Q2 2024 Guild Holdings Co Earnings Call

Good afternoon ladies and gentlemen and welcome to the Guild Holdings Company, second quarter 2020 for earnings conference calls.

Speaker Change: At this time, all participants are in listen-only mode. Later we will conduct a question and answer session with instructions to follow at that time.

Operator: As a reminder, this call will be recorded. I would now like to turn the conference over to investor relations. Please go ahead.

As a reminder, this call will be recorded.

Speaker Change: I would now like to turn the conference over to Investor Relations. Please go ahead.

Investor Relations: Thank you and good afternoon, everyone. Before we begin, I'd like to remind everyone that comments on this conference call may contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods and industry trends. These statements are based on the company's current expectations. Preliminary results for any portion of a quarter may not be indicative of full-quarter results and are subject to management and audit or customary review procedures. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors that are described in greater detail.

Speaker Change: Thank you and good afternoon everyone. Before we begin, I'd like to remind everyone that comments on this conference call may contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods and industry trends.

Speaker Change: These statements are based on the company's current expectations. Preliminary results for any portion of a quarter may not be indicative of full quarter results and are subject to management and audit or customary review procedures.

Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors that are described in greater detail.

Investor Relations: Under the Section Title Risk Packers, in Guild's most recently filed annual report in Form 10K, and in other reports, that are currently filed with the U.S. Securities and Exchange Commission as an exchange commission. Additionally, today's remarks will refer to certain non-gap financial measures. Reconciliation of non-gap financial measures to the corresponding gap measures can be found in our earnings released for each today with SCC and are also available on Guild's Investual Relations website. It now likes to turn the call over to Chief Executive Officer, Terry Schmidt. Here he is.

Speaker Change: Under the section titled Risk Factors, and Guild's most recently filed annual report in Form 10-K , and in other reports subsequently filed with the U.S. Securities and Exchange Commission.

Additionally, today's remarks will refer to certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings released furnished today with the SEC and are also available on Guild's Investor Relations website.

Terry Schmidt: Anallectives turned Nicole over to Chief Executive Officer, Terry Schmidt, Terry?

Terry Schmidt: Good afternoon, and thank you for joining us to discuss our second quarter results and strategic update. With me today are David Neylan, our President, and Amber Cramer, our CFO.

Terry Schmidt: Good afternoon and thank you for joining us to discuss our second quarter results and strategic update. With me today are David Neylan, our President, and Amber Kramer, our CFO .

Terry Schmidt: We are very pleased to share our second quarter results, which clearly demonstrate the effectiveness of our strategy. By remaining disciplined and consistent, we are not only delivering remarkable growth while gaining share, but we are positioning Guild for even stronger performance as rates and the housing market further improve. There are three key elements to Guild's strategy that we continue to deliver on. One is increasing our market share during the industry downturn through accretive acquisitions and organic recruiting. 2.

Terry Schmidt: We are very pleased to share our second quarter results, which clearly demonstrate the effectiveness of our strategies.

Speaker Change: By remaining disciplined and consistent, we are not only delivering remarkable growth while gaining share, but we are positioning Guild for even stronger performance as rates and the housing market further improve.

Terry Schmidt: Investing in our people and technology platforms, and 3. Delivering excellent service to retain customers for life and earn referral business. The successful execution of this strategy is evident in our results. For example, in the second quarter, we delivered adjusted net income of $30.7 million compared to $8 million in the prior quarter.

Speaker Change: There are three key elements to Guild's strategy that we continue to deliver on. One, increasing our market share during the industry downturn through accretive acquisitions and organic recruiting.

Speaker Change: 2. Investing in our people and technology platforms, and 3. Delivering excellent service to retain customers for life and earn referral business.

Speaker Change: The successful execution of this strategy is evident in our results.

Speaker Change: In the second quarter we delivered adjusted net income of $30.7 million compared to $8 million in the prior quarter.

Terry Schmidt: This impressive growth was primarily driven by our origination business and reflects our unwavering commitment to the retail mortgage channel. In the second quarter, total originations reached $6.5 billion, a substantial increase of $2.7 billion, or 69% from the first quarter. In Q2, we also significantly outpaced the industry growth rate, estimated at 14%. This again underscores our market share gains and the strength of our business model. Moreover, we experienced a 43% increase in volume for the quarter compared to the prior year's second quarter. Turning to our servicing segment, our unpaid principal balance increased to $89.1 billion at the quarter end.

Speaker Change: This impressive growth was primarily driven by our original business and reflect our unwavering commitment to the retail mortgage channel.

Speaker Change: In the second quarter, total originations reached 6.5 billion, as substantial increase of 2.7 billion, or 69% from the first quarter.

