rkt-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number: 001-39432

Rocket Companies, Inc.

(Exact name of registrant as specified in its charter)


Delaware						84-4946470
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1050 Woodward Avenue, Detroit, MI						48226
(Address of principal executive offices)						(Zip Code)

(313) 373-7990

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.00001 per share

RKT

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 5, 2024, 145,835,235 shares of the registrant's Class A common stock, $0.00001 par value, and 1,848,879,483 shares of the registrant's Class D common stock, $0.00001 par value, were outstanding.

Rocket Companies, Inc.

Form 10-Q

For the period ended September 30, 2024


	Table of Contents

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Changes in Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	57
Item 4.	Controls and Procedures	57

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 5.	Other Information	59
Item 6.	Exhibits	60
Signature		61

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Rocket Companies, Inc.

Condensed Consolidated Balance Sheets

($ In Thousands, Except Per Share Amounts)


	September 30, 2024		December 31, 2023
Assets	(Unaudited)
Cash and cash equivalents	$	1,228,234	$	1,108,466
Restricted cash	20,363		28,366
Mortgage loans held for sale, at fair value	10,978,259		6,542,232
Interest rate lock commitments (“IRLCs”), at fair value	228,204		132,870
Mortgage servicing rights (“MSRs”), at fair value	6,810,667		6,439,787
Notes receivable and due from affiliates	15,226		19,530
Property and equipment, net of accumulated depreciation and amortization of $598,768 and $536,196, respectively	229,377		250,856
Deferred tax asset, net	535,776		550,149
Lease right of use assets	296,631		347,696
Forward commitments, at fair value	7,655		26,614
Loans subject to repurchase right from Ginnie Mae	2,283,017		1,533,387
Goodwill and intangible assets, net	1,233,954		1,236,765
Other assets	1,250,771		1,015,022
Total assets	$	25,118,134	$	19,231,740
Liabilities and equity
Liabilities
Funding facilities	$	8,499,043	$	3,367,383
Other financing facilities and debt

Senior Notes, net	4,037,557		4,033,448
Early buy out facility	106,863		203,208
Accounts payable	175,925		171,350
Lease liabilities	335,950		393,882
Forward commitments, at fair value	62,991		142,988
Investor reserves	99,080		92,389
Notes payable and due to affiliates	30,511		31,006
Tax receivable agreement liability	584,695		584,695
Loans subject to repurchase right from Ginnie Mae	2,283,017		1,533,387
Other liabilities	550,118		376,294
Total liabilities	$	16,765,750	$	10,930,030
Equity
Class A common stock, $0.00001 par value - 10,000,000,000 shares authorized, 144,920,227 and 135,814,173 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.	$	1	$	1
Class B common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of September 30, 2024 and December 31, 2023.	—		—
Class C common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of September 30, 2024 and December 31, 2023.	—		—
Class D common stock, $0.00001 par value - 6,000,000,000 shares authorized, 1,848,879,483 shares issued and outstanding as of September 30, 2024 and December 31, 2023.	19		19
Additional paid-in capital	373,362		340,532
Retained earnings	278,955		284,296
Accumulated other comprehensive income	60		52
Non-controlling interest	7,699,987		7,676,810
Total equity	8,352,384		8,301,710
Total liabilities and equity	$	25,118,134	$	19,231,740

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

($ In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue
Gain on sale of loans
Gain on sale of loans excluding fair value of originated MSRs, net	$	506,688	$	241,496	$	1,396,128	$	786,128
Fair value of originated MSRs	337,702		330,627		906,044		850,027
Gain on sale of loans, net	844,390		572,123		2,302,172		1,636,155
Loan servicing (loss) income
Servicing fee income	373,796		344,061		1,074,219		1,054,037
Change in fair value of MSRs	(878,311)		12,765		(934,744)		(343,137)
Loan servicing (loss) income, net	(504,515)		356,826		139,475		710,900
Interest income
Interest income	108,566		93,868		309,961		241,369
Interest expense on funding facilities	(101,820)		(67,059)		(234,556)		(161,683)
Interest income, net	6,746		26,809		75,405		79,686
Other income	300,327		247,410		814,334		678,722
Total revenue, net	646,948		1,203,168		3,331,386		3,105,463
Expenses
Salaries, commissions and team member benefits	607,526		589,584		1,702,042		1,772,498
General and administrative expenses	221,074		199,399		690,691		595,214
Marketing and advertising expenses	200,528		193,406		617,761		593,853
Depreciation and amortization	28,607		27,636		83,633		83,678
Interest and amortization expense on non-funding debt	38,620		38,354		115,349		115,021
Other expenses	47,912		37,164		128,817		105,191
Total expenses	1,144,267		1,085,543		3,338,293		3,265,455
(Loss) income before income taxes	(497,319)		117,625		(6,907)		(159,992)
Benefit from (provision for) income taxes	15,895		(2,680)		(5,878)		2,606
Net (loss) income	(481,424)		114,945		(12,785)		(157,386)
Net loss (income) attributable to non-controlling interest	459,413		(108,739)		8,284		152,507
Net (loss) income attributable to Rocket Companies	$	(22,011)	$	6,206	$	(4,501)	$	(4,879)

(Loss) earnings per share of Class A common stock
Basic	$	(0.16)	$	0.05	$	(0.03)	$	(0.04)
Diluted	$	(0.19)	$	0.04	$	(0.03)	$	(0.06)

Weighted average shares outstanding
Basic	141,763,221		129,390,501		139,475,981		126,971,718
Diluted	2,003,296,515		1,983,992,350		139,475,981		1,979,203,982

Comprehensive (loss) income
Net (loss) income	$	(481,424)	$	114,945	$	(12,785)	$	(157,386)
Cumulative translation adjustment	(358)		164		161		12

Comprehensive (loss) income	(481,782)		115,109		(12,624)		(157,374)
Comprehensive loss (income) attributable to non-controlling interest	459,747		(108,893)		8,133		152,496
Comprehensive (loss) income attributable to Rocket Companies	$	(22,035)	$	6,216	$	(4,491)	$	(4,878)

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Changes in Equity

($ In Thousands)

(Unaudited)


	Class A Common Stock Shares	Class A Common Stock Amount		Class D Common Stock Shares	Class D Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Non-controlling Interest		Total Equity
Balance, December 31, 2022	123,491,606	$	1	1,848,879,483	$	19	$	276,221	$	300,394	$	69	$	7,898,845	$	8,475,549
Net loss	—	—		—	—		—		(18,523)		—		(392,960)		(411,483)
Cumulative translation adjustment	—	—		—	—		—		—		—		7		7
Unrealized loss on investment securities	—	—		—	—		—		—		(101)		(1,488)		(1,589)
Share-based compensation, net	1,390,650	—		—	—		3,217		—		—		47,596		50,813
Distributions for state taxes on behalf of unit holders (members), net of refunds	—	—		—	—		—		(209)		—		326		117
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		23		—		347		370
Taxes withheld on team members' restricted share award vesting	—	—		—	—		(444)		—		—		(6,550)		(6,994)
Issuance of Class A common stock under share-based compensation plans	878,817	—		—	—		456		—		—		6,794		7,250
Change in controlling interest of investment, net	—	—		—	—		15,268		(688)		—		(19,275)		(4,695)
Balance, March 31, 2023	125,761,073	$	1	1,848,879,483	$	19	$	294,718	$	280,997	$	(32)	$	7,533,642	$	8,109,345
Net income	—	—		—	—		—		7,438		—		131,714		139,152
Cumulative translation adjustment	—	—		—	—		—		—		(9)		(150)		(159)
Unrealized gain on investment securities	—	—		—	—		—		—		101		1,488		1,589
Share-based compensation, net	574,094	—		—	—		3,170		—		—		46,221		49,391
Contributions from unit holders (members) to subsidiary investment, net	—	—		—	—		—		—		—		61,378		61,378
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		82		—		1,200		1,282
Taxes withheld on employees' restricted share award vesting	—	—		—	—		(210)		—		—		(3,050)		(3,260)
Issuance of Class A common stock under share-based compensation plans	794,282	—		—	—		465		—		—		6,803		7,268
Change in controlling interest of investment, net	—	—		—	—		3,997		—		—		(5,129)		(1,132)
Balance, June 30, 2023	127,129,449	$	1	1,848,879,483	$	19	$	302,140	$	288,517	$	60	$	7,774,117	$	8,364,854
Net income	—	—		—	—		—		6,206		—		108,739		114,945
Cumulative translation adjustment	—	—		—	—		—		—		10		154		164
Share-based compensation, net	3,338,087	—		—	—		2,671		—		—		38,213		40,884
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		47		—		661		708
Taxes withheld on employees' restricted share award vesting	—	—		—	—		(1,282)		—		—		(18,165)		(19,447)
Issuance of Class A common stock under share-based compensation plans	802,759	—		—	—		540		—		—		7,809		8,349
Change in controlling interest of investment, net	—	—		—	—		12,935		—		(2)		(17,017)		(4,084)
Balance, September 30, 2023	131,270,295	$	1	1,848,879,483	$	19	$	317,004	$	294,770	$	68	$	7,894,511	$	8,506,373

Rocket Companies, Inc.

Condensed Consolidated Statements of Changes in Equity

($ In Thousands)

(Unaudited)



	Class A Common Stock Shares	Class A Common Stock Amount		Class D Common Stock Shares	Class D Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Non-controlling Interest		Total Equity
Balance, December 31, 2023	135,814,173	$	1	1,848,879,483	$	19	$	340,532	$	284,296	$	52	$	7,676,810	$	8,301,710
Net income	—	—		—	—		—		16,215		—		274,499		290,714
Cumulative translation adjustment	—	—		—	—		—		—		21		293		314
Share-based compensation, net	2,458,761	—		—	—		2,060		—		—		27,722		29,782
Distributions for state taxes on behalf of unit holders (members)	—	—		—	—		—		(19)		—		(255)		(274)
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		2		—		29		31
Taxes withheld on team members' restricted share award vesting	—	—		—	—		(1,152)		—		—		(15,410)		(16,562)
Issuance of Class A common stock under share-based compensation plans	538,683	—		—	—		454		—		—		6,161		6,615
Change in controlling interest of investment, net	—	—		—	—		8,917		—		(1)		(11,795)		(2,879)
Balance, March 31, 2024	138,811,617	$	1	1,848,879,483	$	19	$	350,811	$	300,494	$	72	$	7,958,054	$	8,609,451
Net income	—	$	—	—	$	—	$	—	$	1,295	$	—	$	176,630	$	177,925
Cumulative translation adjustment	—	—		—	—		—		—		13		192		205
Share-based compensation, net	506,140	—		—	—		2,652		—		—		35,095		37,747
Distributions for state taxes on behalf of unit holders (members)	—	—		—	—		—		(6)		—		(86)		(92)
Distributions to unit holders (members) from subsidiary investment, net	—	—		—	—		—		(837)		—		(13,013)		(13,850)
Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		12		—		161		173
Taxes withheld on employees' restricted share award vesting	—	—		—	—		(305)		—		—		(4,029)		(4,334)
Issuance of Class A common stock under share-based compensation plans	645,826	—		—	—		554		—		—		7,357		7,911
Change in controlling interest of investment, net	—	—		—	—		3,898		—		—		(5,113)		(1,215)
Balance, June 30, 2024	139,963,583	$	1	1,848,879,483	$	19	$	357,610	$	300,958	$	85	$	8,155,248	$	8,813,921
Net loss	—	—		—	—		—		(22,011)		—		(459,413)		(481,424)
Cumulative translation adjustment	—	—		—	—		—		—		(24)		(334)		(358)
Share-based compensation, net	3,576,274	—		—	—		2,760		—		—		35,883		38,643
Distributions for state taxes on behalf of unit holders (members)	—	—		—	—		—		(2)		—		(30)		(32)

Forfeitures of Special Dividend to Class A Shareholders	—	—		—	—		—		10		—		139		149
Issuance of Class A Common Shares upon exercise of stock options	775,211	—		—	—		992		—		—		12,846		13,838
Taxes withheld on employees' restricted share award vesting	—	—		—	—		(2,632)		—		—		(33,688)		(36,320)
Issuance of Class A common stock under share-based compensation plans	605,159	—		—	—		612		—		—		8,060		8,672
Change in controlling interest of investment, net	—	—		—	—		14,020		—		(1)		(18,724)		(4,705)
Balance, September 30, 2024	144,920,227	$	1	1,848,879,483	$	19	$	373,362	$	278,955	$	60	$	7,699,987	$	8,352,384

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Cash Flows

($ In Thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Operating activities
Net loss	$	(12,785)	$	(157,386)
Adjustments to reconcile Net loss to Net cash used in operating activities:
Depreciation and amortization	83,633		83,678
Provision for (benefit from) deferred income taxes	5,600		(3,587)
Origination of MSRs	(906,044)		(850,027)
Change in fair value of MSRs, net	940,747		321,866
Gain on sale of loans excluding fair value of originated MSRs, net	(1,396,128)		(786,128)
Disbursements of mortgage loans held for sale	(72,075,853)		(61,002,673)
Proceeds from sale of mortgage loans held for sale	68,853,271		60,950,186
Disbursements of non-mortgage loans held for sale	(236,845)		(125,756)
Change in fair value of non-mortgage loans held for sale	1,503		2,785
Share-based compensation expense	109,925		144,748
Change in assets and liabilities
Due from affiliates	4,304		36
Other assets	44,460		(5,069)
Accounts payable	4,576		83,586
Due to affiliates	(495)		(3,251)
Other liabilities	107,723		63,433
Total adjustments	$	(4,459,623)	$	(1,126,173)
Net cash used in operating activities	$	(4,472,408)	$	(1,283,559)
Investing activities
Net proceeds from sale of MSRs	$	219,694	$	897,894
Net purchase of MSRs	(641,975)		(106,389)
Decrease in mortgage loans held for investment	11,243		7,325
Purchases of investment securities, available for sale	—		(5,472)
Sales of investment securities, available for sale	—		6,479
Purchase and other additions of property and equipment, net of disposals	(48,787)		(60,876)
Net cash (used in) provided by investing activities	$	(459,825)	$	738,961
Financing activities
Net borrowings on funding facilities	$	5,131,660	$	1,121,704

Net payments on early buy out facility	(96,345)		(416,133)
Net borrowings on notes payable from unconsolidated affiliates	—		536
Proceeds from consolidated CFE, net	51,030		—
Stock issuance	33,288		19,475

Taxes withheld on team members' restricted share award vesting	(57,216)		(29,701)
(Distributions to) contributions from other unit holders (members of Holdings)	(18,580)		51,528
Net cash provided by financing activities	$	5,043,837	$	747,409
Effects of exchange rate changes on cash and cash equivalents	161		12
Net increase in cash and cash equivalents and restricted cash	111,765		202,823
Cash and cash equivalents and restricted cash, beginning of period	1,136,832		789,099
Cash and cash equivalents and restricted cash, end of period	$	1,248,597	$	991,922
Non-cash activities
Loans transferred to other real estate owned	$	3,046	$	2,011
Supplemental disclosures
Cash paid for interest on related party borrowings	$	1,291	$	1,286

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

1. Business, Basis of Presentation and Accounting Policies

Rocket Companies, Inc. (the “Company”, and together with its consolidated subsidiaries, “Rocket Companies”, “we”, “us”, “our”) was incorporated in Delaware on February 26, 2020 as a wholly owned subsidiary of Rock Holdings Inc. (“RHI”) for the purpose of facilitating an initial public offering (“IPO”) of its Class A common stock, $0.00001 par value (the “Class A common stock”) and other related transactions in order to carry on the business of Rocket, LLC dba RKT Holdings (“Holdings”) and its wholly owned subsidiaries.

We are a Detroit‑based fintech company including mortgage, real estate and personal finance business. We are committed to delivering industry-best client experiences through our AI-fueled homeownership strategy. Our full suite of products empowers our clients across financial wellness, personal loans, home search, mortgage finance, title and closing. We believe our widely recognized “Rocket” brand is synonymous with simple, fast and trusted digital experiences. Through these businesses, we seek to deliver innovative client solutions leveraging our Rocket platform. Our business operations are organized into the following two segments: (1) Direct to Consumer and (2) Partner Network, refer to Note 11, Segments.

