Q1 2025 UWM Holdings Corp Earnings Call
Abby: Good morning, my name is Abby and I'll be your conference operator today. At this time I would like to welcome everyone to the UWM Holdings Corporation first quarter 2025 earnings conference call.
Abby: All lines have been placed on mute to prevent any background noise.
Abby: After the speakers remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If at any time you would like to remove yourself from the queue, please repress star one.
Abby: Thank you. And Mr. Blake Kolo, you may begin your conference.
Abby: Good morning. This is Blake Kolo, chief business officer and head of investor relations.
Abby: Before we start, I would like to remind everyone that this conference concludes forward looking statements. For more information about factors that may cause actual results to differ materially from forward looking statements, please refer to the earnings release that we issued this morning.
Our commentary today will also include non-GAAP financial measures.
for information on our non-GAAP measures and metrics.
Abby: And the reconciliation between the gap and non-GAAP metrics for the reported results, please refer to the earnings release issued today, as well as our filing with the SEC.
Abby: I will now turn the call over to Mat Ishbia, chairman and CEO of UWM Holdings Corporation in United Wholesale Mortgage.
Thanks Blake and thank you everyone for joining today.
Abby: I'm very excited for what we accomplished this quarter on many fronts and for what Liza had here at UWM. We will continue investing in technology to widen the gap between us and our competition, regardless of how the industry or markets may change due to technology rich, we will continue to lead the way.
Abby: Since 2022, the mortgage broker's channel, share of the industry is up almost 40% from about 19.7 to almost 28%, the highest level we've seen since 2008, I believe.
This is an incredible growth that we are very excited about.
Abby: I say this a lot. If I would ask all you go back and listen to our initial from early 2023 or even 22 or 21, but 23 when we talked about game on pricing and how we are going to invest in the business and invest in the channel to grow. Many people were concerned about lowering the margins like we did. However, I knew and we knew it would be the best of the broker channel long term.
Abby: The current numbers proved that we made the right decision, and we're just getting started with all the success from that decision years ago. Switching gears I want to address a topic that many of you recently acquired about, last week we announced our strategic decision to bring servicing in-house. This is something we've been contemplating for many years, however we believe now is the time to make this investment. This is something we've been contemplating for many years now. This is something we've been contemplating for many years.
by leveraging Ladies Technology and AI. Bye.
Abby: Our plan is to be the most efficient servicer in America. We are excited to control this part of the process and look for the cost savings that we will achieve, which some people can estimate between $40 and $100 million a year. We're very excited about that opportunity once we get this fully done and going.
Abby: During our past few earnings call, we discussed how UWM is uniquely prepared to win in any type of market. And with the significant volatility of the past couple of months, we showcase that preparation several times.
Abby: When there were brief periods of low rates, our refined operational excellence enables to double our daily productions levels without stack versus speed quality or service and when the rates were higher we demonstrated our continued dominance on the purchase market.
Abby: The numbers tell even better stories, so let's get into them. We close 32.4 billion a production for the quarter, obviously within guidance, and that's a 70% growth year over year, which will outperform the whole industry.
Abby: We also delivered about $10.6 billion R5 volume, almost double what we delivered in the first quarter of 2024. A large portion that came in a small window between the end of February and the beginning of March, really illustrating the power of our business.
The game manager was 94 basis points, [inaudible]
Abby: While we post a $247 million net loss, I want to make sure everyone realizes this is inclusive of $388 million dollar reduction of fair value of our MSR portfolio. As we discussed several times we have zero control over this MSR values whether it goes up or down, so it's really not that relevant to me, but we did have an amazing quarter and we're profitable on all the measures we look at. [inaudible]
Abby: I want to highlight two other key operational metrics. First, our submission to clear the close.
Abby: for the quarter was 12.7 days. While some of the best in this year are still running 40 to 45 days.