Speaker Change: In Q2, we also significantly outpaced the industry growth rate, estimated at 14%. This, again, underscores our market share gains and the strength of our business model.

Speaker Change: Moreover, we experienced a 43% increase in volume for the quarter compared to the prior year's second quarter.

Speaker Change: Turning to our servicing stamp that segment, our unpaid principal balance increased to 89.1 billion at the quarter end.

Terry Schmidt: The cash flow from our servicing continues to grow, providing a natural hedge and complementing our Originations business. Combined with our local sales teams and our Guild 360 Client Retention System, we are well positioned to originate and recapture business across all market cycles. Specifically, our ongoing investments in our platform and technology reinforced our confidence and our abilities that continue to drive outside growth. To that end, we're proud to have recently debuted our internal artificial intelligence platform, Guild TPP.

Speaker Change: The cash flow from our servicing continues to grow, providing a natural hedge and complements our Originations business.

Speaker Change: Combined with our local sales teams and our Guild 360 client retention systems, we are a well-positioned to originate and recapture business across all market cycles.

Speaker Change: Specifically, our ongoing investments in our platform and technology reinforce our confidence in our ability to continue to drive outsized growth.

Speaker Change: To that end, we're proud to have recently debuted our Internal Artificial Intelligence Platform, Guild GPT.

Terry Schmidt: This platform sets new standards for speed and efficiency, allowing team members to easily access an AI assistant for instant delivery of customized information on company products, guidelines, and related questions. This innovation frees up our team to serve their partners and customers with speed and accuracy.

Speaker Change: This platform sets new standards for speed and efficiency, allowing team members to easily access an AI assistant for instant delivery of customized information on company products, guidelines, and related questions.

Speaker Change: This innovation frees up our team to serve their partners and customers with speed and accuracy.

Terry Schmidt: Overall, we believe this quarter is a strong indicator of the power of Guild. Beyond these impressive results, we can clearly see the long-term value being created by our successful execution of our growth strategies. Our investments to expand our sales force organically and through acquisitions are creating a large network of loan officers who live and serve their communities across the United States. This represents an opportunity to further accelerate our growth in the coming quarters.

Speaker Change: Overall, we believe this quarter is a strong indicator of the power of Guild.

Speaker Change: Beyond these impressive results we can clearly see the long-term value being created by our successful execution of Guild's growth strategy.

Speaker Change: Our investments to expand our Salesforce organically and through acquisitions are creating a large network of loan officers who live and serve their communities across the United States.

Speaker Change: This represents an opportunity to further accelerate our growth in the coming quarters.

Terry Schmidt: We have a strong conviction that we are only starting to realize the full power of the Guild platform as we continue to achieve market share gains, grow our servicing portfolio, and operate them as integrated businesses to create customers for life. We're confident in our strategy, our execution capabilities, our platform, and our ability to deliver long-term value for our shareholders. Thank you for your continued support and trust in Guild. With that, I will turn the call over to David. David

Speaker Change: We have a strong conviction that we are only starting to realize the full power of the Guild platform as we continue to achieve market share gains, grow our servicing portfolio, and operate them as integrated businesses to create customers for life.

Speaker Change: We're confident in our strategy, our execution capabilities, our platform, and our ability to deliver long-term value for our shareholders.

Speaker Change: Thank you for your continued support and trust in Guild. With that, I will turn the call over to David. David?

David Neylan: Thank you, Terry. I'd like to share some additional perspectives on our recent performance and strategic direction. In the second quarter, our origination channel demonstrated marked progress. After adjusting for contingent liabilities, this segment reached profitability, even as we integrated and began ramping up our most recent large acquisition, Academy Mortgage. In the third quarter, Academy's team, in excess of 1,000 personnel, were successfully onboarded into Guild systems, and the resulting origination volume increase demonstrates the capabilities of our expanded team and our ability to gain market share profitably, even in challenging market conditions.

David Neylan: Thank you, Terry.

David Neylan: I'd like to share some additional perspectives on our recent performance and strategic direction. In the second quarter, our Regenation Channel demonstrated Mark's progress.

David Neylan: After adjusting for contingent liabilities, this segment reached profitability, even as we integrated and began ramping up our most recent large acquisition, Academy Mortgage.

Speaker Change: During the quarter, Academy's team, in excess of a thousand personnel, were successfully onboarded into guilt systems.

Speaker Change: and the resulting origination volume increase demonstrates the capabilities of our expanded team and our ability to gain market share profitably, even in challenging market conditions.

David Neylan: Regarding our servicing segment, we are well positioned to recapture more business as whole owners opt to refinance or purchase new properties when housing markets, dynamics, and interest rates stabilize. With approximately 20% of our unpaid principal balance at rates above 6% and more than a quarter above 5%, we've identified a considerable portion of our loan portfolio able to benefit from new financing opportunities as rates decrease.