Rocket Companies, Inc. is a holding company. Its primary material asset is the equity interest in Holdings which, including through its direct and indirect subsidiaries, conducts the Company's operations. Holdings is a Michigan limited liability company and wholly owns the following entities, with each entity's subsidiaries identified in parentheses: Rocket Mortgage, LLC, Amrock Holdings, LLC (“Amrock”), Rocket Title Insurance Company (“RTI”) or previously Amrock Title Insurance Company, LMB HoldCo LLC (“Core Digital Media”), RCRA Holdings LLC (Rock Connections LLC dba “Rocket Connections”), Rocket Homes Real Estate LLC (“Rocket Homes”), RockLoans Holdings LLC (“Rocket Loans”), Rocket Money, Inc. (“Rocket Money”), Rocket Worldwide Holdings Inc. (EFB Holdings Inc. (“Rocket Mortgage Canada”) and Lendesk Canada Holdings Inc. (“Lendesk Technologies”)), Woodward Capital Management LLC and Rocket Card, LLC. As used herein, “Rocket Mortgage” refers to either the Rocket Mortgage brand or platform, or the Rocket Mortgage business, as the context allows.

Basis of Presentation and Consolidation

As the sole managing member of Holdings, the Company operates and controls all of the business affairs of Holdings, and through Holdings and its subsidiaries, conducts its business. Holdings is considered a variable interest entity (“VIE”) and we consolidate the financial results of Holdings under the guidance of ASC 810, Consolidation. A portion of our Net (loss) income is allocated to Net loss (income) attributable to non-controlling interest. For further details, refer below to Variable Interest Entities and Note 12, Non-controlling Interest.

For further details on the Company's other consolidated VIE, refer below to Variable Interest Entities.

All significant intercompany transactions and accounts between the businesses comprising the Company have been eliminated in the accompanying condensed consolidated financial statements.

The Company's derivatives, IRLCs, MSRs, mortgage and non-mortgage loans held for sale and trading investment securities are measured at fair value on a recurring basis. Additionally, other assets may be required to be measured at fair value in the condensed consolidated financial statements on a nonrecurring basis. For further details of the Company's transactions refer to Note 2, Fair Value Measurements.

All transactions and accounts between RHI and other related parties with the Company have a history of settlement or will be settled for cash and are reflected as related party transactions. For further details of the Company’s related party transactions refer to Note 6, Transactions with Related Parties.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Our condensed consolidated financial statements are unaudited and presented in U.S. dollars. They have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC. In our opinion, these condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair statement of our results of operations, financial position and cash flows for the periods presented. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. Our results of operations for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Management Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management is not aware of any factors that would significantly change its estimates and assumptions, actual results may differ from these estimates, as of September 30, 2024.

Subsequent Events

In preparing these condensed consolidated financial statements, the Company evaluated events and transactions for potential recognition or disclosure through the date these condensed consolidated financial statements were issued. Refer to Note 5, Borrowings for disclosures on changes to the Company's debt agreements that occurred subsequent to September 30, 2024.

Revenue Recognition

Gain on sale of loans, net — includes all components related to the origination and sale of mortgage loans, including (1) net gain on sale of loans, which represents the premium we receive in excess of the loan principal amount and certain fees charged by investors upon sale of loans into the secondary market, (2) loan origination fees (credits), points and certain costs, (3) provision for or benefit from investor reserves, (4) the change in fair value of interest rate locks and loans held for sale, (5) the gain or loss on forward commitments hedging loans held for sale and interest rate lock commitments (IRLCs) and (6) the fair value of originated MSRs. An estimate of the Gain on sale of loans, net is recognized at the time an IRLC is issued, net of a pull-through factor. Subsequent changes in the fair value of IRLCs and mortgage loans held for sale are recognized in current period earnings. When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings in Gain on sale of loans, net. Included in Gain on sale of loans, net is the Fair value of originated MSRs, which represents the estimated fair value of MSRs related to loans which we have sold and retained the right to service.

Loan servicing (loss) income, net — includes income from servicing, sub-servicing and ancillary fees, and is recorded to income as earned, which is upon collection of payments from borrowers. This amount also includes the Change in fair value of MSRs, which is the adjustment for the fair value measurement of the MSR asset as of the respective balance sheet date. Refer to Note 3, Mortgage Servicing Rights for information related to the gain/(loss) on changes in the fair value of MSRs.

Interest income, net — includes interest earned on mortgage loans held for sale and mortgage loans held for investment net of the interest expense paid on our loan funding facilities. Interest income is recorded as earned and interest expense is recorded as incurred. Interest income is accrued and credited to income daily based on the unpaid principal balance (“UPB”) outstanding. The accrual of interest income is generally discontinued when a loan becomes 90 days past due.

Other income — is derived primarily from deposit income, personal finance subscription revenue, closing fees, net appraisal revenue, net title insurance fees, personal loans business, real estate network referral fees and professional service fees.

The following significant revenue streams fall within the scope of ASC Topic 606 — Revenue from Contracts with Customers and are disaggregated hereunder. The remaining revenue streams within the scope of ASC 606 are immaterial, both individually and in aggregate.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Rocket Money subscription revenue — The Company recognizes subscription revenue ratably over the contract term beginning on the commencement date of each contract. We have determined that subscriptions represent a stand-ready obligation to perform over the subscription term. These performance obligations are satisfied over time as the customer simultaneously receives and consumes the benefits. Contracts are one month to one year in length. Subscription revenues were $65,950 and $46,448 for the three months ended September 30, 2024 and 2023, respectively and $192,119 and $128,627 for the nine months ended September 30, 2024 and 2023, respectively.

Amrock closing fees — The Company recognizes closing fees for non-recurring services provided in connection with the origination of the loan. These fees are recognized at the time of loan closing for purchase transactions or at the end of a client's three-day rescission period for refinance transactions, which represents the point in time the loan closing services performance obligation is satisfied. The consideration received for closing services is a fixed fee per loan that varies by state and loan type. Closing fees were $29,231 and $21,172 for the three months ended September 30, 2024 and 2023, respectively and $75,057 and $59,470 for the nine months ended September 30, 2024 and 2023, respectively.

Amrock appraisal revenue, net — The Company recognizes appraisal revenue when the appraisal service is completed. The Company may choose to deliver appraisal services directly to its client or subcontract such services to a third-party licensed and/or certified appraiser. In instances where the Company performs the appraisal, revenue is recognized as the gross amount of consideration received at a fixed price per appraisal. The Company is an agent in instances where a third-party appraiser is involved in the delivery of appraisal services and revenue is recognized net of third-party appraisal expenses. Appraisal revenue was $9,222 and $8,279 for the three months ended September 30, 2024 and 2023, respectively and $27,552 and $33,098 for the nine months ended September 30, 2024 and 2023, respectively.

Rocket Homes real estate network referral fees — The Company recognizes real estate network referral fee revenue based on arrangements with partner agencies contingent on the closing of a transaction. As this revenue stream is variable, and is contingent on the successful transaction close, the revenue is constrained until the occurrence of the transaction. At this point, the constraint on recognizing revenue is deemed to have been lifted and revenue is recognized for the consideration expected to be received. Real estate network referral fees were $14,363 and $16,841 for the three months ended September 30, 2024 and 2023, respectively and $40,657 and $37,588 for the nine months ended September 30, 2024 and 2023, respectively.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. We maintain our bank accounts with a relatively small number of high-quality financial institutions.

Restricted cash as of September 30, 2024 and 2023 consisted of cash on deposit for a repurchase facility, client application deposits, title premiums collected from the insured that are due to the underwriter, and principal and interest received in collection accounts for purchased assets.


	September 30,
	2024		2023
Cash and cash equivalents	$	1,228,234	$	957,254
Restricted cash	20,363		34,668
Total cash, cash equivalents and restricted cash in the statement of cash flows	$	1,248,597	$	991,922

Loans subject to repurchase right from Ginnie Mae

For certain loans sold to Ginnie Mae, the Company as the servicer has the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets defined criteria, including being delinquent more than 90 days. Once the Company has the unilateral right to repurchase the delinquent loan, the Company has effectively regained control over the loan and must re-recognize the loan on the Condensed Consolidated Balance Sheets and establish a corresponding liability regardless of the Company's intention to repurchase the loan. The asset and corresponding liability are recorded at the unpaid principal balance of the loan, which approximates its fair value.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Variable Interest Entities

Rocket Companies, Inc. is the managing member of Holdings with 100% of the management and voting power in Holdings. In its capacity as managing member, Rocket Companies, Inc. has the sole authority to make decisions on behalf of Holdings and bind Holdings to signed agreements. Further, Holdings maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights. Accordingly, management concluded that Holdings is a limited partnership or similar legal entity as contemplated in ASC 810, Consolidation.

Management concluded that Rocket Companies, Inc. is Holdings’ primary beneficiary. As the primary beneficiary, Rocket Companies, Inc. consolidates the results and operations of Holdings for financial reporting purposes under the variable interest consolidation model guidance in ASC 810.

Rocket Companies, Inc.’s relationship with Holdings results in no recourse to the general credit of Rocket Companies, Inc. Holdings and its consolidated subsidiaries represents Rocket Companies, Inc.’s sole investment. Rocket Companies, Inc. shares in the income and losses of Holdings in direct proportion to Rocket Companies, Inc.'s ownership percentage. Rocket Companies, Inc. has no contractual requirement to provide financial support to Holdings.

Rocket Companies, Inc.’s financial position, performance and cash flows effectively represent those of Holdings and its subsidiaries as of and for the period ended September 30, 2024.

During the quarter ended September 30, 2024, a subsidiary of the Company transferred assets to a trust for which the Company holds a variable interest. Management concluded the Company has power to direct activities impacting the trust’s economic performance and therefore is a consolidated VIE in accordance with ASC 810, Consolidation. The Company has elected to account for the assets and liabilities of the VIE as a collateralized financing entity (“CFE”). A CFE is a VIE that holds financial assets, issues beneficial interests in those assets and has no more than nominal equity. The related assets are not available for general use by the Company and creditors have no recourse to the Company for the related liabilities.

Recently Adopted Accounting Standards

In March 2023, the FASB issued ASU 2023-01: Leases (Topic 842) – Common Control Arrangements. The new guidance requires all lessees in a lease with a lessor under common control to amortize leasehold improvements over the useful life of the common control group and provides new guidance for recognizing a transfer of assets between entities under common control as an adjustment to equity when the lessee no longer controls the use of the underlying asset. This guidance is effective for fiscal years beginning after December 15, 2023. There was no impact to the Company’s Consolidated Financial Statements and related disclosures upon adoption in January of 2024.

Accounting Standards Issued but Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07: Improvements to Reportable Segment Disclosures. The new guidance requires additional disclosures around significant segment expenses and the chief operating decision maker. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods with fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the requirements of the update, which is expected to result in expanded disclosures upon adoption.

In December 2023, the FASB issued ASU 2023-09: Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. The new guidance requires additional disclosures relating to the tax rate reconciliation and the income taxes paid information. The guidance is effective for fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the requirements of the update, which is expected to result in expanded disclosures upon adoption.

2. Fair Value Measurements

Fair value is the price that would be received if an asset were sold or the price that would be paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. Required disclosures include classification of fair value measurements within a three-level hierarchy (Level 1, Level 2 and Level 3). Classification of a fair value measurement within the hierarchy is dependent on the classification and significance of the inputs used to determine the fair value measurement. Observable inputs are those that are observed, implied from, or corroborated with externally available market information. Unobservable inputs represent the Company’s estimates of market participants’ assumptions.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Fair value measurements are classified in the following manner:

Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Valuation is based on either observable prices for identical assets or liabilities in inactive markets, observable prices for similar assets or liabilities, or other inputs that are derived directly from, or through correlation to, observable market data at the measurement date.

Level 3—Valuation is based on the Company’s internal models using assumptions at the measurement date that a market participant would use.

In determining fair value measurement, the Company uses observable inputs whenever possible. The level of a fair value measurement within the hierarchy is dependent on the lowest level of input that has a significant impact on the measurement as a whole. If quoted market prices are available at the measurement date or are available for similar instruments, such prices are used in the measurements. If observable market data is not available at the measurement date, judgment is required to measure fair value.

The following is a description of measurement techniques for items recorded at fair value on a recurring basis. There were no material items recorded at fair value on a nonrecurring basis as of September 30, 2024 or December 31, 2023.

Mortgage loans held for sale: Loans held for sale that trade in active secondary markets are valued using Level 2 measurements derived from observable market data, including market prices of securities backed by similar mortgage loans adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk. Loans held for sale for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon dealer price quotes and internal models.

IRLCs: The fair value of IRLCs is based on current market prices of securities backed by similar mortgage loans (as determined above under mortgage loans held for sale), net of costs to close the loans, subject to the estimated loan funding probability, or “pull-through factor”. Given the significant and unobservable nature of the pull-through factor, IRLCs are classified as Level 3.

MSRs: The fair value of MSRs is determined using an internal valuation model that calculates the present value of estimated net future cash flows. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings and contractual servicing fee income, among others. MSRs are classified as Level 3.

Forward commitments: The Company’s forward commitments are valued based on quoted prices for similar assets in an active market with inputs that are observable and are classified within Level 2 of the valuation hierarchy.

Investment securities: Investment securities are trading debt securities that are recorded at fair value using observable market prices for similar securities or identical securities that are traded in less active markets, which are classified as Level 2 and include highly rated municipal, government and corporate bonds. As of March 31, 2023, the investment securities were classified as available for sale. The investments securities were subsequently transferred to the trading classification during 2023 due to the intent and frequency of purchases and sales.

Non-mortgage loans held for sale: Non-mortgage loans held for sale are personal loans, including solar loans. The fair value of non-mortgage loans is determined using an internal valuation model that calculates the present value of estimated net future cash flows. Non-mortgage loans are classified as Level 3.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Assets and Liabilities of the consolidated CFE: Assets and liabilities represent non-mortgage loans and investment debt certificates at the consolidated CFE, respectively. The Company has elected the fair value option and to measure both the assets and liabilities of the consolidated CFE using the more observable of the fair value of the financial assets or the fair value of the financial liabilities. The Company determined inputs to the fair value measurement of the financial assets to be more observable. The fair value of the assets and liabilities of the consolidated CFE are determined using an internal valuation model that calculates the present value of estimated net future cash flows and are classified as Level 3. The net equity in the consolidated CFE represents the fair value of the Company’s beneficial interest in the entity.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below shows a summary of financial statement items that are measured at estimated fair value on a recurring basis, including assets measured under the fair value option. There were no material transfers of assets or liabilities recorded at fair value on a recurring basis between Levels 1, 2 or 3 during the nine months ended September 30, 2024 or the year ended December 31, 2023.


	Level 1		Level 2		Level 3		Total
Balance at September 30, 2024
Assets:
Mortgage loans held for sale (1)	$	—	$	10,681,964	$	296,295	$	10,978,259
IRLCs	—		—		228,204		228,204
MSRs	—		—		6,810,667		6,810,667
Forward commitments	—		7,655		—		7,655
Investment securities (2)	—		41,105		—		41,105
Non-mortgage loans held for sale (2)	—		—		250,881		250,881
Assets of the consolidated CFE (3)	—		—		61,107		61,107
Total assets	$	—	$	10,730,724	$	7,647,154	$	18,377,878
Liabilities:
Forward commitments	$	—	$	62,991	$	—	$	62,991
Liabilities of the consolidated CFE (3)	—		—		51,030		51,030
Total liabilities	$	—	$	62,991	$	51,030	$	114,021

Balance at December 31, 2023
Assets:
Mortgage loans held for sale (1)	$	—	$	6,103,714	$	438,518	$	6,542,232
IRLCs	—		—		132,870		132,870
MSRs	—		—		6,439,787		6,439,787
Forward commitments	—		26,614		—		26,614
Investment securities (2)	—		39,518		—		39,518
Non-mortgage loans held for sale (2)	—		—		163,018		163,018
Total assets	$	—	$	6,169,846	$	7,174,193	$	13,344,039
Liabilities:
Forward commitments	$	—	$	142,988	$	—	$	142,988
Total liabilities	$	—	$	142,988	$	—	$	142,988

(1) As of September 30, 2024 and December 31, 2023, $138.7 million and $195.6 million of unpaid principal balance of the level 3 mortgage loans held for sale were 90 days or more delinquent and were considered in non-accrual status.