12.7 is outstanding. Beyond that, we improve this metric
Abby: By over a day from 13.9 in the first quarter of 2024, despite doing almost 20% more business. So as you see our AI initiatives and things that we've been rolling out, actually impacting the business day to day by seeing that speed and success. Second, our net promoter score for the quarter was 87.3.
Abby: You know companies with MPS in the 60s and 70s are viewed as world class. This is one of the best MPS scores in the last couple of years and reflect of our industry leading service levels, which you know from our experience will continue to drive more volume in the second quarter and beyond. [inaudible]
Abby: As you can see, this is another really strong quarter for UWM, while the macro environment may remain choppy, we will continue to invest in winning and I can promise you there's no other mortgage lender that is better equipped and prepared to help brokers, borrowers, regardless what the market does and we're excited to show it to you as soon as the opportunity shows. [inaudible]
Mathew Ishbia: I'll now turn the call over to our CFO , Rami Hassani. Here's a new CFO here at UWM has been a key member of our finance team since 2020 and it was the obvious choice to become our next CFO . So I'll turn it over to you, Rami.
Rami Hassani: Thank you, Matt. I appreciate it. Jumping into the numbers, Q1 2025 revenue of $613 million, and that loss of $247 million, inclusive of $388 million reduction in the fair value or MSR portfolio, and adjusted the level of $50 million.
Rami Hassani: As we've discussed before, our focus continues to be on investing in our people, processes and technology.
Rami Hassani: As well as our broker partners to prepare UWM and our brokers collectively for continued growth in 2025 and beyond. We continue to invest in growing our operations, underwriting, and technology teams to support increased production volume, which we experience in Q1 of 25 compared to Q1 of 24 at 17%
Rami Hassani: We continue to originate more than 20 billion a quarter in purchase volume for eight quarters in a row and we view that as our base that no other lender can approach. We almost doubled our V5 volume year from 5.5 to 10.6 billion, despite the rate environment being less than optimal.
Rami Hassani: While our cost of increase compared to Q124, our costs are substantially aligned to Q4 of 24, which is on strategy for investing for continued growth. More specifically, we believe our business is currently in a position to handle twice our 2024 origination volume with minimal impact to our fixed costs.
Rami Hassani: We also maintain our liquidity and capital and leverage ratios within what we believe to be acceptable ranges in the current environment.
Rami Hassani: As of the end of Q125, we had 485 million of cash, 2.4 billion of total accessible liquidity, and MSR portfolio with a fair value of 3.3 billion, overall a strong liquidity position.
Rami Hassani: In summary, Q1 25 was a period of continued investment in operational capabilities to remain prepared for what we see as significant market opportunities for UWM and our broker partners.
Speaker Change: We have also continued to remain prepared for these opportunities from a capital and liquidity perspective and we believe that we remain well positioned operationally and financially for any market cycle. I will now turn things back over to our chairman, president CEO , Mathew Ishbia for closing remarks.
Thanks, Rami. So I'll close with a couple quick points.
Speaker Change: Before the Q&A. The way I think about the business is really simple, volume, gain margin and expenses and we're running out of all these. The expenses part we're investing in the business and we feel great about it even though they're higher than the Q1 because those are investments.
Speaker Change: Investments in the growth and success of our business. The game margin was a little lower in Q1, but we were training higher overall and our volume was up 17% year over year. That's how we run the business.
Speaker Change: As long as we manage these three things, we will continue to dominate [inaudible]
Speaker Change: We are the leaders not just in the mortgage business, but also the leaders in tech.
Speaker Change: here at UWM. The things that we are rolling out the next few weeks and months are game changers. Just show you guys know, whatever you think you know about our business, how dominant we are, it's about to change in a big way. We're about to roll out some things from the best technology you've ever seen or heard of, and it's coming real soon, like, not 2030, like 2025, in 2026.
Speaker Change: The cool things we're going to be doing, they'll impact the business [inaudible]
Speaker Change: Also, as I talked a lot of our large shareholders and investors, I consistently get the message about getting more float in the market. As you guys know, I own about 87% of control, 87% of the shares. Back in March, I put out a 10-B5 program that you'll see in the 10-Q that will go in effect June 17th.
