are delighted to be able to share our success with those who have supported our vision and share our excitement for the future.”

“As more and more consumers shift their preferences toward an increasingly digital experience, we are better positioned than ever to provide them with innovative, technology-driven solutions that simplify even the most stressful and complex transactions. Looking ahead, we will continue to invest in our world-class technology driven solutions that allow us to diversify our scalable platform business model.”

— Jay Farner, Rocket Companies’ Vice Chairman and CEO

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.