(2) These are included in Other assets on the Condensed Consolidated Balance Sheets.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

(3) Asset and Liabilities of the consolidated CFE are included in Other assets and Other liabilities, respectively, on the Condensed Consolidated Balance Sheets. These financial instruments transferred into Level 3 during the three months ended September 30, 2024.

The following tables present the quantitative information about material recurring Level 3 fair value financial instruments and the fair value measurements as of:


	September 30, 2024			December 31, 2023
Unobservable Input	Range	Weighted Average		Range	Weighted Average
Mortgage loans held for sale
Model pricing	70% - 103%	90	%	68% - 100%	87	%
IRLCs
Pull-through probability	0% - 100%	75	%	0% - 100%	72	%
MSRs
Discount rate	9.5% - 12.5%	9.9	%	9.5% - 12.5%	9.9	%
Conditional prepayment rate	6.7% - 20.8%	8.1	%	6.6% - 37.0%	7.5	%
Non-mortgage loans held for sale
Discount rate	0.0% - 9.3%	7.5	%	8.5% - 9.3%	8.6	%

The table below presents a reconciliation of Level 3 assets measured at fair value on a recurring basis for the three and nine months ended September 30, 2024 and 2023. Mortgage servicing rights are also classified as a Level 3 asset measured at fair value on a recurring basis and its reconciliation is found in Note 3, Mortgage Servicing Rights.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)


	Mortgage Loans Held for Sale		IRLCs		Non-Mortgage Loans Held for Sale
Balance at June 30, 2024	$	351,853	$	170,381	$	269,460
Transfers in (1)	104,668		—		72,406
Transfers out/principal reductions (1)	(169,435)		—		(91,071)
Net transfers and revaluation gains	—		57,823		—
Total gains included in Net (loss) income for assets held at the end of the reporting date	9,209		—		86
Balance at September 30, 2024	$	296,295	$	228,204	$	250,881

Balance at June 30, 2023	$	632,378	$	127,690	$	78,490
Transfers in (1)	180,127		—		46,513
Transfers out/principal reductions (1)	(276,249)		—		—
Net transfers and revaluation losses	—		(35,122)		—
Total losses included in Net (loss) income for assets held at the end of the reporting date	(34,011)		—		(2,032)
Balance at September 30, 2023	$	502,245	$	92,568	$	122,971

Balance at December 31, 2023	$	438,518	$	132,870	$	163,018
Transfers in (1)	322,404		—		236,845
Transfers out/principal reductions (1)	(464,972)		—		(147,479)
Net transfers and revaluation gains	—		95,334		—
Total gains (losses) included in Net (loss) income for assets held at the end of the reporting date	345		—		(1,503)
Balance at September 30, 2024	$	296,295	$	228,204	$	250,881

Balance at December 31, 2022	$	1,082,730	$	90,635	$	—
Transfers in (1)	588,894		—		125,756
Transfers out/principal reductions (1)	(1,093,226)		—		—
Net transfers and revaluation gains	—		1,933		—
Total losses included in Net (loss) income for assets held at the end of the reporting date	(76,153)		—		(2,785)
Balance at September 30, 2023	$	502,245	$	92,568	$	122,971

(1) Transfers in represent loans repurchased from investors or loans originated for which an active market currently does not exist. Transfers out primarily represent loans sold or transferred to third parties and loans paid in full.

Fair Value Option

The following is the estimated fair value and UPB of mortgage and non-mortgage loans held for sale that have contractual principal amounts and for which the Company has elected the fair value option. The fair value option was elected for mortgage and non-mortgage loans held for sale as the Company believes fair value best reflects their expected future economic performance:


	Fair Value		Principal Amount Due Upon Maturity		Difference (1)
Balance at September 30, 2024
Mortgage loans held for sale	$	10,978,259	$	10,737,510	$	240,749
Non-mortgage loans held for sale	$	250,881	$	257,938	$	(7,057)

Balance at December 31, 2023
Mortgage loans held for sale	$	6,542,232	$	6,418,082	$	124,150
Non-mortgage loans held for sale	$	163,018	$	168,573	$	(5,555)

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

(1) Represents the amount of gains (losses) included in Gain on sale of loans, net for Mortgage loans held for sale and Other income for Non-mortgage loans held for sale on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), due to changes in fair value of items accounted for using the fair value option.

Disclosures of the fair value of certain financial instruments are required when it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.

The following table presents the carrying amounts and estimated fair value of financial liabilities that are not recorded at fair value on a recurring or nonrecurring basis. This table excludes cash and cash equivalents, restricted cash, warehouse borrowings and line of credit borrowing facilities as these financial instruments are highly liquid or short-term in nature and as a result, their carrying amounts approximate fair value:


	September 30, 2024				December 31, 2023
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior Notes, due 10/15/2026	$	1,145,430	$	1,104,184	$	1,143,716	$	1,064,520
Senior Notes, due 1/15/2028	61,563		59,192		61,463		60,469
Senior Notes, due 3/1/2029	745,572		705,038		744,819		679,455
Senior Notes, due 3/1/2031	1,241,325		1,153,813		1,240,311		1,105,088
Senior Notes, due 10/15/2033	843,667		760,929		843,139		725,458
Total Senior Notes, net	$	4,037,557	$	3,783,156	$	4,033,448	$	3,634,990

The fair value of Senior Notes was calculated using the observable bond price at September 30, 2024 and December 31, 2023, respectively. The Senior Notes are classified as Level 2 in the fair value hierarchy.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

3. Mortgage Servicing Rights

Mortgage servicing rights are recognized as assets on the Condensed Consolidated Balance Sheets when loans are sold, and the associated servicing rights are retained. The Company maintains one class of MSRs asset and has elected the fair value option. These MSRs are recorded at fair value, which is determined using an internal valuation model that calculates the present value of estimated future net servicing fee income. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings and contractual servicing fee income, among others.

The following table summarizes changes to the MSR assets:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Fair value, beginning of period	$	7,162,690	$	6,443,632	$	6,439,787	$	6,946,940
MSRs originated	337,702		330,627		906,044		850,027
MSRs sales	(104,206)		(221,893)		(229,945)		(897,894)
MSRs purchases	310,536		103,115		641,774		103,115
Changes in fair value (1):
Due to changes in valuation model inputs or assumptions	(681,955)		212,128		(379,598)		239,821
Due to collection/realization of cash flows	(214,100)		(189,444)		(567,395)		(563,844)
Total changes in fair value	(896,055)		22,684		(946,993)		(324,023)
Fair value, end of period	$	6,810,667	$	6,678,165	$	6,810,667	$	6,678,165

(1) Reflects changes in market interest rates and assumptions, including discount rates and prepayment speeds, and the effects of contractual prepayment protection associated with sales or purchases of MSRs. It does not include the change in fair value of derivatives that economically hedge MSRs identified for sale or the effects of contractual prepayment protection resulting from sales or purchases of MSRs.

The Company retains the right to service a majority of these loans upon sale through ownership of servicing rights. The total UPB of mortgage loans serviced, excluding subserviced loans, at September 30, 2024 and December 31, 2023 was $512,980,084 and $468,237,971, respectively. The portfolio primarily consists of high-quality performing agency and government (FHA and VA) loans. As of September 30, 2024 and December 31, 2023, delinquent loans (defined as 60-plus days past-due) were 1.40% and 1.23%, respectively, of our total portfolio. During the three and nine months ended September 30, 2023, the Company sold excess servicing cash flows on certain agency loans for total proceeds of $136,916 and $383,694, respectively.

The following is a summary of the weighted average discount rate and prepayment speed assumptions used to determine the fair value of MSRs as well as the expected life of the loans in the servicing portfolio:


	September 30, 2024		December 31, 2023
Discount rate	9.9	%	9.9	%
Prepayment speeds	8.1	%	7.5	%
Life (in years)	7.52		7.83

The key assumptions used to estimate the fair value of MSRs are prepayment speeds and the discount rate. Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore, the estimated life of the MSRs and related cash flows decrease. Decreases in prepayment speeds generally have a positive effect on the value of MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease and therefore, the estimated life of the MSRs and related cash flows increase. Increases in the discount rate result in a lower MSRs value and decreases in the discount rate result in a higher MSRs value. MSRs uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The following sensitivity analysis shows the potential impact on the fair value of the Company’s MSRs based on hypothetical changes in key assumptions, including the discount rate and prepayment speeds:


	Discount Rate				Prepayment Speeds
	100 BPS Adverse Change		200 BPS Adverse Change		10% Adverse Change		20% Adverse Change
September 30, 2024
Mortgage servicing rights	$	(278,645)	$	(535,114)	$	(219,731)	$	(408,685)
December 31, 2023
Mortgage servicing rights	$	(279,493)	$	(536,573)	$	(183,254)	$	(356,871)

4. Mortgage Loans Held for Sale

The Company sells substantially all of its originated mortgage loans into the secondary market. Mortgage loans held for sale are loans originated that are expected to be sold into the secondary market. Below is a roll forward of the activity in mortgage loans held for sale:


	Nine Months Ended September 30,
	2024		2023
Balance at the beginning of period	$	6,542,232	$	7,343,475
Disbursements of mortgage loans held for sale	72,075,853		61,002,673
Proceeds from sales of mortgage loans held for sale	(68,853,271)		(60,919,447)
Gain on sale of mortgage loans excluding fair value of other financial instruments, net (1)	1,213,445		585,851

Balance at the end of period	$	10,978,259	$	8,012,552

(1) The Gain on sale of loans excluding fair value of originated MSRs, net on the Condensed Consolidated Statements of Cash Flows includes income related to non-mortgage loans, interest rate lock commitments, forward commitments and provision for investor reserves.

Credit Risk

The Company is subject to credit risk associated with mortgage loans that it purchases and originates during the period of time prior to the sale of these loans. The Company considers credit risk associated with these loans to be minimal as it holds the loans for a short period of time, which for the nine months ended September 30, 2024 is generally less than 45 days from the date of borrowing, and the market for these loans continues to be highly liquid. The Company is also subject to credit risk associated with mortgage loans it has repurchased as a result of breaches of representations and warranties during the period of time between repurchase and resale.

5. Borrowings

The Company maintains various funding facilities, financing facilities and unsecured senior notes, as shown in the tables below. Interest rates typically have two main components; a base rate - most commonly SOFR, which is sometimes subject to a minimum floor, plus a spread. Some funding facilities have a commitment fee, which can be up to 50 basis points per year. The commitment fee charged by lenders is calculated based on the committed line amount multiplied by a negotiated rate. The Company is required to maintain certain covenants, including minimum tangible net worth, minimum liquidity, maximum total debt or liabilities to net worth ratio, pretax net income requirements and other customary debt covenants, as defined in the agreements. The Company was in compliance with all covenants as of September 30, 2024 and December 31, 2023.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The amount owed and outstanding on the Company’s loan funding facilities fluctuates based on its origination volume, the amount of time it takes the Company to sell the loans it originates and the Company’s ability to use its cash to self-fund loans. In addition to self-funding, the Company may use surplus cash to “buy-down” the effective interest rate of certain loan funding facilities or to self-fund a portion of our loan originations. Buy-down funds are included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets. We have the ability to withdraw these funds at any time, unless a margin call has been made or a default has occurred under the relevant facilities. We will also deploy cash to self-fund loan originations, a portion of which can be transferred to a mortgage loan funding facility or the early buy out line, provided that such loans meet the eligibility criteria to be placed on such lines. The remaining portion will be funded in normal course over a short period of time, generally less than 45 days.

The terms of the Senior Notes restrict our ability and the ability of our subsidiary guarantors among other things to: (1) merge, consolidate or sell, transfer or lease assets and; (2) create liens on assets.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Mortgage Funding Facilities


Facility Type	Collateral	Maturity	Line Amount		Committed Line Amount		Outstanding Balance as of September 30, 2024		Outstanding Balance as of December 31, 2023
Mortgage Loan funding:
1) Master Repurchase Agreement (1)(12)	Mortgage loans held for sale (11)	11/27/2024	1,000,000		100,000		900,686		397,265
2) Master Repurchase Agreement (12)	Mortgage loans held for sale (11)	8/1/2026	1,000,000		—		753,655		429,976
3) Master Repurchase Agreement (2)(12)	Mortgage loans held for sale (11)	7/25/2025	1,500,000		250,000		362,523		552,079
4) Master Repurchase Agreement (3)(12)	Mortgage loans held for sale (11)	9/8/2025	1,000,000		250,000		967,577		547,016
5) Master Repurchase Agreement (4)(12)	Mortgage loans held for sale (11)	11/6/2025	1,500,000		250,000		269,449		106,063
6) Master Repurchase Agreement (5)(12)	Mortgage loans held for sale (11)	N/A	N/A		N/A		—		241,574
7) Master Repurchase Agreement (6)(12)	Mortgage loans held for sale (11)	9/26/2025	800,000		100,000		772,127		507,302
8) Master Repurchase Agreement (12)	Mortgage loans held for sale (11)	5/6/2026	1,000,000		100,000		961,212		—
9) Master Repurchase Agreement (7)(12)	Mortgage loans held for sale (11)	5/29/2026	2,000,000		250,000		696,261		—
10) Master Repurchase Agreement (12)	Mortgage loans held for sale (11)	6/12/2026	750,000		—		729,454		—
11) Master Repurchase Agreement (8)(12)	Mortgage loans held for sale (11)	N/A	N/A		N/A		N/A		N/A
			$	10,550,000	$	1,300,000	$	6,412,944	$	2,781,275
Mortgage Loan Early Funding:
12) Early Funding Facility (9)(12)	Mortgage loans held for sale (11)	(9)	$	5,000,000	$	—	$	1,208,589	$	286,594
13) Early Funding Facility (10)(12)	Mortgage loans held for sale (11)	(10)	2,000,000		—		712,110		183,414
			7,000,000		—		1,920,699		470,008

Total Mortgage Funding Facilities			$	17,550,000	$	1,300,000	$	8,333,643	$	3,251,283

Personal Loan funding:
14) Revolving Credit and Security Agreement (12)	Personal loans held for sale	1/30/2025	$	175,000	$	175,000	$	165,400	$	116,100

Total Funding Facilities			$	17,725,000	$	1,475,000	$	8,499,043	$	3,367,383

(1) This facility has an overall line size of $1,000,000. Subsequent to September 30, 2024, this facility was amended to include a $150,000 sublimit for early buy out financing; capacity is fully fungible and is not restricted by these allocations.

(2) This facility has a 12-month initial term, which can be extended for 3-months at each subsequent 3-month anniversary from the initial start date. Subsequent to September 30, 2024, this facility was extended to October 27, 2025.

(3) Subsequent to September 30, 2024, this facility was increased to $2,500,000 with $250,000 committed and extended to October 1, 2026.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

(4) This facility has an overall line size of $1,500,000. This facility also includes a $1,500,000 sublimit for MSR financing; capacity is fully fungible and is not restricted by these allocations.

(5) This facility was voluntarily paid off and terminated in August 2024.

(6) Subsequent to September 30, 2024, this facility was extended to October 2, 2026.

(7) This facility is a sublimit of Financing Facility 6, found below in Financing Facilities. Refer to Subfootnote 4, Financing Facilities for additional details regarding this facility.

(8) Subsequent to September 30, 2024, the Company entered into a new Master Repurchase Agreement. The new facility has an overall line size of $1,000,000 with $200,000 committed, maturing on October 2, 2026.

(9) This facility is an evergreen agreement with no stated termination or expiration date. This agreement can be terminated by either party upon written notice.

(10) This facility has an overall line size of $2,000,000, which is reviewed every 90 days. This facility is an evergreen agreement with no stated termination or expiration date. This agreement can be terminated by either party upon written notice.