Speaker Change: Regarding our servicing segment, we are well positioned to recapture more business as homeowners opt to refinance or purchase new properties when housing markets dynamics and interest rates stabilize.

Speaker Change: With approximately 20% of our unpaid principal balance at rates above 6% and more than a quarter above 5%. We've identified a considerable portion of our loan portfolio, able to benefit for new financing opportunities as rates decrease.

Amber Cramer: Beyond refinancing options, we believe our integrated technology infrastructure uniquely positions us for sustained future growth. The synergy between our $89 billion servicing portfolio and our Guild 360 sales and marketing platform equips our sales team to provide superior service for future home purchases. We continuously analyze our portfolio for signs of intentions to buy, Dell or relocate, enabling proactive customer engagement and ongoing opportunities to create customers for life. Moving forward, we believe we will see additional growth beyond our historical volumes as we continue to execute our strategy of leveraging Guild's integrated technology, diverse product range, exceptional service, and strong brand across all channels.

Speaker Change: Beyond refinancing options, we believe our integrated technology infrastructure uniquely positions us for sustained future growth.

Speaker Change: The synergy between our $89 billion service report folio and our Guild 360 sales and marketing platform equips our sales team to provide superior service for future home purchases.

Speaker Change: We continuously analyze our portfolio for signs of intentions to buy, sell or relocate, enabling proactive customer engagement, and ongoing opportunities to create customers for life.

Speaker Change: Moving forward, we believe we will see additional growth beyond our historical volumes as we continue to execute our strategy of leveraging guilds integrated technology, diverse product range, exceptional service and strong brand across all channels.

Speaker Change: Furthermore, we believe we will capture additional market share as we realize the benefits of our expanded platform and team of loan officers able to leverage their networks to accelerate growth in the coming years.

Amber Cramer: Furthermore, we believe we will capture additional market share as we realize the benefits of our expanded platform and a team of loan officers able to leverage their networks to accelerate growth in the coming years. In summary, we are confident that our differentiated strategy, proven model, and scalable platform position Guild for continued success and expansion in the dynamic mortgage market landscape now and well into the future. All now hand the call over to Amber, who will provide a more detailed financial review. Amber? Thank you, David.

Speaker Change: In summary, we are confident that our differentiated strategy, proven model, and scalable platform position Guild for continued success and expansion in the dynamic mortgage market landscape now and well into the future.

Speaker Change: All now hand the call over to Amber, who will provide a more detailed financial review. Amber?

Amber Cramer: David, as a best standard practice, my comments will focus on sequential quarter comparisons. For the second quarter of 2024, we generated $6.5 billion of total loan originations compared to $3.9 billion in the first quarter. Net revenue totaled 286 million compared to 232 million in the prior quarter, which generated net income attributable to Guild of 38 million compared to a net income of 28 million in the first quarter. Adjusted net income was $31 million, or $0.49 per diluted share, and adjusted EBITDA was $42 million. Focusing on our origination segment, we realized a net loss of $3 million, a meaningful improvement from the prior quarter.

Amber Kramer: Thank you, David. As of our standard practice, my comments will focus on sequential quarter comparison. For the second quarter of 2024, we've generated $6.5 billion of total loan originations compared to $3.9 billion in the first quarter.

Amber Cramer: Net revenue total 286 million compared to 232 million in the prior quarter, which generated net income attributable to guild of 38 million compared to a net income of 28 million in the first quarter.

Amber Cramer: Adjusting that income of 31 million, or 49 cents per diluted share, an adjusted EBITDA was 42 million.

Amber Cramer: Welcome to our Regenation segment. We realize the net loss is 3 million. A meaningful improvement from the prior quarter. Notably, after adjusting for contingent life abilities, we would have generated positive net income for the segment in the quarter.

Amber Cramer: Notably, after adjusting for contingent liabilities, we would have generated positive net income for this segment in the quarter. We are pleased about our solid performance in the Regenation segment while continuing to ramp up big academy acquisitions. Our gain on sale margin came in at 326 basis points compared to 364 basis points in the prior quarter on funded origination. Year-to-date, the gain on sale margin is 340 basis points, which movements for timing-related adjustments and is in line with our expectations.

Amber Cramer: We are pleased about our solid performance in the Origination segment while continuing to ramp up the Academy Acquisition.

Amber Cramer: Our GNR cell margin came in at 326 basis points compared to 3654 basis points in the prior quarter on funded originations. Here today, the GNR cell margin is 340 basis points which moves for timing-related adjustments and is in line with our expectations.

Amber Cramer: Gain on sale margins on pull-through adjusted lock volume were 315 basis points compared to 290 basis points in the prior quarter, and total pull-through adjusted lock volume was $6.5 billion compared to $4.6 billion in the prior quarter.

