Rocket Companies, Inc. (RKT) Earnings Call Transcript & Summary

Hello, everybody, and welcome to Rocket Company's call about our results for Q1 2026. Joining us today are Varun Krishna, our Chief Executive Officer, along with Brian Brown, who serves as President and Chief Financial Officer. We released our Q1 earnings report earlier today, and you can find it on rocketcompanies.com in the Investor Info section. An investor presentation is posted there as well. Before handing the microphone to Varun, I want to briefly review our disclaimers. During this call, we'll share details about how we performed in Q1 and what we expect financially going forward; forward-looking statements are part of this discussion. Such statements carry risks and uncertainties that might make actual outcomes differ materially from what we anticipate and assume here; please review the risk factors in our SEC filings for a thorough look at those risks and uncertainties; unless the law demands otherwise, we're not obligated to revise these statements because of fresh information or later developments. You can listen to this call via webcast, and it's available on our Investor Relations site. A replay will go up later today. We'll also reference non-GAAP financial measures in our remarks. You can locate reconciliations comparing GAAP and non-GAAP figures for the results we reported in the earnings release we put out earlier today, and also in our SEC filings; with that said, I'll pass it to Varun Krishna to kick us off. Varun?

Good afternoon to all of you, and I appreciate you being on this call for our Q1 2026 earnings discussion. Quite a bit is going on here at Rocket. So I will keep my remarks straightforward. Three items are important for this quarter. Number one, we turned in robust results despite a choppy market. Number two, we leverage AI, data and distribution to build opportunity rather than sitting around hoping the market delivers it to us. And number three, Rocket today is not the company it was 3 years back. The composition of our business hasn't merely shifted — it has undergone a fundamental evolution; so let's begin with the quarter. Adjusted revenue reached $2.8 billion, which topped the upper bound of the guidance range we provided. That outcome isn't luck. It demonstrates how durable our model is, how well we execute, and the discipline and resilience our team brings. We follow through on our commitments. Our words match our actions, and we've proven that amid some of the most turbulent operating conditions this industry has ever faced. Such consistency isn't superficial; it is the essence of Rocket. Our $2.1 trillion unpaid principal balance distinguishes itself in both scale and quality; during Q1, we produced more than $1 billion in servicing fee income. The strength of this portfolio is straightforward; it generates steady cash flow, it keeps the company balanced, and it provides us with an embedded engine for growth ahead. Once you pair that with our origination operation, what you get is an enormous recapture platform that widens the top of our funnel minus the usual client acquisition expenses. That's an uncommon mix — recurring cash flow, strong client ties and built-in upside whenever the market shifts. Net rate lock volume totaled $49 billion, a 19% increase from the previous quarter. We picked up market share in purchase and refinance alike on both a quarter-over-quarter and year-over-year basis. On an adjusted basis, EBITDA was $738 million, and margin expanded to 26%, up from 23% during the prior quarter. Adjusted diluted EPS came in at $0.15, compared with $0.11 in Q4. Turning to housing, I see two dynamics at work. The first is the market itself — interest rates, affordability, inventory levels, and consumer confidence. Q1 proved to be a turbulent period. Early in the quarter, rates moved lower. The 30-year fixed rate fell from 6.15% in January to just under 6% as February ended. That sparked activity in both purchase and refinance. But volatility returned. By March, rates had risen back to 6.5%. Affordability became more strained, and the spring season began unevenly. The data bears this out. Existing home sales for March fell 1% year-over-year and nearly 4% versus February. That's the market for you. It shifts, it pauses, it catches people off guard. We don't design Rocket to be caught off guard. The second force is far more significant — AI. AI is transforming the way every industry operates, and housing is among them; for decades, housing has been sluggish, manual, fragmented and costly. Consumers have shouldered an excessive share of that burden. Agents, loan officers, and servicers have pushed through far too much friction, far too many steps, far too many handoffs, far too much waiting. AI changes that at its core. When you combine real-time data with predictive insights and intelligent automation, buying and owning a home can get quicker, easier, more tailored, and cheaper. A lot of businesses these days claim to be doing AI. Certain ones still lack any real plan for it. And some are bolting these tools onto processes that were never built to support them properly. Rocket doesn't operate that way — this is something we've been working toward for years. Over the past 6 years, we've invested over $500 million in AI, automation, and the infrastructure that backs it up. So when people ask what AI does for Rocket, here's the simple answer: it allows us to expand on the things we're already good at. That nuance is important. Having AI without proprietary data doesn't give you much of an edge. Having AI by itself doesn't get you very far. Pair it with a workflow and you still don't gain much. The real edge shows up when you combine everything. Here at Rocket, we hold the customer's information, the servicing connections, the brand, the tech stack, loan officers, an agent network, a marketing machine, and operational rigor — all of which let us deploy AI where it genuinely counts. Not inside some demo, not inside a lab, but out in the business, operating across the entire country. Once AI becomes part of the homebuying journey, we're able to deliver things competitors just can't replicate. Someone can tell Redfin about the home they've always wanted, and we'll surface listings matching their true intent rather than only the literal words they entered. If someone has a loan we service, we can let them know the moment refinancing makes sense, walk them through what's available, and get them to the finish line within minutes. And a person shopping for a home can be preapproved on their own schedule, rather than waiting for this industry to decide it's ready to answer the phone. That's the part that makes this so incredibly potent. Two illustrations come to mind. To start, at the very top of the funnel, agentic AI now handles prospecting and outreach to clients. That covers assisting people in locating properties via conversational search, getting in touch with servicing customers once they're in the money, and prequalifying buyers on the purchase side. What this unlocks is the capacity to reach, involve, and qualify every client in our book, plus fresh leads, through chat, voice, and text. For our loan officers, finding new business used to eat up a huge amount of time and produce very few results. A loan officer could sometimes call 14 clients and only manage to speak with 1. Today, AI handles those leads with accuracy. It knows when a client prefers to be contacted and through which channel, and it draws on our proprietary data to tailor the experience. This lets us connect with the right client, using the right message, at the right moment. Serving 1 in 6 mortgages in America means speed and scale are essential. When the market shifts, we have to respond at a level that most of the industry cannot match. Thanks to AI prospecting, the time loan officers spend prospecting has gone from as much as 2 hours per day to 0. That time is now being put to use with clients who are already in the pipeline and prequalified, pushing conversion up by double digits. This isn't hypothetical. It's live in production. Now for example number two. Toward the end of February, we rolled out pre-approval letters for purchases powered by AI. It's quick, straightforward, and accessible around the clock. No help from a loan officer is needed. Clients can become preapproved whenever it suits them, and that's precisely what's happening. 40% of the pre-approvals we handle digitally now get finished outside normal business hours. In just a couple of months, 10% of all pre-approvals are now agentic. Our overall output of pre-approval letters has gone up, yet fewer of them require a loan officer to step in, and on top of that, conversion is running 33% higher thanks to AI. That's the model we're following: let automation handle the tasks that should be automated, freeing our people to spend their time where judgment, expertise, and human connection make the biggest difference. The result is a better experience for clients and improved economics for the business. Last quarter, I noted that our AI-driven innovations were adding $1 billion in monthly volume; with our latest releases, that figure has grown by another $1 billion per month. How quickly we launch has shifted fundamentally as well; we're now releasing new features and experiences 5x faster than was the case merely 2 years back. That translates to quicker scaling, greater conversion, added capacity and improved unit economics.