(11) The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by mortgage loans held for sale at fair value as the first priority security interest.

(12) The interest rates charged by lenders on funding facilities included the applicable base rate plus a spread ranging from 1.00% to 1.80% for the nine months ended September 30, 2024 and year ended December 31, 2023.

Financing Facilities


Facility Type	Collateral	Maturity	Line Amount		Committed Line Amount		Outstanding Balance as of September 30, 2024		Outstanding Balance as of December 31, 2023
Line of Credit Financing Facilities
1) Unsecured line of credit (1)	—	7/27/2025	$	2,000,000	$	—	$	—	$	—
2) Unsecured line of credit (1)	—	7/31/2025	100,000		—		—		—
3) Revolving credit facility (6)	—	7/2/2027	1,150,000		1,150,000		—		—
4) MSR line of credit (2)(6)	MSRs	11/8/2024	500,000		—		—		—
5) MSR line of credit (3)(6)	MSRs	11/6/2025	1,500,000		250,000		—		—
			$	5,250,000	$	1,400,000	$	—	$	—
Early Buyout Financing Facility
6) Early buy out facility (4)(6)	Loans/ Advances	5/29/2026	$	2,000,000	$	250,000	$	106,863	$	203,208
7) Early buy out facility (5)(6)	Loans/ Advances	N/A	N/A		N/A		—		—
			$	2,000,000	$	250,000	$	106,863	$	203,208

(1) Refer to Note 6, Transactions with Related Parties for additional details regarding this unsecured line of credit.

(2) Subsequent to September 30, 2024, this facility was extended to November 7, 2025.

(3) This facility is a sublimit of Master Repurchase Agreement 5, found above in Mortgage Funding Facilities. Refer to Subfootnote 4, Mortgage Funding Facilities for additional details regarding this financing facility.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

(4) This facility has an overall line size of $2,000,000. This facility also includes a $2,000,000 sublimit for newly originated mortgage loans held for sale; capacity is fully fungible and is not restricted by these allocations.

(5) This facility is a sublimit of Master Repurchase Agreement 1, found above in Mortgage Funding Facilities. Refer to Subfootnote 1, Mortgage Funding Facilities for additional details regarding this financing facility.

(6) The interest rates charged by lenders on the financing facilities included the applicable base rate, plus a spread ranging from 1.45% to 3.25% for the nine months ended September 30, 2024 and 1.45% to 4.00% for the year ended December 31, 2023.

Unsecured Senior Notes


Facility Type	Maturity	Interest Rate		Outstanding Principal September 30, 2024			Outstanding Principal December 31, 2023
Unsecured Senior Notes (1)	10/15/2026	2.875	%	$	1,150,000		$	1,150,000
Unsecured Senior Notes (2)	1/15/2028	5.250	%	61,985			61,985
Unsecured Senior Notes (3)	3/1/2029	3.625	%	750,000			750,000
Unsecured Senior Notes (4)	3/1/2031	3.875	%	1,250,000			1,250,000
Unsecured Senior Notes (5)	10/15/2033	4.000	%	850,000			850,000
Total Senior Notes				$	4,061,985		$	4,061,985

Weighted Average Interest Rate				3.59		%	3.59		%

(1) The 2026 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $1,150,000 carrying amount on the Condensed Consolidated Balance Sheets by $4,570 and $6,284 as of September 30, 2024 and December 31, 2023, respectively.

(2) The 2028 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs and discounts are presented net against the Senior Notes reducing the $61,985 carrying amount on the Condensed Consolidated Balance Sheets by $230 and $192 as of September 30, 2024, respectively, and $285 and $237, as of December 31, 2023, respectively.

(3) The 2029 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $750,000 carrying amount on the Condensed Consolidated Balance Sheets by $4,428 and $5,181 as of September 30, 2024 and December 31, 2023, respectively.

(4) The 2031 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $1,250,000 carrying amount on the Condensed Consolidated Balance Sheets by $8,675 and $9,689 as of September 30, 2024 and December 31, 2023, respectively.

(5) The 2033 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $850,000 carrying amount on the Condensed Consolidated Balance Sheets by $6,333 and $6,861 as of September 30, 2024 and December 31, 2023, respectively.

Refer to Note 2, Fair Value Measurements for information pertaining to the fair value of the Company’s debt as of September 30, 2024 and December 31, 2023.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

6. Transactions with Related Parties

The Company has entered into various transactions and agreements with RHI, its subsidiaries, certain other affiliates and related parties (collectively, “Related Parties”). These transactions include providing financing and services as well as obtaining financing and services from these Related Parties.

Financing Arrangements

On June 9, 2017, Rocket Mortgage and RHI entered into an unsecured line of credit, as further amended and restated on September 16, 2021 (“RHI Line of Credit”), pursuant to which Rocket Mortgage has a borrowing capacity of $2,000,000. The RHI Line of Credit matures on July 27, 2025. Borrowings under the line of credit bear interest at a rate per annum of the applicable base rate, plus a spread of 1.25%. The line of credit is uncommitted and RHI has sole discretion over advances. The RHI Line of Credit also contains negative covenants which restrict the ability of the Company to incur debt and create liens on certain assets. It also requires Rocket Mortgage to maintain a quarterly consolidated net income before taxes if adjusted tangible net worth meets certain requirements. The Company did not draw on the RHI Line of Credit during the period and there were no outstanding amounts due as of September 30, 2024 and December 31, 2023.

RHI and RTI are parties to a surplus debenture, effective as of December 28, 2015, and as further amended and restated on July 31, 2023 (the “RHI/RTI Debenture”), pursuant to which RTI is indebted to RHI for an aggregate principal amount of $21,500. The RHI/RTI Debenture matures on December 31, 2030. Interest under the RHI/RTI Debenture accrues at an annual rate of 8%. Principal and interest under the RHI/RTI Debenture are due and payable quarterly, in each case subject to RTI achieving a certain amount of surplus and payments of all interest before principal payments begin. Any unpaid amounts of principal and interest shall be due and payable upon the maturity of the RHI/RTI Debenture. RTI repaid an aggregate of $429 and $250 for the three months ended September 30, 2024 and 2023, respectively, and $1,291 and $750 for the nine months ended September 30, 2024 and 2023, respectively. The total amount of interest accrued was $434 for the three months ended September 30, 2024 and 2023, and $1,291 and $1,286 for the nine months ended September 30, 2024 and 2023, respectively. The aggregate amount due to RHI was $30,264 as of September 30, 2024 and December 31, 2023.

On July 31, 2020, Holdings and RHI entered into an agreement for an uncommitted, unsecured revolving line of credit (“RHI 2nd Line of Credit”), which will provide for financing from RHI to the Company of up to $100,000. The RHI 2nd Line of Credit matures on July 31, 2025. Borrowings under the line of credit will bear interest at a rate per annum of the applicable base rate plus a spread of 1.25%. The negative covenants of the line of credit restrict the ability of the Company to incur debt and create liens on certain assets. The line of credit also contains customary events of default. The Company did not draw on the RHI 2nd Line of Credit during the period and there were no amounts outstanding as of September 30, 2024 and December 31, 2023.

The Notes receivable and due from affiliates was $15,226 and $19,530 as of September 30, 2024 and December 31, 2023, respectively. The Notes payable and due to affiliates was $30,511 and $31,006 as of September 30, 2024 and December 31, 2023, respectively.

Services, Products and Other Transactions

We have entered into transactions and agreements to provide certain services to Related Parties. We recognized revenue of $1,450 and $2,318 for the three months ended September 30, 2024 and 2023, respectively and $4,710 and $7,184 for the nine months ended September 30, 2024 and 2023, respectively, for the performance of these services, which was included in Other income on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). We have also entered into transactions and agreements to purchase certain services, products and other transactions from Related Parties. We incurred expenses of $801 and $556, which are included in Salaries, commissions and team member benefits; $13,142 and $12,677, which are included in General and administrative expenses; and $2,813 and $2,637, which are included in Marketing and advertising expenses, for the three months ended September 30, 2024 and 2023, respectively, on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). We incurred expenses of $2,210 and $1,611, which are included in Salaries, commissions and team member benefits; $37,975 and $35,929, which are included in General and administrative expenses; and $8,115 and $9,341, which are included in Marketing and advertising expenses, for the nine months ended September 30, 2024 and 2023, respectively, on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The Company has also entered into a Tax Receivable Agreement with RHI and our Chairman as described further in Note 7, Income Taxes. The Company has also guaranteed the debt of a related party as described further in Note 9, Commitments, Contingencies and Guarantees.

Lease Transactions with Related Parties

The Company is a party to lease agreements for certain offices, including our headquarters in Detroit, with various affiliates of Bedrock Management Services LLC (“Bedrock”), a related party, and other related parties of the Company. The Company incurred expenses related to these arrangements of $18,550 and $18,934 for the three months ended September 30, 2024 and 2023, respectively and $56,848 and $55,620 for the nine months ended September 30, 2024 and 2023, respectively. These amounts are included in General and administrative expenses on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

7. Income Taxes

The Company had an income tax benefit of $15,895 on Loss before income taxes of $497,319 and an income tax expense of $2,680 on Income before income taxes of $117,625 for the three months ended September 30, 2024 and 2023, respectively. The Company had an income tax expense of $5,878 on Loss before income taxes of $6,907 and an income tax benefit of $2,606 on Loss before income taxes of $159,992 for the nine months ended September 30, 2024 and 2023, respectively. The Company’s income tax expense varies from the expense that would be expected based on statutory rates due principally to its organizational structure and valuation allowances for deferred tax benefits the Company does not believe are more likely than not to be realized.

Rocket Companies owns a portion of the units of Holdings, which is treated as a partnership for U.S. federal tax purposes and in most applicable jurisdictions for state and local income tax purposes. The remaining portion of Holdings is owned by RHI and our Chairman (“LLC Members”). As a partnership, Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Holdings is passed through and included in the taxable income or loss of its members, including Rocket Companies, in accordance with the terms of the operating agreement of Holdings (the “Holdings Operating Agreement”). Rocket Companies is a C Corporation and is subject to U.S. federal, state, and local income taxes with respect to its allocable share of any taxable income of Holdings.

Several subsidiaries of Holdings, such as Rocket Mortgage, Amrock and other subsidiaries, are single member LLC entities. As single member LLCs of Holdings, all taxable income or loss generated by these subsidiaries passes through and is included in the income or loss of Holdings. A provision for state and local income taxes is required for certain jurisdictions that tax single member LLCs as regarded entities. Other subsidiaries of Holdings, such as Rocket Title Insurance Company, LMB Mortgage Services and others, are treated as C Corporations and separately file and pay taxes apart from Holdings in various jurisdictions including U.S. federal, state, local and Canada.

Tax Receivable Agreement

The Company expects to obtain an increase in its share of the tax basis in the net assets of Holdings when Holdings Units are redeemed from or exchanged by the LLC Members. The Company intends to treat any redemptions and exchanges of Holdings Units as direct purchases of Holdings Units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The Company previously entered into a Tax Receivable Agreement (the “Tax Receivable Agreement”) with the LLC Members that will obligate the Company to make payments to the LLC Members generally equal to 90% of the applicable cash tax savings that the Company actually realizes or in some cases is deemed to realize as a result of the tax attributes generated by (i) certain increases in our allocable share of the tax basis in Holdings’ assets resulting from (a) the purchases of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) from the LLC Members (or their transferees of Holdings Units or other assignees) using the net proceeds from our initial public offering or in any future offering, (b) exchanges by the LLC Members (or their transferees of Holdings Units or other assignees) of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) for cash or shares of our Class B common stock or Class A common stock, as applicable, or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement and (iii) disproportionate allocations (if any) of tax benefits to Holdings as a result of section 704(c) of the Code that relate to the reorganization transactions. The Company will retain the benefit of the remaining 10% of these tax savings.

No payment was made to the LLC Members pursuant to the Tax Receivable Agreement during the three and nine months ended September 30, 2024 and the three months ended September 30, 2023. A payment of $35,697 was made to the LLC Members pursuant to the Tax Receivable Agreement during the nine months ended September 30, 2023.

The amounts payable under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character and timing of the taxable income of Rocket Companies in the future. Any such changes in these factors or changes in the Company’s determination of the need for a valuation allowance related to the tax benefits acquired under the Tax Receivable Agreement could adjust the Tax receivable agreement liability recognized and recorded within earnings in future periods.

Tax Distributions

The holders of Holdings’ Units, including Rocket Companies Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Holdings. The Holdings Operating Agreement provides for pro rata cash distributions (“tax distributions”) to the holders of the Holdings Units in an amount generally calculated to provide each holder of Holdings Units with sufficient cash to cover its tax liability in respect of the Holdings Units. In general, these tax distributions are computed based on Holdings’ estimated taxable income, multiplied by an assumed tax rate as set forth in the Holdings Operating Agreement.

For the three and nine months ended September 30, 2024, Holdings paid tax distributions totaling $30 and $14,222, respectively, to holders of Holdings Units other than Rocket Companies. For the three and nine months ended September 30, 2023, Holdings paid no tax distributions to holders of Holdings Units other than Rocket Companies.

8. Derivative Financial Instruments

The Company uses forward commitments to hedge the interest rate risk exposure on certain fixed and adjustable rate commitments. Utilization of forward commitments involves some degree of basis risk. Basis risk is defined as the risk that the hedging instrument’s price does not offset the increase or decrease in the market price of the underlying financial instrument being hedged. The Company calculates an expected hedge ratio to mitigate a portion of this risk. The Company’s derivative instruments are not designated as accounting hedging instruments, and therefore, changes in fair value are recorded in current period Net (loss) income. Hedging gains and losses are included in Gain on sale of loans, net and Change in fair value of MSRs in the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

Net hedging (losses) gains were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Hedging (losses) gains (1)	$	(289,120)	$	248,213	$	(145,036)	$	349,989

(1) Includes the change in fair value related to derivatives economically hedging MSRs identified for sale.

Refer to Note 2, Fair Value Measurements, for additional information on the fair value of derivative financial instruments.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Notional and Fair Value

The notional and fair values of derivative financial instruments not designated as hedging instruments were as follows:


	Notional Value		Derivative Asset		Derivative Liability
Balance at September 30, 2024:
IRLCs, net of loan funding probability (1)	$	9,855,971	$	228,204	$	—
Forward commitments (2)	$	19,309,071	$	7,655	$	62,991

Balance at December 31, 2023:
IRLCs, net of loan funding probability (1)	$	4,728,040	$	132,870	$	—
Forward commitments (2)	$	9,650,041	$	26,614	$	142,988

(1) IRLCs are also discussed in Note 9, Commitments, Contingencies and Guarantees.

(2) Includes the fair value and net notional value related to derivatives economically hedging MSRs identified for sale.

Counterparty agreements for forward commitments contain master netting agreements. The table below presents the gross amounts of recognized assets and liabilities subject to master netting agreements. Margin cash is cash that is exchanged by counterparties to be held as collateral related to these derivative financial instruments. Margin cash held on behalf of counterparties is recorded in Cash and cash equivalents, and the related liability is classified in Other liabilities in the Condensed Consolidated Balance Sheets. Margin cash pledged to counterparties is excluded from Cash and cash equivalents and instead recorded in Other assets as a margin call receivable from counterparties in the Condensed Consolidated Balance Sheets. The Company had $58,405 and $66,598 of margin cash pledged to counterparties related to these forward commitments at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, there was $356 and $250 of margin cash held on behalf of counterparties, respectively.


	Gross Amount of Recognized Assets or Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amounts Presented in the Condensed Consolidated Balance Sheets
Offsetting of Derivative Assets
Balance at September 30, 2024:
Forward commitments	$	11,240	$	(3,585)	$	7,655
Balance at December 31, 2023:
Forward commitments	$	37,647	$	(11,033)	$	26,614

Offsetting of Derivative Liabilities
Balance at September 30, 2024:
Forward commitments	$	(110,396)	$	47,405	$	(62,991)
Balance at December 31, 2023:
Forward commitments	$	(174,545)	$	31,557	$	(142,988)

Counterparty Credit Risk

Credit risk is defined as the possibility that a loss may occur from the failure of another party to perform in accordance with the terms of the contract, which exceeds the value of existing collateral, if any. The Company attempts to limit its credit risk by dealing with creditworthy counterparties and obtaining collateral where appropriate.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The Company is exposed to credit loss in the event of contractual nonperformance by its trading counterparties and counterparties to its various over-the-counter derivative financial instruments noted in the above Notional and Fair Value discussion. The Company manages this credit risk by selecting only counterparties that it believes to be financially strong, spreading the credit risk among many such counterparties, placing contractual limits on the amount of unsecured credit extended to any single counterparty and entering into netting agreements with the counterparties as appropriate.