Speaker Change: to basically get more float and make it a consistent process rather than some of the one-off things we've done to try to increase float, which we've done a good job of now will be consistent across the board, where you know exactly what to expect. There will be no more uncertainty and no more creative ways to get float out there. We're going to be consistent with the 10B5, and although I believe, even when I...
Speaker Change: You know, did the docons back in March? It's undervalued, but I believe that if I sell enough float to get out there and get more float in the market, that the other 80, 80, 80, 82% of shares I own still after this next year or two that we do this.
Speaker Change: will be worth much, much more. And so we're excited to hopefully serve what the shareholders want. On top of that, on the shareholder side, we're excited to announce our dividend again. We're consistently
Speaker Change: Pay the dividends that we have for four plus years now, as you guys know, and even at these share prices is a fantastic deal, but we always reward our shareholders, and we have been for years, and we're excited about rolling that out, again, this quarter of $0.10 or $0.40 for the years, what we've been doing.
Mathew Ishbia: Lastly, I'm very excited that many of you on this call in over 5,000 our clients from all 50 states are going to be here in Pontiac next week for UWM Live. It's going to be in the form in an eventful two days that will hopefully change the industry in a huge way. I can't wait to share with what we got going.
Speaker Change: Now quickly on guidance, we expect our second quarter production to be between 38 and 45 billion?
Speaker Change: As a reminder, we did 33.6 billion in Q2, 2020, and I think in the last three years since I don't think we've done over 40 billion I'm actually hoping we we eclipse the 40 billion dollar range and dominate this quarter as we will see the purchase market being strong and opportunities for us to continue to grow here at UWM. [inaudible] I'm sorry, I'm sorry
Speaker Change: Now, with the game margin, I expected between 90 and 115 bases points before, as I said, we control this and we decide what we think is best and then we between 90 and 115 in the second quarter as we continue to help our brokers win and grow their business as we continue to grow as well. Now, I'm going to turn it over to Q&A and look forward to talking to all of you guys. Now, I'm going to turn it over to you guys.
Speaker Change: At this time, I would like to remind everyone in order to ask a question, press star of the number one on your telephone keypad. If at any time you would like to remove yourself from the queue, please repress star one. At this time, we will pause momentarily to assemble our roster.
Speaker Change: And we will now begin the question and answer session. Your first question comes from the line of Eric Hagen with BTIG. Your line is open.
Speaker Change: Hey, good morning, guys. Hope you're doing well. On moving the servicing in-house, I mean, what kind of timeline are you looking at? Can you talk about any one-time costs, other resources, or investments you need to make that happen? And then how does it maybe improve the recapture effort as a result of bringing it all in-house? Thanks, guys.
Speaker Change: Yeah, thanks a lot, Eric. Appreciate it. Yeah, we're like, you know, everything we do we do fast so our expectation is to bring servicing a house and start boring loans at the beginning of 26 and hopefully have it all in house by the end of next year if you think of it that way. So we'll be able to see those significant expense reductions and at the same time as you point out, the more important part is [inaudible]
Speaker Change: One, the recapture rate, but two, the service levels we can provide, the consumers. The consumers get such amazing service working with a mortgage broker with UWM, and then maybe they don't get that same.
Speaker Change: Biel, all the way through the process when they're paying their mortgage payment for the next couple years.
Speaker Change: They'll have that now because we'll control that process 100% in addition to that.
even hit the radar on the financial side. [inaudible]
Speaker Change: Yeah, got you. Definitely support that move from you guys. Imagine almost all of the production last quarter was fixed rate loans, but at what point do you think arms make a comeback? Like do you see that being a compelling affordability product for borrowers, especially like right now, and are you in the position to competitively offer arms? And then like, how do you think a shift to adjustable rate loans could maybe get valued in the MSR market with the intentions to sell those loans?
