Q1 2024 UWM Holdings Corp Earnings Call
Good morning, My name is Krista and I will be your conference operator today at this time I would like to welcome everyone to that U W. M Holdings Corporation first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a quest.
<unk> and answer session.
You would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If at any time you would like to remove your question from the queue. Please repress star one thank you.
You Blake Colo you may begin your conference.
Good morning. This is Blake Colo Chief business Officer, and head of Investor Relations. Thank you for joining us and welcome to the first quarter 2020 for U W. M Holdings Corporation's earnings call before we start I would like to remind everyone that this conference call includes forward looking statements for more information about factors that may cause.
Actual results could differ materially from forward looking statements. Please refer to the earnings release that we issued this morning, I will now turn the call over to Matt <unk>, Chairman and CEO of <unk> Holdings Corporation, and United Wholesale mortgage Thanks, Blake and thank you everyone for joining us today I'm really excited about this earnings call a lot of great things to talk about.
Matt: We're extremely busy here at <unk>, we're hiring hundreds of new team members preparing for the future and the opportunity and there's a great buzz around our campus that I wish all of you guys to feel on our last call. I said, we expect a 'twenty 'twenty four to be a better year for the housing and mortgage industry in the first quarter supports what I expected. We're in the weeds of our business have done a nice job executing on our game plan with that.
I want to touch on a couple of main themes before getting into the quarterly numbers.
Matt: First the broker channel is the best place for a consumer to get alone and is the best place for a loan officer work. Knowing this it's great to see how much the broker channel has grown in both share and people over the last few years more and more loan officers consumers and real estate agents are seeing what we have already known for a long time that the mortgage brokers the best place to get a mortgage consumers and real estate is our thinking is.
Speaker Change: Well, it's very exciting.
Speaker Change: And I want everyone to remember what I'm about to say next is something that I've been saying for years since becoming public when rates are high the brokers and new Wm will always dominate and that is exactly what has happened over the last two and a half years or so now im telling you. This when rates go down every mortgage coming in America, including PWM will look great, but remember we are different because you never know is built to perform in both Peru.
Speaker Change: <unk> and refi markets and is something I'm very proud of overall, it's been a tremendous start to the year and we're excited about the momentum in our business now lets jump into the first quarter, we closed $27 $6 billion in production for the quarter at the higher end of our guidance with over $22 billion of this coming from purchase I'd like to point out that we grew 13%.
Speaker Change: From the fourth quarter and more impressively, 24% compared to last year's first quarter I don't think there's a lot of lenders that can say they've grown that much year over year, we've been guiding to 75 to 100 basis points for a long time and I bumped. It to 80 to 105 for the first quarter, we exceeded that guidance with a gain margin of 108 basis points and it was a very profitable quarter with.
Speaker Change: $185 million and net income and that includes a $15 million write down on fair value. As these results demonstrate we continue to deliver on our expectations by remaining focused on being the best mortgage lender in the country.
Speaker Change: That means continuing to invest in our people and our technology and our service no matter what others in the industry are doing we know what we are good at and we know what we're great at we don't try to be all things to all people and we win because of it [noise] agila.
Speaker Change: As you will hear from Andrew shortly our financial position is very strong and we fully intend to keep rewarding our shareholders with a great dividend as I've been saying quarter in and quarter out we remain confident that the volumes and margin will remain strong in 2024, and we've been saying for the last couple of quarters and we are uniquely positioned to capitalize on the next refi boom, whether it comes next month six months or in <unk>.
Speaker Change: 12 months, we are prepared I'll now turn things over to Andrew our CFO. Thank you Matt.
Andrew: 2024 is off to a great start even during a quarter that is traditionally slower from a seasonal standpoint.
Andrew: We reported positive net income for the quarter and remained profitable operationally before considering the change in fair value of Msr's and on an adjusted EBITDA basis.
Andrew: We were pleased with our first quarter operational performance as we continue to invest and prepare for the next market cycle.
Speaker Change: We've discussed before our plans to Opportunistically sell msr's as a means of generating cash flows to support our ongoing operational capital and financing cash needs.
Speaker Change: This continued in the first quarter.
Speaker Change: Our first quarter sales were accomplished at what we believe to be favorable prices and have allowed us to significantly derisk, our MSR portfolio and de lever our balance sheet, while also supporting our ability to originate substantial new loan volume.