Moving on to integration now. Our major milestones are being met, and we're doing really well against them. By the close of 2026, we now anticipate that Mr. Cooper expense synergies will be completely achieved — that's 1 year sooner than what we originally planned. That stands as a significant proof point. Integration isn't about placing logos side by side; it's about making this company operate better, quicker, and with greater force. Which brings me to what Rocket is today. 3 years back, we started rebuilding this company — we took bold steps to restructure, refocus and reorganize Rocket into something far bigger than a mortgage lender. During 2025, the foundation got built, the ecosystem got expanded. Our platform has become more robust. Our funnel's upper section has expanded. The way we distribute has improved. As we head into 2026, we're uniting everything — search, origination, servicing, data and, obviously, AI. That's how we create our own chances. We aren't holding out for some ideal rate climate. We won't be inactive while waiting for the market to settle. What we're creating is an enterprise that can succeed in the current market and capture additional territory when conditions get better. So these days, when someone thinks of Rocket, 3 things ought to come to mind: platform, distribution engine and ecosystem. Those aren't taglines — they represent the company's operational core. When you combine home search, marketing, and servicing recapture, our top of funnel has no equal. No one matches what we've assembled across brand, scale, distribution, and data. Within our network you'll find hundreds of thousands of real estate agents, along with over 10,000 loan officers and broker partners. Our technology platform was built specifically for this industry. The proprietary data we hold becomes more intelligent with each client interaction. Replicating that is extraordinarily hard. A competitor might copy individual components — some feature, a particular workflow, a marketing statement, a model, a partnership — yet components don't add up to the system, and it's the system that matters. What matters is scale, what matters is servicing, what matters is recapture, what matters is distribution, and data, compliance, and execution all matter too. Without those elements, AI is just another instrument. When you have them, AI becomes a source of advantage. Then you have culture. For Rocket, culture is still among the greatest strengths we hold. No matter if a person came to us from legacy Rocket, from Redfin, or from Mr. Cooper, the reason they are here is a shared belief in our mission of helping everyone home. That matters more than most realize. We have big ambitions. We are fiercely competitive. Winning matters enormously to us, yet we also have deep concern for the client and genuine care for one another. You rarely find that mix. A hard edge paired with a real heart — that is what Rocket has always been. Across 40 years, our culture has carried us through transitions ahead of when others felt ready. It carried us to the front during the Internet age. That gave us the edge in mobile, and now it's giving us the edge once more with artificial intelligence. We don't sit around waiting for change to happen. We build it ourselves. That's what Rocket is right now. The results from this quarter prove the approach is paying off. What we're doing with AI shows the approach keeps getting better, and we've set this company up so it can handle whatever the market throws at us. So, Brian, I'll turn it over to you.