Yeah, so obviously, as rates go up...
Speaker Change: Arms become more exciting, especially with the yield curve being more normalized.
Speaker Change: But with that being said, people still think arms is a four-letter word and people are scared of arms and so I don't think many people it's so you know how much arms will be could it be 10% I mean 15%
Speaker Change: I don't think it gets close to those numbers, and so I don't think it's relevant, I don't think it's really that important. We do have some arm programs, we do some little bit here and there, but most consuming them rates will, the 10 year goes down to 410 and 405, and no one will touch an arm again, right? And so it just...
Speaker Change: It just depends on the situation in the market. Arms are probably more over rebuy program. We're doing some temporary buy downs which is an interesting thing out of purchase which kind of gives them a little bit lower rate for the first 12 or 24 months. And then it sets them up for future refinance down the road. If rates go down like everyone expects. Let's go back.
Speaker Change: But so arms are interesting, but I don't think there is viable and is as big an opportunity as maybe they were 5, 7, 8 years ago from my perspective but we are prepared and we do a little bit of it and we will probably do a little bit more but it won't be meaningful enough that it will hit your guys radar.
Speaker Change: Yeah, gotcha. Thank you for the color and look forward to seeing you guys next week.
Bose George: And our next question comes from the line of Bose George with KBW. Your line is open.
Bose George: And please check your mute button. Your line is open. Sorry about that. It was muted. Good morning. I just wanted to follow up on the MSR question. Actually, given the change with servicing in-house, could that change how you dispose of MSRs? Could you hold more MSRs to capture more value that way as well?
Bose George: Yeah, absolutely. So we look at all those things all the time. You know, we were not selling MSRs because we were subservicing and we're not going to hold them because we're servicing ourselves. We're going to be opportunistic like we always have.
Bose George: Now, the fact that we control the process, that we can control the experience even more, it makes me lean a little more towards retaining more of it. But it's all dependent on the opportunities. Once again, people want to offer me six and a half, seven multiples, seven and a half multiples on MSRs.
Bose George: I have a lot of MSRs, right, and those opportunities are there, but the reality of it is understanding what's best for the businesses, what we always think about, what's best for our clients as in the brokers, what's best for consumers, what's best for our team members, what's best for our shareholders. And so we look at all those things, we think bringing servicing in-house is best for us at this point. It's been in the flagship point, we've been 50-50 for a while on it, and we kind of pushed our over-the-edge recently, and we're excited about that savings, that experience enhancement.
Bose George: And once again, it couldn't make us hold MSR differently or think of it, absolutely, but we're looking at all things at all times.
Speaker Change: Okay, great. And then in terms of GSE reform, obviously there's a lot of noise on potential privatization. Can you just talk about what you're hearing and anything you might be doing in terms of preparing that potentially happening? [inaudible]
Speaker Change: Yeah, I mean, I think that that stuff's way, way far in the future if it even happens. Here's what I'd say about it. I think you got...
Great leaders now running.
Speaker Change: The Mortgage Market from FHFA director of Bill Poulty to a HUD director of Scott Turner. You got people on top of the mortgage bins, obviously, all that goes up through the president. I think people that actually care and understand it, so I think they're going to make the right decisions for all of us.
Speaker Change: and so my view on it is, whatever happens, we will win with it because we are nimble, we react quickly, we make changes and we impact the business in our brokers in a positive way.
Speaker Change: and if nothing changes, we'll continue to win that way. So, you know, nothing's changing as of now. I think the best part is you have great leaders in
Speaker Change: That's a Jeffrey director, the head of HUD, and people that actually care and want to do what's best for consumers, and the mortars lending the MTA and the housing market in general, and they understand it, which is a little bit different than we've had in the past.
Speaker Change: Okay, great, thanks a lot and looking forward to next week.
Look forward to seeing you there, too.
Speaker Change: And your next question comes from the line of Jeff Adelson with Morgan Stanley . Your line is open.