Certain counterparties have master netting agreements. The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. Derivative assets in the Condensed Consolidated Balance Sheets represent derivative contracts in a gain position, net of loss positions with the same counterparty and, therefore, also represent the Company’s maximum counterparty credit risk. The Company incurred no credit losses due to nonperformance of any of its counterparties during the three and nine months ended September 30, 2024 and 2023.

9. Commitments, Contingencies and Guarantees

Interest Rate Lock Commitments

IRLCs are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each client’s creditworthiness on a case-by-case basis.

The number of days from the date of the IRLC to expiration of fixed and variable rate lock commitments outstanding at September 30, 2024 and December 31, 2023 was 40 days and 41 days, respectively, on average.

The UPB of IRLCs was as follows:


	September 30, 2024				December 31, 2023
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
IRLCs	$	12,381,454	$	730,451	$	6,317,330	$	258,045

Commitments to Sell Mortgage Loans

In the ordinary course of business, the Company enters into contracts to sell existing mortgage loans held for sale into the secondary market at specified future dates. The amount of commitments to sell existing loans at September 30, 2024 and December 31, 2023 was $869,159 and zero, respectively.

Commitments to Sell Loans with Servicing Released

In the ordinary course of business, the Company enters into contracts to sell the MSRs of certain newly originated loans on a servicing released basis. In the event that a forward commitment is not filled and there has been an unfavorable market shift from the date of commitment to the date of settlement, the Company is contractually obligated to pay a pair-off fee on the undelivered balance. There were $371,025 and $226,535 of loans committed to be sold servicing released at September 30, 2024 and December 31, 2023, respectively.

Investor Reserves

The following presents the activity in the investor reserves:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Balance at beginning of period	$	94,362	$	100,828	$	92,389	$	110,147
Provision for investor reserves	11,204		10,775		29,872		103,616
Realized losses	(6,486)		(16,036)		(23,181)		(118,196)
Balance at end of period	$	99,080	$	95,567	$	99,080	$	95,567

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The maximum exposure under the Company’s representations and warranties would be the outstanding principal balance and any premium received on all loans ever sold by the Company, less (i) loans that have already been paid in full by the mortgagee, (ii) loans that have defaulted without a breach of representations and warranties, (iii) loans that have been indemnified via settlement or make-whole, or (iv) loans that have been repurchased. Additionally, the Company may receive relief of certain representation and warranty obligations on loans sold to Fannie Mae or Freddie Mac on or after January 1, 2013 if Fannie Mae or Freddie Mac satisfactorily concludes a quality control loan file review or if the borrower meets certain acceptable payment history requirements within 12 or 36 months after the loan is sold to Fannie Mae or Freddie Mac.

Escrow Deposits

As a service to its clients, the Company administers escrow deposits representing undisbursed amounts received for payment of property taxes, insurance, funds for title services, principal and interest on loans held for sale. Cash held by the Company for property taxes, insurance and settlement funds for title services was $5,538,255 and $3,469,770 and for principal and interest was $3,925,863 and $2,225,625 at September 30, 2024 and December 31, 2023, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the Condensed Consolidated Balance Sheets. The Company remains contingently liable for the disposition of these deposits.

Guarantees

As of September 30, 2024 and December 31, 2023, the Company guaranteed the debt of a related party consisting of three separate guarantees totaling $443 and $1,770, respectively. As of September 30, 2024 and December 31, 2023, the Company did not record a liability on the Condensed Consolidated Balance Sheets for these guarantees because it was not probable that the Company would be required to make payments under these guarantees.

Tax Receivable Agreement

As indicated in Note 7, Income Taxes, the Company is party to a Tax Receivable Agreement.

Legal

Rocket Companies, through its subsidiaries, engages in, among other things, mortgage lending, title and settlement services and other financial technology services and products. Rocket Companies and its subsidiaries operate in highly regulated industries and are routinely subject to various legal and administrative proceedings concerning matters that arise in the normal and ordinary course of business, including inquiries, complaints, subpoenas, audits, examinations, investigations and potential enforcement actions from regulatory agencies and state attorneys general; state and federal lawsuits and putative class actions; and other litigation. Periodically, we assess our potential liabilities and contingencies in connection with outstanding legal and administrative proceedings utilizing the latest information available. While it is not possible to predict the outcome of any of these matters, based on our assessment of the facts and circumstances, we do not believe any of these matters, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, or cash flows. However, actual outcomes may differ from those expected and could have a material effect on our financial position, results of operations, or cash flows in a future period. Rocket Companies accrues for losses when they are probable to occur and such losses are reasonably estimable. Legal costs are expensed as they are incurred.

As of September 30, 2024 and December 31, 2023, the Company has recorded reserves related to potential damages in connection with any legal proceedings of $19,500 and $15,000, respectively. The ultimate outcome of these or other proceedings, including any monetary awards against Rocket Companies or one or more of its subsidiaries, is uncertain and there can be no assurance as to the amount of any such potential awards. Rocket Companies and its subsidiaries will incur defense costs and other expenses in connection with these proceedings. Plus, if a judgment for money that exceeds specified thresholds is rendered against Rocket Companies or any of its subsidiaries and it or they fail to timely pay, discharge, bond or obtain a stay of execution of such judgment, it is possible that one or more of the companies could be deemed in default of loan funding facilities and other agreements governing indebtedness. If the final resolution in one or more of these proceedings is unfavorable, it could have a material adverse effect on the business, liquidity, financial condition, cash flows and results of operations of Rocket Companies.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

10. Regulatory Minimum Net Worth, Capital Ratio and Liquidity Requirements

Certain secondary market investors and state regulators require the Company to maintain minimum net worth, liquidity and capital requirements. To the extent that these requirements are not met, secondary market investors and/or the state regulators may utilize a range of remedies including sanctions, and/or suspension or termination of selling and servicing agreements, which may prohibit the Company from originating, securitizing or servicing these specific types of mortgage loans.

Rocket Mortgage is subject to certain minimum net worth, minimum capital ratio and minimum liquidity requirements established by the Federal Housing Finance Agency (“FHFA”) for Fannie Mae and Freddie Mac (collectively defined as “GSEs”) Seller/Servicers and Ginnie Mae (together with GSEs, the “Agencies”) for single family issuers. The effective requirements as of September 30, 2024 are listed below. Furthermore, refer to Note 5, Borrowings for additional information regarding compliance with all covenant requirements. As of September 30, 2024 and December 31, 2023, Rocket Mortgage was in compliance with these requirements.

Minimum Net Worth

The minimum net worth requirement for FHFA is defined as follows:

• Base of $2,500 plus 25 basis points of total GSE Residential First Lien Mortgage Servicing UPB, plus 25 basis points of total non-agency single-family outstanding serving portfolio, plus 35 basis points of the Ginnie Mae total single-family effective outstanding obligations.

• Adjusted/Tangible Net Worth is defined as total equity less goodwill and other intangible assets, affiliate receivables, deferred tax assets net of associated deferred tax liabilities and carrying value of pledged assets net of associated liabilities.

The minimum net worth requirement for Ginnie Mae is defined as follows:

• Base of $2,500, plus 35 basis points of the Ginnie Mae total single-family effective outstanding obligations, plus 25 basis points of total GSE single-family outstanding servicing portfolio balance, plus 25 basis points of total non-agency single-family outstanding serving portfolio.

• Adjusted Net Worth is defined as total equity less goodwill and other intangible assets, affiliate receivables and net of associated liabilities, deferred tax assets net of associated deferred tax liabilities and valuation adjustment of certain assets.

Minimum Capital Ratio

The minimum capital ratio requirement for Fannie Mae and Freddie Mac is defined as follows:

• For Fannie Mae and Freddie Mac, the Company is also required to hold a ratio of Adjusted/Tangible Net Worth to Total Assets greater than 6%.

The minimum capital ratio requirement for Ginnie Mae is defined as follows:

• For Ginnie Mae, the Company is also required to hold a ratio of Adjusted Net Worth to Total Assets greater than 6%. Ginnie Mae total assets excludes the Ginnie Mae loan eligible for repurchase.

Minimum Total Liquidity

The minimum liquidity requirement for Fannie Mae and Freddie Mac is defined as follows:

• Base liquidity; 7 basis points of the portion of the servicing UPB for GSEs if the Company remits interest or principal, or both, as scheduled, plus 3.5 basis points of total UPB of GSE servicing if the Company remits interest and principal as actually collected, plus 3.5 basis points of our other servicing UPB, plus 10 basis points of our servicing UPB for Ginnie Mae.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

• Origination liquidity; plus 50 basis points of the sum of mortgage loans held for sale at lower cost or market, mortgage loans held for sale at fair value and UPB of interest rate lock commitments after fallout adjustment.

• Supplemental liquidity; plus 2 basis points of our UPB serviced for GSEs, plus 5 basis points of our UPB serviced for Ginnie Mae.

• Allowable assets for liquidity may include cash and cash equivalents (unrestricted), available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of GSEs, US Treasury Obligations) and 50% of committed/unused Agency Mortgage Servicing advance lines of credit.

The minimum liquidity requirement for Ginnie Mae is defined as follows:

• 7 basis points of the portion of the servicing UPB for GSEs if the Company remits interest or principal, or both, as scheduled, plus 3.5 basis points of total UPB of GSE servicing if the Company remits interest and principal as actually collected, plus 3.5 basis points of our other servicing UPB, plus 10 basis points of our servicing UPB for Ginnie Mae, plus 50 basis points of the sum of loans held for sale and UPB of interest rate lock commitments after fallout adjustment.

The most restrictive of the minimum net worth and capital requirements require Rocket Mortgage to maintain a minimum adjusted net worth balance of $1,500,000 as of September 30, 2024 and $1,568,586 as of December 31, 2023. As of September 30, 2024 and December 31, 2023, Rocket Mortgage was in compliance with this requirement.

11. Segments

The Company’s Chief Executive Officer, who has been identified as its Chief Operating Decision Maker (“CODM”), has evaluated how the Company views and measures its performance. ASC 280, Segment Reporting establishes the standards for reporting information about segments in financial statements. In applying the criteria set forth in that guidance, the Company has determined that it has two reportable segments - Direct to Consumer and Partner Network. The key factors used to identify these reportable segments are the Company’s internal operations and the nature of its marketing channels, which drive client acquisition into the mortgage platform. This determination reflects how the CODM monitors performance, allocates capital and makes strategic and operational decisions.

Direct to Consumer

In the Direct to Consumer segment, clients have the ability to interact with Rocket Mortgage online and/or with the Company’s mortgage bankers. The Company markets to potential clients in this segment through various brand campaigns and performance marketing channels. The Direct to Consumer segment derives revenue from originating, closing, selling and servicing predominantly agency-conforming loans, which are pooled and sold to the secondary market. The segment also includes title insurance, appraisals and settlement services complementing the Company’s end-to-end mortgage origination experience. Servicing activities are fully allocated to the Direct to Consumer segment and are viewed as an extension of the client experience. Servicing enables Rocket Mortgage to establish and maintain long term relationships with our clients, through multiple touchpoints at regular engagement intervals.

Revenues in the Direct to Consumer segment are generated primarily from the gain on sale of loans, which includes loan origination fees, revenues associated with title insurance, appraisals and settlement services and revenues from sales of loans into the secondary market, as well as the fair value of originated MSRs and hedging gains and losses. Loan servicing income consists of the contractual fees earned for servicing loans and other ancillary servicing fees, as well as changes in the fair value of MSRs due to changes in valuation assumptions and realization of cash flows.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Partner Network

The Rocket Professional platform supports our Partner Network segment, where we leverage our superior client service and widely recognized brand to grow marketing and influencer relationships, and our mortgage broker partnerships through Rocket Pro TPO (“third party origination”). Our marketing partnerships consist of well-known consumer-focused companies that find value in our award-winning client experience and want to offer their clients mortgage solutions with our trusted, widely recognized brand. These organizations connect their clients directly to us through marketing channels and a referral process. Our influencer partnerships are typically with companies that employ licensed mortgage professionals that find value in our client experience, technology and efficient mortgage process, where mortgages may not be their primary offering. We also enable clients to start the mortgage process through the Rocket platform in the way that works best for them, including through a local mortgage broker.

Revenues in the Partner Network segment are generated primarily from the gain on sale of loans, which includes loan origination fees, revenues associated with title insurance, appraisals and settlement services and revenues from sales of loans into the secondary market, as well as the fair value of originated MSRs and hedging gains and losses.

Other Information About Our Segments

The Company measures the performance of the segments primarily on a contribution margin basis. The accounting policies applied by our segments are described in Note 1, Business, Basis of Presentation and Accounting Policies. Directly attributable expenses include Salaries, commissions and team member benefits, General and administrative expenses and Other expenses, such as servicing costs and origination costs.

The Company does not allocate assets to its reportable segments as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources. The Condensed Consolidated Balance Sheets is managed on a consolidated basis and is not used in the context of segment reporting.

The Company also reports an “All Other” category that includes operations from Rocket Money, Rocket Loans, Rocket Homes and includes professional service fee revenues from related parties. These operations are neither significant individually nor in aggregate and therefore do not constitute a reportable segment.

Key operating data for our business segments for the periods ended:


Three Months Ended September 30, 2024	Direct to Consumer		Partner Network		Segments Total		All Other		Total
Revenues
Gain on sale of loans, net	$	665,825	$	168,159	$	833,984	$	10,406	$	844,390
Interest income	58,549		50,017		108,566		—		108,566
Interest expense on funding facilities	(55,068)		(47,074)		(102,142)		322		(101,820)
Servicing fee income	372,363		—		372,363		1,433		373,796
Changes in fair value of MSRs	(878,311)		—		(878,311)		—		(878,311)
Other income	167,794		5,795		173,589		126,738		300,327
Total U.S. GAAP Revenue, net	331,152		176,897		508,049		138,899		646,948
Change in fair value of MSRs due to valuation assumptions, net of hedges	676,073		—		676,073		—		676,073
Adjusted revenue	1,007,225		176,897		1,184,122		138,899		1,323,021
Less: Directly attributable expenses	551,248		64,611		615,859		85,446		701,305
Contribution margin	$	455,977	$	112,286	$	568,263	$	53,453	$	621,716

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)


Nine Months Ended September 30, 2024	Direct to Consumer		Partner Network		Segments Total		All Other		Total
Revenues
Gain on sale of loans, net	$	1,783,221	$	486,686	$	2,269,907	$	32,265	$	2,302,172
Interest income	167,237		142,724		309,961		—		309,961
Interest expense on funding facilities	(126,430)		(108,126)		(234,556)		—		(234,556)
Servicing fee income	1,070,022		—		1,070,022		4,197		1,074,219
Changes in fair value of MSRs	(934,744)		—		(934,744)		—		(934,744)
Other income	447,048		13,731		460,779		353,555		814,334
Total U.S. GAAP Revenue, net	2,406,354		535,015		2,941,369		390,017		3,331,386
Change in fair value of MSRs due to valuation assumptions, net of hedges	383,036		—		383,036		—		383,036
Adjusted revenue	2,789,390		535,015		3,324,405		390,017		3,714,422
Less: Directly attributable expenses	1,615,101		182,061		1,797,162		263,187		2,060,349
Contribution margin	$	1,174,289	$	352,954	$	1,527,243	$	126,830	$	1,654,073