Amber Cramer: Kano-Selmargen Gunfoulthur Adjusted Lock's volume was 315 basis points compared to 290 basis points in the prior quarter, and total pull through Adjusted Lock's volume was 6.5 billion compared to 4.6 billion in the prior quarter.

Amber Cramer: For the servicing segment, our portfolio grew to 89 billion and reported net income of 70 million compared to net income of 84 million in the first quarter. Our servicing portfolio continues to be a valuable source for ongoing cash flow, future opportunities for loan recapture, and it reinforces our customer-for-life strategy. Our balance sheet remains strong and provides us with the flexibility to continue to invest in our growth. Turning to liquidity, as of June 30th, cash and cash equivalents totaled $102 million, while unutilized loan funding capacity was $376 million, and the unutilized mortgage servicing rights lines of credit were $214 million, based on total committed amounts and borrowing base limitations.

Amber Cramer: For our servicing segment, our portfolio grew to $89 billion. We reported net income of $70 million compared to net income of $84 million in the first quarter.

Amber Cramer: Our servicing portfolio continues to be a valuable source for ongoing cash flow, future opportunities for loan recapture, and it reinforces our customer for life strategy.

Amber Cramer: Our balance sheet remains strong and provides us with the flexibility to continue to invest in our growth.

Amber Cramer: Turning to liquidity as of June 30th, cash and cash equivalent total to 102 million while unutilized loan funding capacity with 376 million.

Amber Cramer: and the Unutilized Mortgage Servicing Rights Lines of Credit was $214 million based on total committed amounts and borrowing base limitations.

Amber Cramer: Maintaining a well-positioned balance sheet continues to be a key priority for Guild. Our leverage ratio, which has been updated to be defined as recourse debt excluding HMBS liability divided by tangible equity, was 1.9 times at quarter end, a strong indicator of our prudent financial management. Book value per share at the end of the quarter was $19.90, while tangible net book value per share was $16.15.

Joe's: Maintaining a well-positioned balance sheet continues to be a key priority for Joe's. Our leverage ratio, which has been updated to be defined as recourse debt, excluding H&BS liability, divided by tangible equity, was 1.9 times that quarter-end, a strong indicator of our prudent financial management.

Amber Cramer: Book value per share at the end of the quarter was $19.90, while tangible net book value per share was $16.15. We believe we are well positioned to both manage through the current more challenging operating environment while allowing us to invest to create additional value.

Amber Cramer: We believe we are well positioned to both manage the current more challenging operating environment while allowing us to invest to create additional value. In addition, we continued our efforts to return capital to shareholders. Specifically, during the second quarter, we repurchased approximately 14,000 shares at an average stock price of $14.9 per share. As of June 30, 2024, there was $10.7 million remaining under the original $20 million share repurchase authorization. Additionally, in June, we also paid out a 50 cents per share special dividend that we announced last quarter. In July, we generated $2.3 billion of loan originations and $2.2 billion of pull-through adjusted loss volume.

Amber Cramer: In addition, we continued our efforts to return capital to shareholders. Specifically, during the second quarter, we repurchased approximately 14,000 shares at an average stock price of $14.09 per share.

Amber Cramer: As of June 30, 2024, there was $10.7 million remaining under the original $20 million share repurchase authorization. Additionally, in June, we also paid out a 50 cents per share special dividend that we announced last quarter.

Amber Cramer: In July , we generated $2.3 billion of loan originations and $2.2 billion of pull-through adjusted loss volume.

Amber Cramer: We are pleased with the positive momentum and meaningful market share gains we achieved as we move through the first half of the year. As we look ahead, we expect that the Guild platform will benefit longer term from a combination of our ongoing organic growth, acquisitions, and platform investments as we realize our mission of creating clients for life. That said, while we expect to continue to show growth, market headwinds remain, and it will take time until the market cycle fully turns and we realize the accelerated growth we anticipate. And with that, we'll open up the call to questions. Operator? Thank you.

Amber Cramer: We are pleased with the positive momentum and meaningful market share games we achieved as we move to the first half of the year.

Amber Cramer: As we look ahead, we expect that the Guild platform will benefit longer term from a combination of our ongoing organic growth, acquisitions, and platform investments as we realize our mission of creating clients for life.

Amber Cramer: That said, while we expect to continue to show growth, market headwinds remain and it will take time until the market cycle fully turns and we realize the accelerated growth we anticipate. And with that, we'll open up the call for questions. Operator?

Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: Thank you.

Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad.

Operator: A confirmation tone will indicate your line is in the question queue.

Operator: You may press star and 2 if you would like to remove a question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: We request you to restrict yourself to one question and one follow-up question for parties. Ladies and gentlemen, we will wait for a moment while we pull for questions. The first question comes from Don Fandetti with Wells Fargo; please go ahead.