Speaker Change: As at the end of the quarter, our capital and leverage ratios remain within expected ranges in the current environment and generally consistent with or improved from the end of last year.
Speaker Change: Furthermore, our liquidity and access to liquidity, including cash and accessible borrowing capacity increased by over $600 million from the end of 2023, bringing our total available liquidity to just under $2 9 billion. We believe that we continue to be well positioned operationally and financially for different market cycles.
Speaker Change: Okay, I will now turn things back over to our chairman President and CEO, Matt <unk> for closing remarks, Thanks, Andrew I'll close with a few points before the Q&A I said on our last call that I believe the 'twenty 'twenty four will be a better overall year for housing and the mortgage industry. The 2023 everything we're seeing now confirms that definitely at UWS.
Matt: But as I always say, regardless of the market will remain the best mortgage lender in America, our focus will remain on providing elite service technology pricing and partnership to our mortgage broker partners.
Matt: Lastly, I'm very excited for next week, we will welcome you know about 5000 in the mortgage industry professionals to our campus here in Pontiac, Michigan for U W. M life, which has become the biggest annual mortgage event in America.
Matt: I know many of you on this call are joining us in the past and I look forward to seeing many of you here again next week now looking forward to the second quarter, we expect production to be between 28 and $35 billion and consistent with what I said before about margins things continue to show signs of improvement in the second quarter, we expect our game arguably between 85 and 110 basis points as always.
Speaker Change: I really want to thank our team members our clients and our shareholders. We've got a great team here at <unk>, We're really proud of what we're doing and we're excited to continue to dominate together now lets turn it over to Q&A.
Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. If at any time, you would like to remove yourself from the queue. Please press star one at this time, we'll pause momentarily to assemble our roster.
Speaker Change: Your first question comes from Kyle Joseph with Jefferies. Please go ahead.
Kyle Joseph: Hey, good morning, guys. Congrats on a good quarter. Thanks for taking my question.
Kyle Joseph: And I just wanted to get your perspective, you guys have been seeing some good growth.
Kyle Joseph: Non agency volume is that is that primarily on the jumbo side or what are the drivers there.
Speaker Change: Yes. Thanks, a lot guys I appreciate the question, yes, a lot of it has been on the jumbo side.
Speaker Change: Our brokers are really trying to be out there and compete for jumbo loans.
Speaker Change: From our perspective with the banks and the credit use out there, but obviously do a great job of that stuff thats. The one spot the brokers traditionally struggled with them, we're doing a much better job with that and they're doing some great things. So a big part of that is due in jumbo loans and then no jumbo loans have non jumbo friends and referrals that come our brokers way. So it's been a focus and we do a little bit of other non agency with most.
Speaker Change: It has been in the jumbo space.
Speaker Change: Got it yeah, and then just moving over to servicing I think we've talked in the past about kind of a 300 billion.
Kyle Joseph: But.
Kyle Joseph: That mostly just a function of the market and where youre seeing opportunities like you said to derisk and get attractive pricing and you guys don't really have a target there and it's going to be more market driven is that fair is it fair to assume.
Kyle Joseph: We're always opportunistic looking at the opportunities out there on MSR is one of the few out there originally a lot of a lot of business. There are a lot of the MSR buyers are coming to us and looking for volume and we're providing it because of the amount of originations we do on a quarterly basis. So we look at it opportunistically. We can hold the rest of the year. We can sell some more we have all different things that we look at.
Kyle Joseph: It just depends on what the market conditions are.
Speaker Change: Great. Thanks, so much for taking my questions. Thank.
Speaker Change: Thank you.
Kyle Joseph: Your next question comes from the line of Eric Hagen with BP I G. Please go ahead.
Eric J. Hagen: Hey, Thanks, I appreciate you guys looking forward to next week.
Eric J. Hagen: Just looking at the guidance for the margin in the second quarter I'm, just trying to square up how you saw the margin just just in April relative to that guidance just given what we saw in mortgage rates.
Eric J. Hagen: That's just a benchmark how we think about the full quarter and then when we look further out I mean, how stable do you see that margin under even if rates were to maybe tick up from here and certainly if they were to go lower I mean, how do you see that the stability of that margin from here. Thank you guys.
Speaker Change: Yes, thanks for the question so in general.
Speaker Change: I felt comfortable enough to raise the margin from 80 585 to $1 10 range.
Speaker Change: I look at it my job is to try to give you guidance can be right in the middle of that guidance and try to put ourselves in that position, so based on where I see margins.