Three Months Ended September 30, 2023	Direct to Consumer		Partner Network		Segments Total		All Other		Total
Revenues
Gain on sale of loans, net	$	460,559	$	102,088	$	562,647	$	9,476	$	572,123
Interest income	50,644		43,404		94,048		(180)		93,868
Interest expense on funding facilities	(36,124)		(30,836)		(66,960)		(99)		(67,059)
Servicing fee income	342,719		—		342,719		1,342		344,061
Changes in fair value of MSRs	12,765		—		12,765		—		12,765
Other income	153,868		3,431		157,299		90,111		247,410
Total U.S. GAAP Revenue, net	984,431		118,087		1,102,518		100,650		1,203,168
Change in fair value of MSRs due to valuation assumptions, net of hedges	(201,248)		—		(201,248)		—		(201,248)
Adjusted revenue	783,183		118,087		901,270		100,650		1,001,920
Less: Directly attributable expenses	479,307		59,686		538,993		95,974		634,967
Contribution margin	$	303,876	$	58,401	$	362,277	$	4,676	$	366,953

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)


Nine Months Ended September 30, 2023	Direct to Consumer		Partner Network		Segments Total		All Other		Total
Revenues
Gain on sale of loans, net	$	1,326,953	$	282,662	$	1,609,615	$	26,540	$	1,636,155
Interest income	134,250		107,119		241,369		—		241,369
Interest expense on funding facilities	(89,516)		(71,916)		(161,432)		(251)		(161,683)
Servicing fee income	1,050,264		—		1,050,264		3,773		1,054,037
Changes in fair value of MSRs	(343,137)		—		(343,137)		—		(343,137)
Other income	426,542		11,245		437,787		240,935		678,722
Total U.S. GAAP Revenue, net	2,505,356		329,110		2,834,466		270,997		3,105,463
Change in fair value of MSRs due to valuation assumptions, net of hedges	(219,746)		—		(219,746)		—		(219,746)
Adjusted revenue	2,285,610		329,110		2,614,720		270,997		2,885,717
Less: Directly attributable expenses	1,514,113		191,470		1,705,583		242,409		1,947,992
Contribution margin	$	771,497	$	137,640	$	909,137	$	28,588	$	937,725

The following table represents a reconciliation of segment contribution margin to consolidated U.S. GAAP (Loss) income before income taxes for the three and nine months ended:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Contribution margin, excluding change in MSRs due to valuation assumptions	$	621,716	$	366,953	$	1,654,073	$	937,725
Change in fair value of MSRs due to valuation assumptions, net of hedges	(676,073)		201,248		(383,036)		219,746
Contribution margin, including change in MSRs due to valuation assumptions	(54,357)		568,201		1,271,037		1,157,471
Less expenses not allocated to segments:
Salaries, commissions and team member benefits	219,730		240,186		617,329		683,713
General and administrative expenses	140,143		142,110		408,994		430,818
Depreciation and amortization	28,607		27,636		83,633		83,678
Interest and amortization expense on non-funding debt	38,620		38,354		115,349		115,021
Other expenses	15,862		2,290		52,639		4,233
(Loss) income before income taxes	$	(497,319)	$	117,625	$	(6,907)	$	(159,992)

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

12. Non-controlling Interest

The non-controlling interest balance represents the economic interest in Holdings held by our Chairman and RHI. The following table summarizes the ownership of Holdings Units in Holdings as of September 30, 2024 and December 31, 2023:


	September 30, 2024			December 31, 2023
	Holdings Units	Ownership Percentage		Holdings Units	Ownership Percentage
Rocket Companies, Inc.'s ownership of Holdings Units	144,920,227	7.27	%	135,814,173	6.84	%
Holdings Units held by our Chairman	1,101,822	0.06	%	1,101,822	0.06	%
Holdings Units held by RHI	1,847,777,661	92.67	%	1,847,777,661	93.10	%
Balance at end of period	1,993,799,710	100.00	%	1,984,693,656	100.00	%

The non-controlling interest holders have the right to exchange Holdings Units, together with a corresponding number of shares of our Class D common stock or Class C common stock (together referred to as “Paired Interests”), for, at our option, (i) shares of our Class B common stock or Class A common stock or (ii) cash from a substantially concurrent public offering or private sale (based on the price of our Class A common stock). As such, future exchanges of Paired Interests by non-controlling interest holders will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in-capital when Holdings has positive or negative net assets, respectively. During the periods presented, neither our Chairman nor RHI has exchanged any Paired Interests.

13. Share-based Compensation

Restricted stock units ("RSUs"), performance stock units ("PSUs") and stock options are granted to team members and directors of the Company and its affiliates under the 2020 Omnibus Incentive Plan. Share-based compensation expense is recognized on a straight-line basis over the requisite service period based on the fair value of the award on the date of grant, with forfeitures recognized as they occur.

The Company granted approximately 1,100,000 and 13,500,000 RSUs with an estimated future expense of $22,500 and $180,300 during the three and nine months ended September 30, 2024, respectively. These awards generally vest semi-annually over a three-year period, subject to the grantee’s employment or service with the Company through each applicable vesting date.

Additionally, the Company authorized approximately 1,100,000 PSUs at target during the nine months ended September 30, 2024, that will vest based on the satisfaction of certain market, performance and service conditions. A portion of the PSUs will cliff vest at the end of a three-year period based on the satisfaction of certain market and service conditions. The fair value of the award is determined based on a Monte Carlo valuation model. The remaining portion of the PSUs will cliff vest at the end of a three-year period based on the satisfaction of certain performance and service conditions, which will be established by the Company at a future date. The Company has determined that the service inception date precedes the grant date and the fair value of these awards will be remeasured quarterly based on the current period share price until the awards are granted. This portion of the PSUs is not considered contingently issuable and is excluded from the calculation of earnings per share as of September 30, 2024.

The Company has an employee stock purchase plan, referred to as the Team Member Stock Purchase Plan (“TMSPP”), under which eligible team members may direct the Company to withhold up to 15% of their gross pay to purchase shares of common stock at a price equal to 85% of the closing market price on the exercise date. The TMSPP is a liability classified compensatory plan and the Company recognizes compensation expense over the offering period based on the fair value of the purchase discount. The number of shares purchased by team members through the TMSPP were 434,822 and 802,759, during the three months ended September 30, 2024 and 2023, respectively and 1,685,807 and 2,475,858 for the nine months ended September 30, 2024 and 2023, respectively.

Additionally, certain of our subsidiaries have individual compensation plans that include equity awards and stock appreciation rights.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The components of share-based compensation expense included in Salaries, commissions and team member benefits on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Rocket Companies, Inc. sponsored plans
Restricted stock units	$	36,440	$	37,722	$	101,841	$	121,889
Performance stock units	2,091		—		3,975		—
Stock options	15		2,877		45		18,925
Team Member Stock Purchase Plan	1,284		1,122		3,748		3,391
Subtotal Rocket Companies, Inc. sponsored plans	$	39,830	$	41,721	$	109,609	$	144,205
Subsidiary plans	98		371		316		543
Total share-based compensation expense	$	39,928	$	42,092	$	109,925	$	144,748

14. Earnings Per Share

The Company applies the two-class method for calculating and presenting earnings per share by separately presenting earnings per share for Class A common stock and Class B common stock. In applying the two-class method, the Company allocates undistributed earnings equally on a per share basis between Class A and Class B common stock. According to the Company’s certificate of incorporation, the holders of the Class A and Class B common stock are entitled to participate in earnings equally on a per-share basis, as if all shares of common stock were of a single class, and in dividends as may be declared by the board of directors. Holders of the Class A and Class B common stock also have equal priority in liquidation. Shares of Class C and Class D common stock do not participate in earnings of Rocket Companies, Inc. As a result, the shares of Class C and Class D common stock are not considered participating securities and are not included in the weighted-average shares outstanding for purposes of earnings per share. RSUs and PSUs awarded as part of the Company’s compensation program are included in the weighted-average Class A shares outstanding in the calculation of basic earnings per share once the units are fully vested.

Basic earnings per share of Class A common stock is computed by dividing Net (loss) income attributable to Rocket Companies by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing Net (loss) income attributable to Rocket Companies by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities. There was no Class B common stock outstanding as of September 30, 2024 or 2023. See Note 12, Non-controlling Interest for a description of Paired Interests and their potential impact on Class A and Class B share ownership.

Diluted earnings per share reflects the dilutive effect of potential common shares from share-based awards and Class D common stock. The treasury stock method is used to calculate the dilutive effect of outstanding share-based awards, which assumes the proceeds upon vesting or exercise of awards would be used to purchase common stock at the average price for the period. The if-converted method is used to calculate the dilutive effect of converting Class D common stock to Class A common stock.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

The following table sets forth the calculation of the basic and diluted earnings per share for the period:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net (loss) income	$	(481,424)	$	114,945	$	(12,785)	$	(157,386)
Net loss (income) attributable to non-controlling interest	459,413		(108,739)		8,284		152,507
Net (loss) income attributable to Rocket Companies	$	(22,011)	$	6,206	$	(4,501)	$	(4,879)

Numerator:
Net (loss) income attributable to Class A common shareholders - basic	$	(22,011)	$	6,206	$	(4,501)	$	(4,879)
Add: Reallocation of Net (loss) income attributable to dilutive impact of pro-forma conversion of Class D shares to Class A shares (1)	(350,140)		82,585		—		(115,420)
Add: Reallocation of Net (loss) income attributable to dilutive impact of share-based compensation awards (2)	(2,357)		255		—		(207)
Net (loss) income attributable to Class A common shareholders - diluted	$	(374,508)	$	89,046	$	(4,501)	$	(120,506)
Denominator:
Weighted average shares of Class A common stock outstanding - basic	141,763,221		129,390,501		139,475,981		126,971,718
Add: Dilutive impact of conversion of Class D shares to Class A shares	1,848,879,483		1,848,879,483		—		1,848,879,483
Add: Dilutive impact of share-based compensation awards (3)	12,653,811		5,722,366		—		3,352,781
Weighted average shares of Class A common stock outstanding - diluted	2,003,296,515		1,983,992,350		139,475,981		1,979,203,982

(Loss) earnings per share of Class A common stock outstanding - basic	$	(0.16)	$	0.05	$	(0.03)	$	(0.04)
(Loss) earnings per share of Class A common stock outstanding - diluted	$	(0.19)	$	0.04	$	(0.03)	$	(0.06)

(1) Net (loss) income is calculated using the estimated annual effective tax rate of Rocket Companies, Inc.

(2) Reallocation of Net (loss) income attributable to dilutive impact of share-based compensation awards for the three months ended September 30, 2024 and 2023 comprised of $(2,234) and $252 related to RSUs, $(111) and zero related to PSUs, $(5) and zero related to stock options and $(7) and $2 related to TMSPP, respectively. Reallocation of Net (loss) income attributable to dilutive impact of share-based compensation awards for the nine months ended September 30, 2024 and 2023 comprised of zero and $(200) related to RSUs and zero and $(7) related to TMSPP, respectively.

(3) Dilutive impact of share-based compensation awards for the three months ended September 30, 2024 and 2023 comprised of 11,995,156 and 5,668,240 related to RSUs, 593,285 and zero related to PSUs, 27,123 and zero related to stock options and 38,247 and 54,126 related to TMSPP, respectively. Dilutive impact of share-based compensation awards for the nine months ended September 30, 2024 and 2023 comprised of zero and 3,244,244 related to RSUs and zero and 108,537 related to TMSPP, respectively.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

A portion of the Company RSUs, stock options, PSUs and shares issuable under the TMSPP were excluded from the computation of diluted earnings per share as the weighted portion for the period they were outstanding was determined to have an anti-dilutive effect.

RSUs excluded from the computation for the three months ended September 30, 2024 and 2023 were 1,140,223 and 8,285,164, respectively. Stock options excluded from the computation for the three months ended September 30, 2024 and 2023 were 14,757,544 and 18,673,390, respectively.

RSUs excluded from the computation for the nine months ended September 30, 2024 and 2023 were 23,251,181 and 9,755,719, respectively. Stock options excluded from the computation for the nine months ended September 30, 2024 and 2023 were 14,817,544 and 18,673,390, respectively. PSUs excluded from the computation for the nine months ended September 30, 2024 and 2023 were 1,055,408 and zero, respectively. Shares issuable under the TMSPP excluded from the computation for the nine months ended September 30, 2024 and 2023 were 76,490 and zero.

For the nine months ended September 30, 2024, 1,848,879,483 Holdings Units were outstanding, together with a corresponding number of shares of our Class D common stock, which were exchangeable, at our option, for shares of our Class A common stock. After evaluating the potential dilutive effect under the if-converted method, the outstanding Holdings Units for the assumed exchange of non-controlling interests were determined to be anti-dilutive and thus were excluded from the computation of diluted earnings per share. The Holding Units were dilutive for the three months ended September 30, 2024 and the three and nine months ended September 30, 2023 and therefore included in the earnings per share calculation.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited condensed consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”) and our audited consolidated financial statements included in our Annual Report on Form 10-K (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”). This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Special Note Regarding Forward-Looking Statements,” and in Part I. Item 1A. “Risk Factors” in our Form 10-K and elsewhere in this Form 10-Q and in our Form 10-K.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. As you read this Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions, including those described under the heading “Risk Factors” in this Form 10-Q. Although we believe that these forward-looking statements are based upon reasonable assumptions, you should be aware that many factors, including those described under the heading “Risk Factors” in this Form 10-Q, could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.

Our forward-looking statements made herein are made only as of the date of this Form 10-Q. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Form 10-Q.

Objective

The following discussion provides an analysis of the Company's financial condition, cash flows and results of operations from management's perspective and should be read in conjunction with the consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Our objective is to provide a discussion of events and uncertainties known to management that are reasonably likely to cause the reported financial information not to be indicative of future operating results or of future financial condition and to also offer information that provides an understanding of our financial condition, cash flows and results of operations.

Executive Summary

Recent Developments

Business Trends

From January to September 2024, the U.S. inflation rate declined from 3.1% to 2.4%, progressing toward the Federal Reserve’s target rate of 2%. In mid-September, the Federal Reserve lowered the federal funds rate by 50 basis points to 5.00%. Subsequent to quarter end, in November 2024, the Federal Reserve lowered the federal funds rate by an additional 25 basis points to 4.75%. Mortgage interest rates declined during the quarter, providing some relief to home affordability, however, rate volatility, constrained housing inventory, rising home prices and economic uncertainty persist, impacting both refinance and purchase origination activity across the industry.

Three months ended September 30, 2024 summary

We originated $28.5 billion in residential mortgage loans, an increase of $6.3 billion, or 28%, compared to $22.2 billion for the same period in 2023. Our Net loss for the period was $481.4 million, a decrease of $596.4 million, compared to Net income of $114.9 million for the same period in 2023. We generated Adjusted EBITDA of $285.9 million, an increase of $212.7 million, compared to Adjusted EBITDA of $73.2 million for the same period in 2023. For more information on Adjusted EBITDA, please see “Non-GAAP Financial Measures” below.

Nine months ended September 30, 2024 summary

We originated $73.4 billion in residential mortgage loans, an increase of $11.9 billion, or 19%, compared to $61.5 billion for the same period in 2023. Our Net loss for the period was $12.8 million, an increase of $144.6 million, compared to Net loss of $157.4 million for the same period in 2023. We generated $685.0 million of Adjusted EBITDA, an increase of $672.6 million, compared to Adjusted EBITDA of $12.5 million for the same period in 2023. For more information on Adjusted EBITDA, please see “Non-GAAP Financial Measures” below.

Non-GAAP Financial Measures

To provide investors with information in addition to our results as determined by GAAP, we disclose Adjusted revenue, Adjusted net income (loss), Adjusted diluted earnings (loss) per share and Adjusted EBITDA (collectively “our non-GAAP financial measures”) as non-GAAP measures which management believes provide useful information to investors. We believe that the presentation of our non-GAAP financial measures provides useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. Our non-GAAP financial measures are not calculated in accordance with GAAP and should not be considered as a substitute for revenue, net income (loss), or any other operating performance measure calculated in accordance with GAAP. Other companies may define our non-GAAP financial measures differently, and as a result, our measures of our non-GAAP financial measures may not be directly comparable to those of other companies. Our non-GAAP financial measures provide indicators of performance that are not affected by fluctuations in certain costs or other items. Accordingly, management believes that these measurements are useful for comparing general operating performance from period to period, and management relies on these measures for planning and forecasting of future periods. Additionally, these measures allow management to compare our results with those of other companies that have different financing and capital structures.