Operator: We request you to restrict to one question and one follow-up question per participant.

Operator: Ladies and gentlemen, we will wait for a moment while we pull for questions.

Speaker Change: Thank you very much for watching this video, and don't forget to like, share, and subscribe to our channel.

Operator: The first question comes from Don Fandetti with Wells Fargo. Please go ahead.

Don Fandetti: Yes, Amber, the gain on sale margin was lower in Q2 versus Q1. Can you talk a little bit about the dynamic and where that's trending in July and August and expectations near term?

Don Fandetti: Yes, Amber, the gain on sale margin was lower in Q2 versus Q1. Can you talk a little bit about the dynamic and where that's trending in July and August and expectations near term?

Amber Cramer: Sure, so as I noted on the call, if you look at the year-to-date, we're at 340 basis points overall, so there is some timing differences where we had the pull-through adjusted lock volume increase significantly in Q1 and that led to that 364 down to the 326 but that 340 basis points.

Amber Cramer: That's our operational gain on sale that we were at last quarter, that's what we've seen year-to-date this quarter. We don't provide guidance going forward, but I would say we haven't seen, there's nothing to indicate any differences in that margin overall.

unknown: Though it's not stepping down as we go until it's free.

Speaker Change: Though it's not stepping down as we go and take to the reef.

unknown: You know, I mean, if you look historically here today, we're at their own 40 basis points, and so I think if you take out that smooth out that timing difference, we're aligned with where we were last year.

unknown: You know, I mean, if you look historically year to date, we're at 340 basis points. And so I think if you take out that smooth out that timing difference, we're aligned with where we were last year.

unknown: Got it. And where are you on acquisitions? Obviously, the Academy was a pretty meaningful acquisition for you. Are there still opportunities? Or are we kind of on a path to the halfway point? We're skill, have a pipeline for skill.

Speaker Change: Got it. And where are you on acquisitions? Obviously, the Academy was a pretty meaningful acquisition for you. Are there still opportunities? Or are we kind of past halfway point on that?

unknown: We still have a pipeline and are still active in the M&A space and the organic space, but it seems like the M&A side is starting to slow down a bit, but the organic side is extremely strong. So, you know, I feel like our brand in the community and the industry continues to gain steam. And so there are a lot of individual loan officers and teams of originators that are interested in hearing the Guild story and want to talk to us. So that seems to be continuing to ramp up more and more.

unknown: We're still have a pipeline and still active in the M&A space and the organic, but it seems like the M&A side is slowing starting to slow down a bit.

unknown: and but the organic side is extremely strong.

unknown: So, you know, I feel like our brand in the community, the industry.

unknown: Continues to gain steam and so there's a lot of individual loan officers and teams of originators.

unknown: Interested in hearing the Guild story and want to talk to us. That seems to be continuing to ramp up more and more.

unknown: Thank you.

Operator: The next question is from Derek Sommers with Jeffries. Please go ahead.

Derek Sommers: Thank you.

Speaker Change: The next question is from Derek Sommers with Jefferies. Please go ahead.

Derek Sommers: Hey, good afternoon, everyone, and nice quarter. Just on the 2.3 billion of originations and 2.2 billion of locks in July, is that, you know, do you view academies fully ramped up in those numbers, or is there still a little bit of, you know, kind of, you know, onboarding process to go with that?

Derek Sommers: Hey, good afternoon, everyone, and nice quarter, just on the 2.3 billion of organizations and 2.2 billion of locks in July.

Derek Sommers: Is that, you know, do you view a academy that's fully ramped in those numbers or is there still a little bit of, you know, kind of, you know, onboarding process to get with that acquisition?

unknown: I can't state it anyone else. I really can't. Go ahead, Amber, go ahead.

Amber Cramer: Okay, they're integrated into our numbers overall, but everyone is recruiting, as Terry mentioned, in terms of onboarding new loan officers, but they are on our platform fully integrated early last quarter.

Speaker Change: I was degraded.

Amber Cramer: Go ahead Amber, go ahead. Okay, they're integrated into our numbers overall, but everyone is recruiting as Terry mentioned in terms of onboarding you know new loan officers, but they are in our platform fully integrated, you know early last quarter.

unknown: Got it. Yeah, I will then...

unknown: And they're kind of at the same pace they were as far as volume in the past. I think they were between 18 and 20 percent of our volume size, and that's staying pretty steady. So to Amber's point, yeah, they're pretty integrated at this point, but we're still growing by bringing on larger teams organically, so you still should see some growth during the rest of the year.