Thanks, Varun, and good afternoon to all of you. I'll begin by talking about the strong results Rocket delivered in the first quarter, which demonstrate what our ecosystem and platform can accomplish. I'll also share an update on the continued progress we're making against our fixed cost base and then take you through what we expect for the second quarter. Starting with our financial results: over the last 12 months, we've deliberately reshaped Rocket, and that shows in the figures. During Q1, we came in above guidance, widened EBITDA margins and picked up share in refinance as well as purchase. Adjusted revenue climbed to $2.822 billion, exceeding the top end of the range we had guided to. Adjusted net income came to $422 million, equal to $0.15 in adjusted EPS. Adjusted EBITDA increased to $738 million, compared with $592 million in the prior quarter, as margins widened to 26%. That made it our most profitable quarter in 4 years. These results came directly from a deliberate strategy and sustained investment. Rocket was designed to deliver through volatility in any rate environment and any market cycle. Conditions for origination were favorable across the industry in January and February, with rates cooperating, before a sharp reversal arrived in March when energy prices spiked following the outbreak of conflict in the Middle East. Rocket handled both sets of conditions from a position of strength. We saw $49 billion in net rate lock volume, which represents a 19% increase compared to the prior quarter, driven by growth in all origination channels. The service client recapture channel, along with Rocket Pro, were the top performers. By bringing together the Rocket brand, enhanced personalization, and AI-driven origination tools, recapture among clients originated by Mr. Cooper hit an all-time high. The gains recorded throughout the first 2 quarters following the close have exceeded what we anticipated internally, and the figures confirm that. A record was set for closed loan volume from our servicing portfolio, with existing service clients accounting for 54% of refinance closings. Regarding wholesale, Rocket Pro built up steam as the quarter progressed. A significant catalyst was Rocket Ignite, our large-scale event, which brought mortgage broker partners from around the country together. At Ignite, we introduced Jupiter, a white-labeled loan origination system that we're providing to broker partners at no cost. Jupiter streamlines workflow, automates follow-ups and handles the loan life cycle from registration through closing. We also announced an expansion of our partnership with Compass and rolled out a special pricing incentive for Rocket Pro partners working with Compass agents. The market responded right away. In only the last 2 months, we've added close to 180 new Rocket Pro partners, who together represent a $5 billion opportunity in annual closed loan volume. The rate at which we're bringing on partners keeps climbing. Looking at every channel, we saw expansion in our home equity offerings and jumbo loans, and each of those doubled compared with the same period last year. That momentum translated directly into quarter-over-quarter and year-over-year market share improvement. Those gains arrived together with solid margins. Excluding correspondent, gain on sale margin reached 322 basis points during the first quarter, a level not seen since the first quarter of 2021. But what truly makes these figures meaningful goes beyond just their magnitude or scope — it comes down to the foundation beneath them. Because we welcomed Mr. Cooper and Redfin into the fold, Rocket's revenue mix is now more diverse than at any point before. In the first quarter, roughly 70% of Rocket's revenue came from sources that either recur or have less rate sensitivity. We view our business as falling into 3 separate revenue categories. The first is recurring revenue, made up of the servicing operation plus the Rocket Money subscription offering. That category forms our steady, fee-based base. The second is less rate-sensitive revenue, covering purchase mortgages, cash out, closed-end seconds, and the Redfin business, which is mainly tied to housing activity and client demand. These products do bear some connection to rates, yet they come with a large and fairly steady addressable market. Category three is rate-sensitive revenue, made up of rate and term refinances along with other items. When it comes to our revenue, no other category is as directly affected by where rates go. At the same time, it's the area that gives us the greatest potential gain when rates decline. That's the hallmark of a well-balanced business model. Stability and predictability across the cycle come from more than two-thirds of what we earn. Rate movements alone no longer define Rocket — we've become a company