We define “Adjusted revenue” as total revenues net of the change in fair value of mortgage servicing rights (“MSRs”) due to valuation assumptions, net of hedges. We define “Adjusted net income (loss)” as tax-effected net income (loss) before share-based compensation expense, the change in fair value of MSRs due to valuation assumptions, net of hedges, career transition program and the tax effects of those adjustments as applicable. We define “Adjusted diluted earnings (loss) per share” as Adjusted net income (loss) divided by the adjusted diluted weighted average shares outstanding which includes diluted weighted average Class A common stock and the assumed pro forma exchange and conversion of Class D common stock outstanding for the applicable period presented. We define “Adjusted EBITDA” as net income (loss) before interest and amortization expense on non-funding debt, (benefit from) provision for income taxes, depreciation and amortization, share-based compensation expense, change in fair value of MSRs due to valuation assumptions, net of hedges and career transition program.

We exclude from each of our non-GAAP financial measures the change in fair value of MSRs due to valuation assumptions, net of hedges, as this represents a non-cash non-realized adjustment to our total revenues, reflecting changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, which is not indicative of our performance or results of operation. We also exclude effects of contractual prepayment protection associated with sales of MSRs. Adjusted EBITDA includes Interest expense on funding facilities, which are recorded as a component of Interest income, net, as these expenses are a direct cost driven by loan origination volume. By contrast, interest and amortization expense on non-funding debt is a function of our capital structure and is therefore excluded from Adjusted EBITDA.

Our definitions of each of our non-GAAP financial measures allow us to add back certain cash and non-cash charges, and deduct certain gains that are included in calculating Total revenue, net, Net (loss) income attributable to Rocket Companies or Net (loss) income. However, these expenses and gains vary greatly, and are difficult to predict. From time to time in the future, we may include or exclude other items if we believe that doing so is consistent with the goal of providing useful information to investors.

Although we use our non-GAAP financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business. Our non-GAAP financial measures can represent the effect of long-term strategies as opposed to short-term results. Our presentation of our non-GAAP financial measures should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items. Our non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Because of these limitations, our non-GAAP financial measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

Limitations to our non-GAAP financial measures included, but are not limited to:

(a) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;

(b) Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

(c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted revenue, Adjusted net income (loss) and Adjusted EBITDA do not reflect any cash requirement for such replacements or improvements; and

(d) they are not adjusted for all non-cash income or expense items that are reflected in our Condensed Consolidated Statements of Cash Flows.

We compensate for these limitations by using our non-GAAP financial measures along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. See below for reconciliation of our non-GAAP financial measures to their most comparable U.S. GAAP measures. Additionally, our U.S. GAAP-based measures can be found in the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q.

Reconciliation of Adjusted Revenue to Total Revenue, net


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Total revenue, net	$	646,948	$	1,203,168	$	3,331,386	$	3,105,463
Change in fair value of MSRs due to valuation assumptions, net of hedges (1)	676,073		(201,248)		383,036		(219,746)
Adjusted revenue	$	1,323,021	$	1,001,920	$	3,714,422	$	2,885,717

Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss) Attributable to Rocket Companies


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Net (loss) income attributable to Rocket Companies	$	(22,011)	$	6,206	$	(4,501)	$	(4,879)
Net (loss) income impact from pro forma conversion of Class D common shares to Class A common shares (1)	(459,180)		109,266		(7,415)		(150,798)
Adjustment to the benefit from (provision for) income tax (2)	105,395		(26,019)		7,352		35,841
Tax-effected net (loss) income (2)	$	(375,796)	$	89,453	$	(4,564)	$	(119,836)
Share-based compensation expense (3)	39,928		39,348		109,925		142,004
Change in fair value of MSRs due to valuation assumptions, net of hedges (4)	676,073		(201,248)		383,036		(219,746)

Career transition program (5)	—		51,495		—		51,495

Tax impact of adjustments (6)	(174,705)		26,817		(120,283)		6,378
Other tax adjustments (7)	978		973		2,939		2,919
Adjusted net income (loss)	$	166,478	$	6,838	$	371,053	$	(136,786)

(1) Reflects net income (loss) to Class A common stock from pro forma exchange and conversion of corresponding shares of our Class D common shares held by non-controlling interest holders as of September 30, 2024 and 2023.

(2) Rocket Companies is subject to U.S. Federal income taxes, in addition to state, local and Canadian taxes with respect to its allocable share of any net taxable income or loss of Holdings. The adjustment to the benefit from (provision for) income tax reflects the difference between (a) the income tax computed using the effective tax rates below applied to the (loss) income before income taxes assuming Rocket Companies, Inc. owns 100% of the non-voting common interest units of Holdings and (b) the (benefit from) provision for income taxes.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net (loss) income attributable to Rocket Companies	$	(22,011)		$	6,206		$	(4,501)		$	(4,879)
Net (loss) income impact from pro forma conversion of Class D common shares to Class A common shares	(459,180)			109,266			(7,415)			(150,798)
(Benefit from) provision for income taxes	(15,895)			2,680			5,878			(2,606)
Adjusted (loss) income before income taxes	(497,086)			118,152			(6,038)			(158,283)
Effective income tax rate for adjusted net (loss) income	24.40		%	24.29		%	24.40		%	24.29		%
Adjusted (benefit from) provision for income taxes	(121,290)			28,699			(1,474)			(38,447)
(Benefit from) provision for income taxes	(15,895)			2,680			5,878			(2,606)
Adjustment to the benefit from (provision for) income tax	$	105,395		$	(26,019)		$	7,352		$	35,841


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Statutory U.S. Federal income tax rate	21.00	%	21.00	%	21.00	%	21.00	%
Canadian taxes	0.01		0.01		0.01		0.01
State and local income taxes, net of federal benefit	3.39		3.28		3.39		3.28
Effective income tax rate for adjusted net (loss) income	24.40	%	24.29	%	24.40	%	24.29	%

(3) The three and nine months ended September 30, 2023 amounts exclude the impact of the career transition program.

(4) Reflects changes in market interest rates and assumptions, including discount rates and prepayment speeds and the effects of contractual prepayment protection associated with sales or purchases of MSRs.

(5) Reflects net expenses associated with compensation packages, healthcare coverage, career transition services and accelerated vesting of certain equity awards.

(6) Tax impact of adjustments gives effect to the income tax related to share-based compensation expense, the change in fair value of MSRs due to valuation assumptions and career transition program, at the effective tax rates for each quarter.

(7) Represents tax benefits due to the amortization of intangible assets and other tax attributes resulting from the purchase of Holdings units, net of payment obligations under Tax Receivable Agreement.

Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Outstanding


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands, except shares and per share)	2024		2023		2024		2023
Diluted weighted average Class A Common shares outstanding	2,003,296,515		1,983,992,350		139,475,981		1,979,203,982
Assumed pro forma conversion of Class D shares (1)	—		—		1,848,879,483		—
Adjusted diluted weighted average shares outstanding	2,003,296,515		1,983,992,350		1,988,355,464		1,979,203,982

Adjusted net income (loss)	$	166,478	$	6,838	$	371,053	$	(136,786)
Adjusted diluted earnings (loss) per share	$	0.08	$	0.00	$	0.19	$	(0.07)

(1) Reflects the pro forma exchange and conversion of anti-dilutive Class D common stock to Class A common stock for the nine months ended September 30, 2024. For the three months ended September 30, 2024 and three and nine months ended September 30, 2023, Class D common shares were dilutive and are included in the Diluted weighted average Class A common shares outstanding in the table above.

Reconciliation of Adjusted EBITDA to Net Income (Loss)


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Net (loss) income	$	(481,424)	$	114,945	$	(12,785)	$	(157,386)
Interest and amortization expense on non-funding debt	38,620		38,354		115,349		115,021
(Benefit from) provision for income taxes	(15,895)		2,680		5,878		(2,606)
Depreciation and amortization	28,607		27,636		83,633		83,678
Share-based compensation expense (1)	39,928		39,348		109,925		142,004
Change in fair value of MSRs due to valuation assumptions, net of hedges (2)	676,073		(201,248)		383,036		(219,746)

Career transition program (3)	—		51,495		—		51,495

Adjusted EBITDA	$	285,909	$	73,210	$	685,036	$	12,460

(1) The three and nine months ended September 30, 2023 amounts exclude the impact of the career transition program.

(2) Reflects changes in market interest rates and assumptions, including discount rates and prepayment speeds, and the effects of contractual prepayment protection associated with sales or purchases of MSRs.

(3) Reflects net expenses associated with compensation packages, healthcare coverage, career transition services and accelerated vesting of certain equity awards.

Key Performance Indicators

We monitor a number of key performance indicators to evaluate the performance of our business operations. Our loan production key performance indicators enable us to monitor our ability to generate gain on sale revenue as well as understand how our performance compares to the total mortgage origination market. Our servicing portfolio key performance indicators enable us to monitor the overall size of our servicing portfolio of business, the related value of our mortgage servicing rights, and the health of the business as measured by the average MSR delinquency rate. Other key performance indicators for other Rocket Companies, besides Rocket Mortgage (“Other Rocket Companies”), allow us to monitor both revenues and unit sales generated by these businesses. We include Rocket Money paid subscriptions, as we believe the metric is a key indicator of growth and revenue. We also include Rockethomes.com average unique monthly visits, as we believe traffic on the site is an indicator of consumer interest.

The following summarizes key performance indicators of the business:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Units and $ in thousands)	2024			2023			2024			2023
Rocket Mortgage
Loan Production Data
Closed loan origination volume	$	28,495,976		$	22,191,440		$	73,362,902		$	61,451,105
Direct to Consumer origination volume	$	15,375,174		$	11,947,102		$	39,604,954		$	34,170,699
Partner Network origination volume	$	13,120,802		$	10,244,338		$	33,757,948		$	27,280,406
Gain on sale margin (1)	2.78		%	2.76		%	2.94		%	2.61		%


	September 30,
	2024		2023
Servicing Portfolio Data
Total serviced UPB (includes subserviced)	$	546,064,899	$	506,083,328
MSRs UPB of loans serviced	$	512,980,084	$	470,203,438
UPB of loans subserviced and temporarily serviced	$	33,084,815	$	35,879,890
Total loans serviced (includes subserviced)	2,615.0		2,431.0
Number of MSRs loans serviced	2,544.4		2,347.7
Number of loans subserviced and temporarily serviced	70.6		83.3
MSR fair value multiple (2)	4.71		5.11
Total serviced MSR delinquency rate (60+)	1.40%		1.13%
Net client retention rate (trailing twelve months) (3)	97%		97%


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Select Other Rocket Companies
Amrock closings (units)	61.5		44.1		158.4		122.8
Rocket Money paid subscriptions, at period end	3,870.4		2,854.1		3,870.4		2,854.1
Rocket Homes real estate transactions	4.6		7.7		17.2		19.4
Rockethomes.com average unique monthly visitors (4)	1,041.4		1,641.7		1,481.7		1,500.0
Rocket Loans closed (units)	10.2		10.4		32.0		29.7
Total Select Other Rocket Companies gross revenue	$	199,555	$	151,841	$	554,088	$	429,643
Total Select Other Rocket Companies net revenue (5)	$	195,050	$	146,147	$	539,225	$	415,356

(1) Gain on sale margin is calculated by dividing Gain on sale of loans, net by the net rate lock volume for the period. Gain on sale of loans, net includes the net gain on sale of loans, fair value of originated MSRs, fair value adjustments on originated loans held for sale and IRLC’s and revaluation of forward commitments economically hedging loans held for sale and IRLCs. This metric is a measure of gain on sale revenue and excludes revenues from Rocket Loans, changes in the loan repurchase reserve and fair value adjustments on repurchased loans held on our balance sheet, such as early buyouts.

(2) MSR fair market value multiple is a metric used to determine the relative value of the MSR asset in relation to the annualized retained servicing fee, which is the cash that the holder of the MSR asset would receive from the portfolio as of such date. It is calculated as the quotient of (a) the MSR fair market value as of a specified date divided by (b) the weighted average annualized retained servicing fee for our MSR portfolio as of such date. The weighted average annualized retained servicing fee for our MSR portfolio was 0.28% as of September 30, 2024 and 2023. The vast majority of our portfolio consists of originated MSRs and consequently, the impact of purchased MSRs does not have a material impact on our weighted average service fee.

(3) This metric measures our retention across a greater percentage of our client bases versus our recapture rate. We define “net client retention rate” as the number of clients that were active at the beginning of a period and which remain active at the end of the period, divided by the number of clients that were active at the beginning of the period. This metric excludes clients whose loans were sold during the period as well as clients to whom we did not actively market to due to contractual prohibitions or other business reasons. We define “active” as those clients who do not pay-off their mortgage with us and originate a new mortgage with another lender during the period.

(4) Rockethomes.com average unique monthly visits is calculated by a third party service that monitors website and app engagement activity. This metric doesn't necessarily have a direct correlation to revenues and is used primarily to monitor consumer interest in the Rockethomes.com site and app.

(5) Net revenue presented above is calculated as gross revenues less intercompany revenue eliminations, as a portion of the Select Other Rocket Companies revenues is generated through intercompany transactions. Consequently, we view gross revenue of individual Select Other Rocket Companies as a key performance indicator, and we consider net revenue of Select Other Rocket Companies on a combined basis.

Description of Certain Components of Financial Data

Components of Revenue

Our sources of revenue include Gain on sale of loans, net, Loan servicing (loss) income, net, Interest income, net and Other income.

Gain on sale of loans, net

Gain on sale of loans, net includes all components related to the origination and sale of mortgage loans, including (1) net gain on sale of loans, which represents the premium we receive in excess of the loan principal amount and certain fees charged by investors upon sale of loans into the secondary market, (2) loan origination fees, credits, points and certain costs, (3) provision for or benefit from investor reserves, (4) the change in fair value of interest rate locks (“IRLCs” or “rate lock”) and loans held for sale, (5) the gain or loss on forward commitments hedging loans held for sale and IRLCs and (6) the fair value of originated MSRs. MSR assets are created at the time mortgage loans held for sale are securitized and sold to investors for cash, while the Company retains the right to service the loan.

Loan servicing (loss) income, net

Loan servicing fee income consists of the contractual fees earned for servicing the loans and includes ancillary revenue such as late fees and modification incentives. Loan servicing fee income is recorded to income as earned, which is upon collection of payments from borrowers. We have elected to measure the MSRs at fair value on a recurring basis. Changes in fair value of MSRs, net primarily due to the realization of expected cash flows and/or changes in valuation inputs and estimates, are recognized in current period earnings.

Interest income, net

Interest income, net is interest earned on mortgage loans held for sale net of the interest expense paid on our loan funding facilities.

Other income

Other income includes revenues generated from Rocket Money (personal finance subscription revenue), Amrock (closing fees and appraisal fees), Rocket Loans (personal loans), Rocket Homes (real estate network referral fees), Deposit income related to revenue earned on deposits, including escrow deposits and professional service fees. The professional service fees represent amounts received in exchange for professional services provided to affiliated companies. Services are provided primarily in connection with technology, facilities, human resources, accounting, training and security functions. Other income also includes revenues from additional entities and other miscellaneous income.

Components of operating expenses

Our operating expenses as presented in the statement of operations data include Salaries, commissions and team member benefits, General and administrative expenses, Marketing and advertising expenses, Interest and amortization expense on non-funding debt and Other expenses.

Salaries, commissions and team member benefits

Salaries, commissions and team member benefits include all payroll, benefits and share-based compensation expenses for our team members.

General and administrative expenses

General and administrative expenses primarily include occupancy costs, professional services, loan processing expenses on loans that do not close or that are not charged to clients on closed loans, commitment fees, fees on loan funding facilities, license fees, office expenses and other operating expenses.

Marketing and advertising expenses

Marketing and advertising expenses are primarily related to performance and brand marketing.

Interest and amortization expense on non-funding debt

Interest and amortization expense related to our Senior Notes.