Speaker Change: Got it. Yeah, I will then, uh...

unknown: And they're kind of at the same pace they were as far as the volume.

unknown: In the past, I think they were between 18 and 20% of our volume size, and that's staying pretty steady. So, to Amber's point, yeah, they're pretty integrated at this point, but we're still...

unknown: Growing with bringing on larger teams organically so we still should see some growth during the rest of the year.

unknown: Got it, that's helpful, call there, and then kind of the..., similar question just related to, you know, commission salaries and commissions, although the expense efficiency there, kind of any incremental color on how it all trends going forward.

Speaker Change: Got it, that helpful color, and then time is at an end.

Speaker Change: Similar question just related to, you know, salaries and commissions, all of the expense efficiency there, kind of any incremental color on how that will trend going forward would be helpful.

unknown: Yeah, I mean, if you look at our origination segment overall, and you look, whether it's cost per loan or in basis points, you know, we're at numbers we haven't seen since 2022, the end of 2022, or, my apologies, 2021. So, you know, our strategy of volume and scale is working and driving our per loan costs down. That being said, as volume increases, right, you're going to have the variable expense with the incentive comp.

unknown: Yeah, I mean, I think, yeah, if you look at our origination segment overall, and you look whether it's cost per loan or in basis points, you know, we're at numbers we haven't seen since 2022, the end of 2022. I'm sorry, 2021. So, you know,

unknown: Our strategy of volume and scale is working and driving our per loan cost down. That being said, as volume increases, you're going to have the variable expense with the incentive comp. So I think we have some capacity to build more volume at some point. We would need to hire, and salaries would be an increase for that. But I think the big win here is showing that our origination segment is profitable, excluding the contingent liability change. Our cost per loan has gone down, and in basis points has gone down as well. So the strategy is working.

unknown: So I think, you know, we have the capacity to, some capacity to build more volume; at some point, we would need to hire, right, and salaries would be an increase for that. But the big win here is showing that our origination segment is profitable, excluding the contingent liability change; our cost per loan has gone down, and in basis points, it has gone down as well. So, you know, the strategy's working.

unknown: Great and helpful, Tyler. Thanks, guys.

Speaker Change: Great. Helpful color. Thanks guys.

Operator: Thank you. The next question is from Eric Hagen with VTIG. Please go ahead.

Unknown Speaker: Unknown Speaker. Okay. Okay. Okay.

Speaker Change: Thank you. The next question is from Eric Hagen with BTIG. Please go ahead.

Eric Hagen: Hey, thanks. How are you guys doing? First question, I just want to ask about pull-through rates, how you see that maybe developing a phrase or becoming more volatile, and what your pull-through rate has historically been relative to what you might expect over the call it near term.

Eric Hagen: Hey, thanks. How are you guys doing? First question, I just want to ask about pull-through rates.

Eric Hagen: You see that maybe developing a phrase or more volatile and what your pull through rate is historically been relative to what you might expect over the call it near term.

unknown: Amber, do you want to take that one? Yes.

Amber Cramer: Yeah, we haven't seen significant changes this year overall, we're always monitoring it, and I can't say what's going to happen in the future, but we've stayed within a pretty tight range over the last, you know, I would say, six to nine months. We haven't wavered from where we're at overall.

Amber Cramer: Amber, do you want to take that one?

Amber Cramer: Yeah, we haven't seen significant changes this year, overall, we were always monitoring it and, you know, I can't say what's going to happen in the future, but we've stayed with friends within a pretty tight range over the last, you know, I would say.

Amber Cramer: 6-9 months. We haven't wavered from where we're at overall.

unknown: Okay. Is there a pull-through rate that you guys target or that you... Unknown Attendee, Kyle Joseph, Derek Sommers, Nikki Sacks, Guild Hldg

Speaker Change: Okay, is there a pull-through rate that you guys target or that you...

Speaker Change: historically seen just kind of a number that we can

unknown: I don't know what we publicly disclosed. I would have to get back to you on that. I don't want to give a number that's not out there. Sure.

Speaker Change: Thank you.

unknown: I don't know what we publicly disclosed. I would have to get back to you on that. I don't want to give a number that's not out there. Sure.

unknown: All right, and then on the hedging of the MSR portfolio, can you say what kind of products you're using to hedge that portfolio right now, and is there a, call it, a hedge ratio for the portfolio that you've historically targeted relative to what you're looking to target right now?

unknown: And then on the hedging of the MSR portfolio, can you say what kind of products you're using to hedge that portfolio right now and is there a, call it a hedge ratio for the portfolio that you've historically targeted relative to what you're looking to target right now?

unknown: Unknown Executive, Mark Cranston

unknown: Since we're a retail platform, we've been really successful at just using the natural hedge, and our production has always, in environments like that, we've always actually been more profitable. I think this next, this, I think this cycle will be a little more muted because I don't think the margins will be as, you know, grow as exponentially as they have in the past, but we always do even better in a situation like that, and I would say that right now, our coupon stack.