with lasting recurring revenue streams that still hold considerable upside if rates drop; I'd now like to give you an update on integration synergies. Bringing a business of this size together requires disciplined execution. Speed and precision have defined how our teams have operated, with an intense focus on safeguarding the Rocket client experience. When it comes to Mr. Cooper, the integration is well ahead of schedule. During our previous earnings call, we told you we had pinpointed the complete $400 million goal for yearly expense synergies, with the entire amount anticipated to be achieved by the close of 2026. That places us a full twelve months ahead of the schedule we initially set. Let me walk through how we anticipate these cost reductions to roll out from now until year-end. As of the conclusion of the first quarter, we have already secured $75 million in annualized run rate savings. When the second quarter wraps up, we anticipate adding a further $100 million in annualized savings, and the leftover $225 million in annualized savings is slated for capture during this year's second half. Those savings land right in our fixed expenses, mostly by cutting vendor agreements that overlap and streamlining roles that duplicate each other. Speaking of which, I have some great news about how much we can originate. Back at our Investor Day in September 2024, we told everyone that Rocket could then handle originations of as much as $150 billion with no additional fixed costs, and we said we anticipated that figure would grow twofold, reaching $300 billion, by the close of 2027. Since that point, how quickly we've been putting this to work has picked up significantly, thanks to AI running the full digital refinance process, digital pre-approvals on purchase loans, voice AI plus SMS messaging to reach potential borrowers, and AI agents handling underwriting. Thanks to continuous investment, these features are now deployed at scale and are producing genuine operational efficiency. The upshot: our origination capability has grown to roughly $300 billion, even though our production staff has shrunk by a few hundred positions since 2024. We achieved this two years ahead of federal, and at the same time we kept lowering fixed costs via synergies. March provides the most obvious proof — we ramped volumes up quickly from January and February levels, finishing near $20 billion in volume while the platform handled it without stress. Measured per team member, closed loans climbed 75% compared with two years earlier. AI is honing our unit economics and broadening our competitive moat; let's shift now to how we see the second quarter. Before I walk through the figures, allow me to set up the market backdrop we're facing. Ever since conflict broke out in the Middle East in late February, higher energy prices have dragged on consumer sentiment and stirred worries about where inflation is headed. Mortgage rates sit roughly 50 basis points above the lows they hit in February. Homes are sitting on the market longer, averaging 51 days, which is the longest run since 2019. The spring home buying season has gotten off to a sluggish start. Based on what our real-time market indicator is telling us, the usual seasonal pattern won't deliver the second-quarter boost the mortgage market would typically see. We've accounted for that in our guidance, and we've also accounted for our ability to do better than the market regardless; for Q2, our projection for adjusted revenue falls between $2.700 billion and $2.900 billion. Choosing the middle of that range reflects how confident we are about gaining additional share; on the cost side, at the midpoint of the revenue range we're looking at about $2.430 billion. Within that number, $110 million comes from amortization of intangible assets, $100 million relates to stock-based compensation, and $20 million covers anticipated onetime acquisition costs. If you take those out, we're looking at $2.200 billion in expenses — roughly $60 million less than the first quarter. That improvement comes from synergies we're capturing along with ongoing benefits tied to our AI work. One thing to note: the Q2 expense guidance reflects moving warehouse interest expense from a contra revenue account over to an expense line item, which lines up with how the Q1 financials show up in the earnings release. What that means is we expect better profitability in Q2 even as the market gets tougher. 2026 is a make-or-break year, and this platform was designed for exactly that. Our top-of-funnel reach, distribution network, massive servicing portfolio and technology platform for a durable self-reinforcing competitive engine. At this point, those advantages keep producing profitable growth no matter which way macro conditions move. With that said, operator, we're ready for questions.