Jeff Adelson: Today, good morning, guys. Thanks for taking my questions. Now, I was wondering if you could just maybe help us understand what's sort of embedded in the second quarter outlook. I know you mentioned that hopefully you can get over the $40 billion, right? But I'm just wondering is that more of a stable environment, environment for where we're sitting today or just maybe help us understand what else is speaking into that? [inaudible]
Jeff Adelson: Hey, thanks, Jeff. Nice to connect with you, buddy. So, I guess I'll say this.
Jeff Adelson: You know nothing it's not like interest rates are real low and I'm saying let's do 40 billion plus I'm saying we've been building we've been investing all these things having the broker channels now it is highest it's been in since 2008 so all the things that we've been talking about for years are starting to happen now
Jeff Adelson: We have rates drop a little bit and we won't talk about 40, we'll talk about 60 billion, right? There's opportunities right there and we're ready to do that tomorrow if the 10-year dropped, right? So the way I look at it is, but I am trying to guide you guys towards that hate.
Jeff Adelson: We haven't hit over 40 billion since the Reef Eye Booms times and we are going to do that at this quarter and I know I got it 38 to 45 but I expect this to do over 40 billion and that's a that's a big statement compared to what we did last year in the second quarter compared to what we did even in this first quarter this year where everyone else is kind of hovering our investments. [inaudible]
Jeff Adelson: have been wearing working. Our broker channel is winning. And then on top of that, the technology stuff that's going to come out in the second quarter, Jeff, I think you're going to be here at UWM Live, along with a lot of people on this call.
Jeff Adelson: It's going to blow your mind. And it's just the beginning, just the beginning what we're doing. And so you'll understand the strategy even more as you see the things we're doing and brokers are going to grow, UWM is going to grow and we're all going to win together and watch out. Because of race strap, I got bigger numbers and different things. But if they don't, you see where we're trending and how we're doing things and that's what we're going to keep doing. [inaudible]
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Okay, great thanks. And obviously there's been, you know, there's been a big deal announcing the space and just sort of wondering, you know, do you guys have a view of how that might change competition in the space if at all? And, you know, what's United's own view on eminent as well as as it looks going forward in addition to all the types of events that you're looking for here. Is there anything that you'd be looking to maybe both your own tech ambitions in the space? [inaudible]
Jeff Adelson: Yeah, you broke up a little bit at the beginning because of M&A.
Jeff Adelson: Oh, yeah, I was just saying there was obviously a big transaction in the space from one of your competitors. So I'm just sort of wondering your reaction to the impact on this.
Jeff Adelson: Yeah, so, yeah, I guess my take, and I think, you know, in general, my take is, you know, we look at everything in opportunities from an MA perspective, but we're a build versus buy type of company. I can buy something and then make you guys feel really good, and you guys can try to pump my stock price for a little bit, but it wouldn't be the right decision for our long-term business. Now, there are things that we look at and we could buy, but for my technology stuff, I mean, I'm going to go out and buy a bunch of these company, you know, [inaudible]
Jeff Adelson: in, you know, going to buy a bunch of these companies to try to, like, pump my stock, whatever the words you want to use, you know, spend billions and billions of dollars potentially just to get a couple more leads. Like, our business is organic, it's been dominant, and it will continue to be dominant. Now, we're opportunistic, if an opportunity comes up, we always look at it, but that's really not the strategy right now. The strategy is, let's dominate. And the same thing on the tech side, you know, the tech side, you know, people only go buy this company that could do this, that could come up with some AI stuff, or I'm just going to sit here with my almost 2000 technology. [inaudible]
Speaker Change: and people and build the best stuff in the world. And so that's kind of how I lean on that stuff. But we're open to everything and everyone has their own strategy, and we're going to keep doing it our way. But we're always opportunistic of the right thing came up.
Great, thanks for taking my questions and see you next week.
Thank you.