Speaker Change: Unknown Executive, Unknown Executive, Unknown

unknown: Since we're a retail platform, we've been really successful at just using the natural hedge and our production has always, in environments like that, we've always actually been net-net more profitable.

unknown: I think this next, I think this cycle will be a little more muted because I don't think the margins will be as, you know,

unknown: Grow as exponentially as they have in the past, but we always do even better in a situation like that, and I would say that our right now, our coupon stack.

unknown: 20% of it's over 6% 25% of it is over at 5% and above. And keep in mind that also, because we've brought in all this organic growth and M&A growth, we've got all these additional loan officers that have their customer and client base. So, you know, anything related to rates going down, I think we're going to have an even bigger benefit than we have had in the past.

unknown: 20% of it's over 6%, 25% of it is over at 5% and above.

unknown: and, you know, keep in mind that also because we brought in all this organic growth and M&A growth.

unknown: We've got all these, you know, additional loan officers that, you know, have their customer and client base. So, you know, anything related to, you know, rates going down, I think we're going to have an even bigger benefit than we've had in the past.

unknown: Yeah, and I would just add to that that historically, if you look back, we do have, you know, we were at a 69% recapture rate in prior years during the refi boom. Also, our entire MSR portfolio is originated by our loan officers. So we have relationships with our borrowers. So that helps in terms of that recapture rate in the future potential refi opportunities going forward.

unknown: Yeah, and I would just add to that that historically if you look back we do have you know, we were at a 69% recapture rate

unknown: and prior years during the refide boom, also that our entire MSR portfolio is originated by our loan officers, so we have relationships with our borrowers.

unknown: So that helps in terms of that recapture rate in the future, potential, you know, refi opportunity going forward.

unknown: Yep, that's really helpful. Thank you, guys.

Speaker Change: Yep, that's really helpful. Thank you guys.

Operator: Thank you. The next question is from Rick Shane with JP Morgan. Please go ahead.

Operator: Uh-huh.

Speaker Change: Thank you. The next question is from Rick Shane with JP Morgan, please go ahead.

Rick Shane: Good afternoon, everybody. And thanks for taking my questions.

Rick Shane: Good afternoon, everybody and thanks for taking my questions.

Rick Shane: Can we talk a little bit about

Rick Shane: The MSR that was retained during the quarter, I'm calculating the UPB was about $4.4 billion and the capitalization of that was about $74 million, does that sound right?

unknown: Can we talk a little bit about the MSR that was retained during the quarter? I'm calculating the UPV was about $4.4 billion, and the capitalization of that was about $74 million. Does that sound right?

Speaker Change: Yeah, overall, our retained was about 4 billion overall, 68% retained.

Amber Cramer: Yeah, overall, our retained revenue was about 4 billion overall, 68% retained.

Amber Cramer: Got it. And so, Amber, when I look at the numbers,

Amber Cramer: Got it. And so, Amber, when I look at the numbers, it looks like the cap rate on the MSR went up, and again, maybe call it 40 basis points quarter over quarter. Does that sound correct, and what's driving the change in that assumption?

Speaker Change: It looks like the cap rate on the MSR went up.

Amber Cramer: And again, maybe call it 40 basis points, quarter over quarter. Does that sound correct? And what's driving the change in that assumption?

Amber Cramer: I mean, I'd have to look at the exact numbers and look at the cap rate. But, overall, I mean, we're using the there's no significant change in the assumptions that we're making on our cap rate overall. I mean, the product makes the same. Our discount rates and CPRs are pretty much aligned, so there's not aren't any big differences. I mean, the numbers are slightly off from what you're calculating, so maybe that's what's driving some of the differences. Okay.

Amber Cramer: I'd have to look at the exact numbers and look at the cap rate, but the overall, I mean, we're using the, there's no significant change in the assumptions that we're making on our cap rate overall. I mean, the product mix is the same. Our discount rates and CPRs are pretty much aligned, so there's not big differences.

Amber Cramer: I mean, the numbers are slightly off from what you're calculating, so maybe that's what's driving some of the differences.

unknown: Okay, we'll follow up with that on the outline, but the question is this, so going forward. You're going, your book is going to be, you're, your business is going to be a little bit different, and it's going to be increasingly driven by the recapture from the servicing. And again, we've got an overall cap rate on that of 145 days, which suggests that when you recapture a loan, there is a 145 basis point cost associated with the amortization of that, which will offset the gain on sale.

unknown: Okay, we'll follow up with that one offline, but the question is this, so going forward,

unknown: You're going, your book is going to be, you're...

unknown: Your business is going to be a little bit different in that it's going to be increasingly driven by the recapture from the servicing book.

unknown: And again, we've got a overall cap rate on that of 145 basis points.