Regarding your guidance, you're pointing to a level somewhat under where the first quarter finished. I wanted to ask whether you might walk us through a few of the underlying pieces, and what exactly is causing that? Is it volume, margins? I realize rates have moved up somewhat, but if anything < > in contents?

Sure, Mihir, I appreciate that question. Let me begin by discussing our view of the market briefly; after that I'll have Brian go into greater depth regarding the particular elements of our actual guide, since I believe that background matters. So I'll begin simply by noting that Q1 got off to an incredibly strong start. Rates were favorable, and what becomes apparent is Rocket's business model engaging precisely the way it was intended to. That's genuinely what sets apart our ecosystem and platform functioning together. Clearly, what took place afterward in the quarter was that a significant conflict in the Middle East erupted. Because of that war, oil prices climbed, inflationary pressure grew, and subsequently rates rose; that definitely altered part of the path as we head into Q2. I believe industry forecasts anticipate an acceleration in Q2, yet I'd tell you we simply aren't witnessing that. What we're observing is that Q2 will likely resemble Q1 somewhat more. It remains healthy, though I anticipate the forecasts will eventually align with that reality. And that's what our real-time data shows us. So yes, the environment has changed; even so, I'd argue the underlying demand remains resilient, and that's the crucial point. And speaking directly about Rocket, when you possess an ecosystem and platform designed for conditions like these, when you can transform demand at scale, you end up with a more self-sustaining ecosystem whose servicing is genuinely suited to this precise moment. Our guide captures all of that, and it's strong. And clearly, once the conflict is resolved, we anticipate gaining even more. So with that background, I'll pass it to Brian to elaborate a bit further on Q1 and the Q2 guide.

Absolutely, Mihir, and I appreciate the question. I want to start by unpacking the first quarter a bit. Looking back at January, February, and honestly even the early part of March, those months really showed what we can do when the rate backdrop is favorable. Every one of our channels delivered above expectations — recapture, newly acquired clients, and in particular the Pro segment. That said, to build on what Varun mentioned, the rate picture right now looks entirely different. The 10-year sits at roughly 440 basis points. You'd need to look back as far as July of last year to find rates at that level. So a decline in rate-and-term refinance activity was something we anticipated, and it has certainly materialized. On the positive side, as we head into the second quarter, products that are less sensitive to rates — cash out and closed-in seconds — are still performing in line with what we saw in Q1. Another point worth raising is servicing amortization. It has decelerated, and that really shows our balanced business model working as intended. Let me also touch briefly on the purchase side. The season has been slow to take shape. Still, it's worth highlighting that our pipeline of preapproved purchase clients stands at an all-time high, which confirms that buyers are out there and want to purchase homes — they simply need rates to cooperate a bit. I'll wrap up with a bit more color on the second-quarter guidance. As Varun noted, we believe the market is harder than what the industry forecast suggests. In our view, the Q2 figures appearing in certain energy forecasts are simply incorrect. From a volume standpoint at Rocket, though, we anticipate something comparable to Q1, and that's quite striking given that rates are over 50 basis points above where they stood during Q1. Turning to gain on sale margin, we're pleased to say those margins remain very stable. In fact, looking channel by channel, gain on sale margins in Q2 thus far are tracking in line with Q1. There is some modest downward pressure coming from a mix shift toward more Pro volume during a busier purchase season, but on the whole, margins at the channel level look really healthy.