Speaker Change: And your next question comes from the line of Mikhail Goberman with citizens. Your line is open.
Speaker Change: Hey, good morning guys. Thanks for taking the question. Excited to hear about these technological changes coming down the coming up and just wondering how do you guys expect those changes to affect the expense base going forward. Thanks.
Good question. So yeah, the technology enhancements, the AI investments.
Um...
Speaker Change: You know, it's going to, how's it going to impact expenses? I mean, we're going to continue to invest and so will our costs go down? Absolutely, or our revenue go up? Absolutely. So if those are the things you care about and focus on then you'll probably be happy with all the things we're doing. With that being said, I can roll out or explain what I'm doing now on this call but.
Speaker Change: We look at all these things. I'm the expense side.
Speaker Change: You know, the fixed costs are kind of at a peak based on where we think of things but realize that
Speaker Change: You know, you think they're higher? Well, look at it as I'm just investing and other people can't they can't afford to invest right now and we are prepared and like I just said on a I think question or two ago like
Speaker Change: You know, we're going to 35, 40, 45 billion dollars, a lot of these quarters and we're going to do some great things.
Speaker Change: But then, you know, Ray Stroppel, we'll do 60, nobody else can do that. And our Jay and I, Sam Marge will be higher and our volume will be higher and our expenses will basically stay the same from a fixed perspective. And so imagine that and that's how we will build the business where nobody else can prepare for that. So we feel good, you know, I think our expenses...
Speaker Change: As you will say, are up 25% from last year's first quarter. Oh my goodness.
Speaker Change: Our volume's up 17%. So there's an 8% delta. I think that's pretty good to be honest. You do based on the amount of investment and stuff that we've been working on. So I focus on investing in the business in the future. I'm not focused on expenses. I was focused on expenses.
Speaker Change: As my primary thing, we would not be prepared to dominate as we are right now and so when that domination can I mean we've been dominating for three four years now as you guys have seen but it's a whole not a level what you'll see in the near future. Thank you.
[inaudible]
All right, thank you, Matt. I appreciate it.
Speaker Change: Andrew, our final question comes from the line of Doug Harder or CBS . Your line is open.
Doug Parter: Thanks. In your prepared remarks, you talked about the, you know, being comfortable with the leverage range that you're in right now. Can you just maybe put some numbers around that? What is kind of the target non-funding debt equity range that you're looking at?
Speaker Change: Doug, that stuff is not the focus of the business. We're really in a great position on that stuff. I know you like to focus on things that are not relevant, but that's not relevant.
That's just like-
Speaker Change: Someone that looks at a spreadsheet all day is asking me that question. Not someone that actually understands the mortgage business in our industry and what we're trying to do. And so, like, come out to UWM Live.
Speaker Change: I think you're going to be there so you'll understand the tech investments, what we're doing, like our non-funding debt ratios, all those things are in great position. We feel really good about our cash position.
Speaker Change: Our Network, our all-bar ratios, and we have a lot of room in there to continue to grow, and I think you'll see that stuff after this second quarter, and I think you'll be excited to see those numbers go to the ways you might like.
Great. Thanks.
Speaker Change: And that will wrap up the Q&A portion I would like to turn the call back over to Mat Ishbia for closing remarks.
Speaker Change: Hey, thanks so everyone for the questions. We're really happy with the quarter to be honest with you and I'm actually even more excited about the second quarter so we feel like we're in a great, great position as a company.
Speaker Change: You know, I like to say never been stronger because I know what we're about to roll out and how we're going to do different things over the next 3 to 12 months. But in general, I appreciate all your support. I look forward to seeing a lot of you at UWM Live. It really means a lot to us. I look forward to spending time with you guys there and talking about the business and when I can open up a little bit more about all the great things we're doing here. It's going to be a lot of great things coming out soon. And then...
Speaker Change: Soon after that as well. So thank you for the time. Have a great day and look forward to see you guys soon.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.
Please wait, the conference will begin shortly.