Speaker Change: Last quarter, and where I see the train this quarter I felt it was the right thing to bump that range up and as I told you for probably a couple of years that 75 to 100 is kind of the bottom of the.
Eric J. Hagen: Beryl wholesale margins and now it's up to 85 to 110 range and I can see that continue to sustain I see that going up when rates drop further.
Eric J. Hagen: No.
Eric J. Hagen: People, some people being higher for longer I'm, not one of those believers, but let's just say it's higher for longer than I would say that this is probably a range that I feel comfortable with for a longer if that's the right way to think of it and then when it when rates do go down a little bit more.
Eric J. Hagen: That's when the margins usually it will tick up a little bit.
Speaker Change: Yeah, that's really helpful. Thank you.
Eric J. Hagen: Looking at the strength in the stock I mean, you know the momentum you seem to have here on the origination side I mean, one thing we've talked about is getting more participation in the stock rate raising the slowed having an opportunity to support growth with maybe some fresh capital I mean, how should investors maybe you start to think about that opportunity.
Eric J. Hagen: Given the way you guys are trading in the.
Eric J. Hagen: Outlook for the rest of the year.
Speaker Change: Yeah, no. It's a good question I appreciate it.
Eric J. Hagen: My take is we have a great base of investors right now and I know a lot of them would like to be able to add more.
Eric J. Hagen: And right now however.
Eric J. Hagen: Float is a concern so we always look at it opportunistically and look at those opportunities and see if there's something we can do but.
Eric J. Hagen: We want to look at what our shareholders need and want and the float is definitely something we talk about and they're concerned about and consider all things.
Speaker Change: Great. Thank you guys so much thank.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Doug Harter with UBS. Please go ahead.
Speaker Change: Okay.
Speaker Change: Thanks.
Douglas Michael Harter: Matt can you just talk about.
Douglas Michael Harter: Kind of what Youre seeing in the spring selling season.
Douglas Michael Harter: Kind of.
Matt: On the demand side and the supply side in terms of new purchases.
Matt: Yeah, absolutely I don't I don't think gets reported in the mainstream media, but we've seen a really strong purchase year. So far not just our mortgage Kelly, but just in the market I think inventories are up.
Matt: It's not a new story, because it's positive so a lot of people naturally doesn't talk about it but inventories up housing values are strong and theres a lot of first time homebuyers and people out there in the market and Fannie Mae Freddie Mac has done some good things to try to drive more first time homebuyers and people in their homes and opportunity out there and so I think it's actually a really strong purchase market.
Matt: Won't say like extremely strong as we make the best of all time, but it's a strong market definitely stronger than it was last year and Thats why were seeing volume increases.
Matt: And I think we were up 24% year over year and that's in the first quarter.
Speaker Change: Overall volume and so purchases are strong and I think they'll maintain strong being strong through the second and third quarter.
Speaker Change: Great.
Speaker Change: Then, Matt Freddie Mac has talked about possibly getting into second liens.
Speaker Change: <unk>.
Matt: What are your thoughts around that product and how large could that opportunity be.
Matt: Yeah, I mean, it's interesting in Freddie Mac and Fannie Mae both do a good job of trying to innovate and come up with ways to help consumers and.
Speaker Change: And grow the mortgage pie in a positive way.
Speaker Change: It's a good program potentially I think it's still months and months out if it came out and that product has really already served in the market today.
Speaker Change: Home equity lines of credit and other products that are already out there that can Freddie Mac doing better potentially little cheaper potentially yes, yes, but it's not material in any way shape or form.
Speaker Change: I appreciate it thank you Matt.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Boss George with <unk>. Please go ahead.
Bose Thomas George: Hey, everyone. Good morning.
Bose Thomas George: But can you give us your thoughts on some of the potential changes that could happen in the title insurance industry in and can you remind us what you guys have done in term to date in terms of reducing titled caused some of your programs.
Speaker Change: Yes, thanks for the question.
Speaker Change: You're obviously in the weeds of the business I understand that the title insurance business.
Bose Thomas George: It is one of those parts of the industry that are ripe for disruption right.
Bose Thomas George: Charging consumers a lot of money for a product that doesn't require a lot of cost.
Speaker Change: So reality is thats going to get disrupted at some point, we're doing some things to help lower the cost for consumers on title and it's been extremely successful so far and we're going to continue to lean in on that.