I'd like to zero in a little on costs here; it appears your costs declined fairly significantly during this quarter. My understanding is they landed roughly 2%, or perhaps $60 million, under the guidance you provided. Could you discuss somewhat what caused that outperformance? Was it the synergy work being done, or was something else going on? I'm aware that you've historically mentioned that whenever you guide toward the upper portion of your revenue range, your costs have a tendency to exceed the quarterly guide you issued. So perhaps what occurred in this case? Additionally, your incremental margin moved up somewhat this quarter. Could you perhaps explain how you're viewing the businesses and incremental margins across time? I know you frequently reference the 70% figure on the Rocket stand-alone side, but perhaps you could help us break down a little the varying incremental margins across the 2 major segments of the business you now operate?

Yes. Thank you, Jeff. I appreciate that question. Honestly, I feel a lot of pride. It makes me happy you raised it, given the effort we've put in on the cost side. And a quick note for everyone listening, our objective is quite straightforward. It's removing fixed expenses from the operation while boosting efficiency in capacity, basically expanding operating leverage. And since we've brought up capacity, we currently have $300 billion of origination capacity, which has more than doubled across 2 years. It's somewhat wild to consider. If you pause and think, what might our capacity look like 2 years from today at this pace? Then regarding what you mentioned, let me address the margin aspect. Keep in mind, whenever we handle recapture loans, which represent a significant portion of our business, your acquisition cost is very near 0 and you produce 50% to 70% incremental EBITDA margins following amortization as we utilize that capacity; but regarding what you said about the stronger-than-anticipated costs in Q1 and the note that Q2 guidance costs are also lower, that's the synergies; it's removing fixed expenses from the operation and it's running ahead of our plan. The Q2 guide at the midpoint shows costs roughly $60 million lower than Q1 after adjustments, which equals nearly $0.02 of EPS; therefore you can observe operating leverage rising. And you can observe EBITDA margins widening. And it deserves a mention, we stated this during the prepared remarks, but we're an entire year ahead of our initial target on the synergy on the cost side. We committed to $400 million by the close of '27 and we'll have it recorded by the close of '26. So we're accomplishing everything we intended. We're lowering fixed expenses, we're boosting operating leverage, and we're becoming more efficient throughout the process.

You provided several strong illustrations of how artificial intelligence is already delivering value for your company. What's the right framework for thinking about the future advantages AI brings to the business? My assumption would be that, first, it ought to enable you to achieve improved long-term recapture rates as time goes on, and second, how should we think about what AI does for margin over, say, the medium and longer horizons?

Yeah. Appreciate that question, Chad. The straightforward response, I'd say, is that our technology and artificial intelligence investments should deliver gains that compound nonlinearly; though to take a step back on this, there's currently a great deal of hype surrounding AI in the marketplace. And much of what other companies in our sector are showing amounts to quite limited applications. They function for a single loan type, they function for a single situation. You may catch a demonstration occasionally. But in our experience, such competitive assertions don't actually convert into genuine cloud-style results, and instead resemble promotional noise; and that simply isn't the way an actual enterprise functions. I've spent many years as a technologist. And what I believe counts with AI isn't the model itself, it's the surrounding system connected to that model which supplies its inputs. And that's precisely where Rocket stands apart, correct? We possess the intent through Redfin, 50 million monthly active users at the top of the funnel; we possess the economics within financing via Rocket Mortgage, right? That's the scale needed to run across 50 states, 3,000 counties, plus we hold the continuing servicing relationship through Mr. Cooper. The point of all this is that it produces a proprietary data set spanning the whole home ownership life cycle. And as you suggested, we run that system at scale. And I'd say that's a crucial point. For instance, our chat pulls credit 4,000 times per day, while our prospecting for AI has more than — handles over 32,000 outbound leads daily. And that represents genuine productivity. To illustrate, between just March of 2024 and March of 2026, closings per production team member, because of AI, have risen 74%. So honestly nobody else within this industry operates with AI at such a level; and we've been building the system that AI runs on at scale from day 1, and the one thing I would — I'd want to leave you with is simply this, as you evaluate other players, well, just pose the basic question, what outcomes are they actually generating at scale? How many customers gain, how much expense is removed, what's the net conversion gain? How many loans truly get closed? So I'd say that's really the point where things begin to diverge, yet I anticipate advantages touching each part of our business — from the way we bring in and build demand up at the top of the funnel, to the way we push conversion, to the way we lower what it costs to originate a loan, and finally, to the way we use force multiplication on recapture so that it rises and compounds in a nonlinear fashion across the years ahead.