unknown: which suggests that when

unknown: You recapture a loan, there is 145 basis point cost associated with the amortization of that, which will offset the gain on sale. I'm curious how we think about the economics to the loan officers.

unknown: I'm curious how we think about the economics. Do the loan officers get paid as much on a recapture, or because it's easier for them and easier business for you, is there a compensation offset for them that basically sort of mitigates the impact of that increased MSR amortization?

unknown: get paid as much on a recapture, or because it's easier for them and easier business for you, is there a compensation offset for them that

unknown: diminishes, that basically sort of mitigates the impact of that increased MSR amortization.

unknown: If the loan is in our portfolio, we do have a different compensation structure for our loan office, so the compensation is lower than... Transcription by CastingWords

unknown: If the loan is in our portfolio, we do have a

unknown: different compensation structure for our loan officers. So the compensation is lower than

unknown: than a typical transaction that's not currently in our portfolio.

unknown: Is it enough to offset the cost of the amortization, or is that one of the reasons why you talk about, ultimately, sort of, and again, higher volume, lower margin? So I'm not, I just want to understand the dynamics here. Is that one of the reasons why you're talking about lower margins on a volume basis going forward because of the cost of that amortization?

unknown: Is it enough to offset the cost of the amortization, or is that one of the reasons why you talk about ultimately?

unknown: and again, higher volume lower margins. I just want to understand the dynamics here. Is that one of the reasons why you're talking about lower margins on a volume base that's going for because of the cost of that amirization?

Speaker Change: No, that was just due to, you know, in the past when we've had these re-fight, if we're in a re-fight boom, all the aggregators.

Speaker Change: seem to be adjusting their margins to get more revenue out of the transaction, just because there's so much, there's

Speaker Change: Not enough capacity to get the loans through the system so they want to slow the final down, and in this situation, I think everybody's scaled down and become a lot more efficient over the last three years that we probably won't see that type of a margin adjustment.

unknown: Uh, that makes sense. And I apologize for asking so many questions, but it's probably the benefit of being at the end of the queue. The, I guess what I'm really trying to understand is, are the unit economics on a recapture, re-fi likely to be lower on an all-in-cost, cost allocated basis than an external re-fi that your, one of your officers goes out and sources away from them?

Speaker Change: Disco Round

unknown: That makes sense, and I apologize for asking so many questions, but it's probably the benefit of being at the end of the queue. I guess what I'm really trying to understand is...

unknown: Are the unit economics on a reCAPTCHA reFI likely to be lower on an all-in cost basis?

unknown: Cost-allocated Basis, then an external-refied that one of your officers goes out and

unknown: On a per-long basis, I would say, if you're adding the amerization cost, the net net would be less. But in the past, we've always captured more business on the origination side to make up for that, on a dollar basis. You know what I mean?

unknown: On a per-long basis, I would say if you're adding the amortization cost, it would be the net net, it would be less. But in the past, we've always captured more business on the origination side to make up for that.

unknown: In a dollar's basis, you know what I mean?

unknown: understood. Yes.

unknown: I mean, look, there are going to be two parts to this business. There's going to be the recapture and the new customer business. And you're not going to just sit here, presumably, and do recapture. The officers have every incentive to go out and find additional customers away. Correct, that's right. Thank you very much.

unknown: Understood, yes. I mean, look, they're going to be two parts of the business. There's going to be the recapture in the new customer business. And you're not going to just sit here presumably and do recapture the officers have every incentive to go out and find additional customers away from the block.

Speaker Change: Correct, that's right.

Speaker Change: God, thank you very much.

unknown: And I just wanted to jump in on the pull-through adjusted lock volume question. Our rate that we publish is 88% of our rate, and it is the rate that we use to get from lock volume to pull-through adjusted lock volume, which is in our queue.

unknown: [inaudible]

Terry Schmidt: As there are no further questions, I would now like to hand the conference over to Terry Schmidt for closing remarks.

Terry Schmidt: Thank you. As there are no further questions, I would now like to hand the conference over to Terry Schmidt for closing remarks.

Terry Schmidt: I just wanted to say thank you for trusting us, and we'll keep working on continuing to grow our platform and provide additional shareholder values as we move along. We'll see you next quarter. Thank you.

Terry Schmidt: I just wanted to say thank you for trusting us and we'll keep working on continuing to grow our platform and provide additional shareholder values we move along and we'll see you next quarter. Thank you.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

unknown: No, that was just due to, you know, in the past when we've had these refi booms, all the aggregators seem to be adjusting their margins to get more revenue out of the transaction just because there's so much, there's not enough capacity to get the loan through the system, so they want to slow the final down. And in this situation, I think everybody's scaled down and become a lot more efficient over the last three years, so we probably won't see that type of margin adjustment.

unknown: [inaudible] You know, there's nothing to indicate any differences in that margin overall.