Speaker Change: Title insurance companies, which we worked with a lot of Teletubbies and allowed them to do a lot of great things in or break to be partners with them, but we're always looking at ways to make things better for consumers and help brokers grow and succeed so title insurance isn't going to go anywhere theyre going to be part of the industry and they do great things, but there is going to be some disruption and some movement because there is a better way to do things for consumers.
Speaker Change: There is a lot of people look at it and we're one of those people that look at it.
Speaker Change: Okay, Great. That's helpful. Thanks, and then just.
Speaker Change: One on the MSR. So the sale MSR sales can you just talk about the sale price relative to the carrying value since it looks like some of that went through the.
Speaker Change: Fair value Mark on the MSR.
Speaker Change: Yes.
Speaker Change: Sting is depending on the time of the month and where rates are at that moment.
Speaker Change: Prices are right in line with what our carrying value is and so sometimes you pick up a little sometimes you lose a little bit but in general it's been not a material negative or positive to be honest with you. So it's good because we're actually one of the few out there that sell enough MSR is to know that we're carrying it at the right values.
Speaker Change: Some others may be carrying values that we think are unattainable in the shale market.
Speaker Change: Okay, great. Thanks.
Speaker Change: Your next question.
Speaker Change: Your next question comes from the line of Brad <unk> with Piper Sandler. Please go ahead.
Brad: Hi, Thanks for taking my question.
Brad: Going back to the origination guidance can you just give us a sense of scenarios that would bring us bringing in a low end of the range and what scenarios, we're bringing to that high end of that range and then just are you seeing any different industry trends.
Brad: During this years spring selling season. Thanks.
Speaker Change: Yes, so I think.
Speaker Change: Once again my job is to try to guide you guys and if I give a range that I feel like we will hit in the middle of that range. So what would make it go up or down obviously, a spur on interest rates lower could maybe help us at the higher end of it I don't see that happening or exceeded range. It's your point and at the same time could could rates really go up enough to hit us below really.
Brad: It's a good range to be honest with you 20% to 35, I mean, I think last year, we did about 31.
Brad: In the second quarter, and so I think if we can exceed last year's number that would be a really big number and we've exceeded last year's number the first quarter, but last year's second quarter, we had a great quarter. If you look back at the numbers and so I think where margins are at along with where volumes were at I feel really good about our business enable to handle this and we are prepared and then one thing that we have.
Brad: But we are prepared for when rates do drop if rates drop tomorrow, we will be ready if rates drop in six months, we will be ready if they drop in 12 months, we will be ready at UW to capitalize on the opportunity that's been a big part of our hiring in strategy along the way.
Brad: Hopefully you can see that in some of our numbers as we've hired people and grown and we are ready for the volume to to pick up.
Brad: Typically but at the same time, we're very profitable very successful at these ranges. If these margins at these volumes and I feel really good about the numbers I provided.
Brad: In the speech earlier.
Speaker Change: Thanks, and then just a follow up in terms of the pricing initiatives you have for the brokers how has that driven increased volume and do you expect to rollout further initiatives going forward.
Speaker Change: Yes, I mean, we always are looking at everything how do we make things better for brokers, how do we help the brokers when more loans, how do we have the brokerage grow and so price initiatives. This is one of those many tools. We have other things that we look at how do we roll out new technology, we've done some things on it whether it's AI, whether it's tied to innovation that people don't even speak about our understand but our brokers understood.
Speaker Change: And so there's things we're always constantly trying to rollout to help them grow prices just one of those minor category that you can do to drive value and help them win more business, but in a purchase market prices less relevant.
Speaker Change: More about can you take care of the client make it fast easy simple get them in the house on time, and then obviously be affordable and so those are all the things that we're working on.
Speaker Change: So I feel really good about the technology, the innovation were providing to brokers to help them grow their business and we're going to continue to do that and whether our price initiative or something comes out at some point, we always look at that stuff, but I don't foresee that right now I foresee more other ways to help them grow.
Speaker Change: Thanks for taking my question.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Currently have no questions in our queue at this time I will now turn the call back.
Speaker Change: Back over to management for closing remarks.
Speaker Change: Yes, well. Thank you guys. Thanks for the questions.
Speaker Change: Really proud of the quarter and we're excited about this quarter that we're in right now to win when it keeps doing right things. So we appreciate you being on the call. Thank you for the questions and supporting UWS have a great day.
Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.
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