Other expenses

Other expenses primarily consist of depreciation and amortization on property and equipment, mortgage servicing related expenses and expenses generated from Amrock (title insurance services, property valuation and settlement services).

Income taxes

In calculating the provision for interim income taxes, in accordance with ASC Topic 740 Income Taxes, we apply an estimated annual effective tax rate to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full year. Tax-effects of significant, unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

Tax Receivable Agreement

Refer to Note 7, Income Taxes for more information on Tax Receivable Agreement.

Share-based compensation

Share-based compensation is comprised of both equity and liability awards and is measured and expensed accordingly under Accounting Standards Codification (“ASC”) 718 Compensation - Stock Compensation. As indicated above, share-based compensation expense is included as part of salaries, benefits and team member benefits.

Non-controlling interest

We are the sole managing member of Holdings and consolidate the financial results of Holdings. Therefore, we report a non-controlling interest based on the Holdings Units of Holdings held by Dan Gilbert, our founder and Chairman (our “Chairman”) and RHI on our Condensed Consolidated Balance Sheets. Income or loss is attributed to the non-controlling interests based on the weighted average Holdings Units outstanding during the period and is presented on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). Refer to Note 12, Non-controlling Interest for more information on non-controlling interests.

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

Summary of Operations


Condensed Statement of Operations Data	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Revenue
Gain on sale of loans, net	$	844,390	$	572,123	$	2,302,172	$	1,636,155
Servicing fee income	373,796		344,061		1,074,219		1,054,037
Change in fair value of MSRs	(878,311)		12,765		(934,744)		(343,137)
Interest income, net	6,746		26,809		75,405		79,686
Other income	300,327		247,410		814,334		678,722
Total revenue, net	$	646,948	$	1,203,168	$	3,331,386	$	3,105,463
Expenses
Salaries, commissions and team member benefits	607,526		589,584		1,702,042		1,772,498
General and administrative expenses	221,074		199,399		690,691		595,214
Marketing and advertising expenses	200,528		193,406		617,761		593,853
Interest and amortization expense on non-funding-debt	38,620		38,354		115,349		115,021
Other expenses	76,519		64,800		212,450		188,869
Total expenses	$	1,144,267	$	1,085,543	$	3,338,293	$	3,265,455
(Loss) income before income taxes	(497,319)		117,625		(6,907)		(159,992)
Benefit from (provision for) income taxes	15,895		(2,680)		(5,878)		2,606
Net (loss) income	(481,424)		114,945		(12,785)		(157,386)
Net loss (income) attributable to non-controlling interest	459,413		(108,739)		8,284		152,507
Net (loss) income attributable to Rocket Companies	$	(22,011)	$	6,206	$	(4,501)	$	(4,879)

Gain on sale of loans, net

The components of gain on sale of loans, net for the periods presented were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Net gain on sale of loans (1)	$	683,526	$	67,520	$	1,352,102	$	483,429
Fair value of originated MSRs	337,702		330,627		906,044		850,027
Provision for investor reserves	(11,204)		(10,775)		(29,872)		(103,616)
Fair value adjustment on loans held for sale and IRLCs	129,480		(71,173)		217,886		37,744
Revaluation from forward commitments economically hedging loans held for sale and IRLCs	(295,114)		255,924		(143,988)		368,571
Gain on sale of loans, net	$	844,390	$	572,123	$	2,302,172	$	1,636,155

(1) Net gain on sale of loans represents the premium received in excess of the UPB, plus net origination fees.

The table below provides details of the characteristics of our mortgage loan production for each of the periods presented:


	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2024			2023			2024			2023
Closed loan origination volume by type:
Conventional Conforming	$	17,469,401		$	13,455,007		$	43,845,531		$	37,786,428
FHA/VA	7,675,776			6,783,591			20,575,429			18,822,831
Non-Agency	3,350,799			1,952,842			8,941,942			4,841,846
Total mortgage closed loan origination volume	$	28,495,976		$	22,191,440		$	73,362,902		$	61,451,105
Portfolio metrics:
Average loan amount	$	280		$	271		$	274		$	275
Weighted average loan-to-value ratio	73.28		%	74.91		%	73.36		%	75.20		%
Weighted average credit score	738			734			737			733
Weighted average loan rate	6.54		%	6.79		%	6.71		%	6.43		%
Percentage of loans sold:
To GSEs and government	82.67		%	92.30		%	84.17		%	92.19		%
To other counterparties	17.33		%	7.70		%	15.83		%	7.81		%
Servicing-retained	93.33		%	99.14		%	94.49		%	99.57		%
Servicing-released	6.67		%	0.86		%	5.51		%	0.43		%

Net rate lock volume (1)	$	29,835,118		$	20,814,634		$	77,247,083		$	62,593,856
Gain on sale margin (2)	2.78		%	2.76		%	2.94		%	2.61		%

(1) Net rate lock volume includes the UPB of loans subject to IRLCs, net of the pull-through factor as described in the “Description of Certain Components of Financial Data” section of our most recently filed Form10-K.

(2) Gain on sale margin is calculated by dividing Gain on sale of loans, net by the net rate lock volume for the period. Gain on sale of loans, net includes the net gain on sale of loans, fair value of originated MSRs, fair value adjustments on originated loans held for sale and IRLC’s and revaluation of forward commitments economically hedging loans held for sale and IRLCs. This metric is a measure of gain on sale revenue and excludes revenues from Rocket Loans, changes in the loan repurchase reserve and fair value adjustments on repurchased loans held on our balance sheet, such as early buyouts. See the table above for each of the components of gain on sale of loans, net.

Overview of the Gain on sale of loans, net table

At the time an IRLC is issued, an estimate of the Gain on sale of loans, net is recognized in the Fair value adjustment on loans held for sale and IRLCs component in the table above. Subsequent changes in the fair value of IRLCs and mortgage loans held for sale are recognized in this same component as the loan progresses through closing, which is the moment that loans move from an IRLC to a loan held for sale, and ultimately through the sale of the loan. We deploy a hedge strategy to mitigate the impact of interest rate changes from the point of the IRLC through the sale of the loan. The changes to the Fair value adjustment on loans held for sale and IRLCs in each period is dependent on several factors, including mortgage origination volume, how long a loan remains at a given stage in the origination process and the movement of interest rates during that period as compared to the immediately preceding period. Loans originated during an increasing rate environment generally decrease in value, and loans originated during a decreasing rate environment generally increase in value. When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized and moves from the Fair value adjustment on loans held for sale and IRLCs component in the Net gain on sale of loans component in the table above. The Revaluation gain from forward commitments economically hedging loans held for sale and IRLCs component reflects the forward hedge commitments intended to offset the various fair value adjustments that impact the Fair value adjustment on loans held for sale and IRLCs and the Net gain on sale of loans components. As a result, these three components should be evaluated in combination when evaluating Gain on sale of loans, net, as the sum of these components are primarily driven by net rate lock volume. Furthermore, at the point of sale of the loan, the Fair value of originated MSRs and the Provision for investor reserves are recognized each in their respective components shown above.

Three months ended September 30, 2024 summary

Gain on sale of loans, net was $844.4 million, an increase of $272.3 million, or 48%, compared to $572.1 million for the same period in 2023, primarily due to a 43% increase in net rate lock volume, impacting Net gain on sale of loans, Fair value adjustment on loans held for sale and IRLCs, and Revaluation from forward commitments economically hedging loans held for sale and IRLCs.

The Fair value of originated MSRs was $337.7 million, an increase of $7.1 million, or 2%, when compared to $330.6 million for the same period in 2023, driven by an increase in sold loan volume, offset by a lower MSR fair value multiple during the period.

The Provision for investor reserves expense was flat period over period.

Nine months ended September 30, 2024 summary

Gain on sale of loans, net was $2.3 billion, an increase of $666.0 million, or 41%, compared to $1.6 billion for the same period in 2023, primarily due to a 23% increase in net rate lock volume and 13% higher gain on sale margin, impacting Net gain on sale of loans, Fair value adjustment on loans held for sale and IRLCs, and Revaluation from forward commitments economically hedging loans held for sale and IRLCs.

The Fair value of originated MSRs was $906.0 million, an increase of $56.0 million, or 7%, when compared to $850.0 million for the same period in 2023, driven by an increase in sold loan volume, offset by a lower MSR fair value multiple during the period.

The Investor reserves liability balance was relatively flat in the current and prior period. The $73.7 million reduction in provision expense was primarily due to a decrease in losses on repurchased loans in the current period, compared to the same period in 2023.

Loan servicing (loss) income, net

For the periods presented, Loan servicing (loss) income, net consisted of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Retained servicing fee	$	358,336	$	331,420	$	1,029,704	$	1,016,343
Subservicing income	1,771		2,050		5,799		7,231
Ancillary income	13,689		10,591		38,716		30,463
Servicing fee income	373,796		344,061		1,074,219		1,054,037
Change in valuation model inputs or assumptions (1)	(682,640)		211,041		(381,651)		233,266
Change in fair value of MSR hedge	6,567		(9,793)		(1,385)		(13,520)
Collection / realization of cash flows (1)	(202,238)		(188,483)		(551,708)		(562,883)
Change in fair value of MSRs	(878,311)		12,765		(934,744)		(343,137)
Loan servicing (loss) income, net	$	(504,515)	$	356,826	$	139,475	$	710,900

(1) Includes the effect of contractual prepayment protection resulting from sales or purchases of MSRs.


	September 30,
($ in thousands)	2024		2023
MSRs UPB of loans serviced	$	512,980,084	$	470,203,438
Number of MSR loans serviced	2,544,411		2,347,685
UPB of loans subserviced and temporarily serviced	$	33,084,815	$	35,879,890
Number of loans subserviced and temporarily serviced	70,627		83,340
Total serviced UPB	$	546,064,899	$	506,083,328
Total loans serviced	2,615,038		2,431,025
MSR fair value	$	6,810,667	$	6,678,165
Total serviced delinquency count (60+) as % of total	1.40%		1.13%
Weighted average credit score	733		733
Weighted average LTV	71.77%		71.34%
Weighted average loan rate	4.18%		3.67%
Weighted average service fee	0.28%		0.28%

Three months ended September 30, 2024 summary

Loan servicing loss, net was $504.5 million, a decrease of $861.3 million, compared to $356.8 million loan servicing income, net for the same period in 2023, primarily due to the $893.7 million decline in valuation reflected in Change in valuation model inputs or assumptions. In 2024, the Change in valuation model inputs or assumptions was a $682.6 million decrease, compared to an increase of $211.0 million in 2023. This change was driven by a decrease in interest rates during the third quarter of 2024, compared to an increase in interest rates during the same period in 2023.

Nine months ended September 30, 2024 summary

Loan servicing income, net was $139.5 million, a decrease of $571.4 million, or 80%, compared to $710.9 million for the same period in 2023, primarily due to the $614.9 million decline in valuation reflected in Change in valuation model inputs or assumptions. In 2024, the Change in valuation model inputs or assumptions was a $381.7 million decrease, compared to an increase of $233.3 million in 2023. This change was driven by a decrease in interest rates during the current period, compared to an increase in interest rates during the same period in 2023.

Interest income, net

The components of Interest income, net for the periods presented were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Interest income	$	108,566	$	93,868	$	309,961	$	241,369
Interest expense on funding facilities	(101,820)		(67,059)		(234,556)		(161,683)
Interest income, net	$	6,746	$	26,809	$	75,405	$	79,686

Three months ended September 30, 2024 summary

Interest income, net was $6.7 million, a decrease of $20.1 million, or 75%, compared to $26.8 million for the same period in 2023, primarily due to timing of loan pooling for securitization.

Nine months ended September 30, 2024 summary

Interest income, net was $75.4 million, a decrease of $4.3 million, or 5%, compared to $79.7 million for the same period in 2023, primarily due to timing of loan pooling for securitization.

Other income


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Deposit income	$	104,351	$	104,143	$	278,562	$	275,189
Amrock revenue	83,283		61,964		220,229		190,127
Rocket Money revenue	78,274		51,282		219,466		144,084
Rocket Homes revenue	14,454		16,931		40,914		37,761
Rocket Loans revenue	6,906		5,469		22,212		13,541
Other (1)	13,059		7,621		32,951		18,020
Total other income	$	300,327	$	247,410	$	814,334	$	678,722

(1) Other consists of revenue from additional entities and other miscellaneous income.

Three months ended September 30, 2024 summary

Other income was $300.3 million, an increase of $52.9 million, or 21%, compared to $247.4 million for the same period in 2023, driven by a $27.0 million, or 53%, increase in Rocket Money revenue associated with growth in paid subscriptions and also an increase in Amrock revenue of $21.3 million, or 34%, driven by higher Amrock closing volume.

Nine months ended September 30, 2024 summary

Other income was $814.3 million, an increase of $135.6 million, or 20%, compared to $678.7 million for same period in 2023, driven by a $75.4 million, or 52%, increase in Rocket Money revenue associated with growth in paid subscriptions and also an increase in Amrock revenue of $30.1 million, or 16%, driven by higher Amrock closing volume.

Expenses

Expenses for the periods presented were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Salaries, commissions and team member benefits	$	607,526	$	589,584	$	1,702,042	$	1,772,498
General and administrative expenses	221,074		199,399		690,691		595,214
Marketing and advertising expenses	200,528		193,406		617,761		593,853
Interest and amortization expense on non-funding debt	38,620		38,354		115,349		115,021
Other expenses	76,519		64,800		212,450		188,869
Total expenses	$	1,144,267	$	1,085,543	$	3,338,293	$	3,265,455

Three months ended September 30, 2024 summary

Total expenses during the period were $1.1 billion, an increase of $58.7 million, or 5%, compared to the same period in 2023. General and administrative expenses were $221.1 million, an increase of $21.7 million, or 11%, compared to $199.4 million for the same period in 2023, driven by an increase in variable costs associated with higher origination volume and increased third-party credit report costs per unit, partially offset by other loan processing and vendor cost efficiencies. Salaries, commissions and team member benefits were $607.5 million, an increase of $17.9 million, or 3%, compared to $589.6 million for the same period in 2023. The increase, excluding 2023 non-recurring Career transition program expense of $51.5 million, was driven by increased variable compensation associated with the higher origination volume during the current period.

Nine months ended September 30, 2024 summary

Total expenses during the period were $3.3 billion, an increase of $72.8 million, or 2%, compared to the same period in 2023, primarily driven by higher General and administrative expenses. General and administrative expenses were $690.7 million, an increase of $95.5 million, or 16%, compared to $595.2 million for the same period in 2023, driven by an increase in variable costs associated with higher origination volume and increased third-party credit report costs per unit, partially offset by other loan processing and vendor cost efficiencies.

Summary Results by Segment for the Three and Nine Months Ended September 30, 2024 and 2023

Our operations are organized by distinct marketing channels which promote client acquisition and are categorized under two reportable segments: Direct to Consumer and Partner Network. In the Direct to Consumer segment, clients have the ability to interact with the Rocket Mortgage app and/or with our mortgage bankers, consisting of sales team members across our platform. We market to potential clients in this segment through various performance marketing channels. The Direct to Consumer segment derives revenue from originating, closing, selling and servicing predominantly agency-conforming loans, which are pooled and sold to the secondary market. This also includes providing title insurance services, appraisals and settlement services to these clients as part of our end-to-end mortgage origination experience. Servicing activities are fully allocated to the Direct to Consumer segment as they are viewed as an extension of the client experience with the primary objective to establish and maintain positive, regular touchpoints with our clients, which positions us to have high retention and recapture the clients’ next refinance, purchase and personal loan transactions. These activities position us to be the natural choice for clients’ next refinance or purchase transaction.

The Rocket Professional platform supports our Partner Network segment, where we leverage our superior client service and widely recognized brand to grow marketing and influencer relationships, and our mortgage broker partnerships through Rocket Pro TPO. Our marketing partnerships consist of well-known consumer-focused companies that find value in our award-winning client experience and want to offer their clients mortgage solutions with our trusted, widely recognized brand. These organizations connect their clients directly to us through marketing channels and a referral process. Our influencer partnerships are typically with companies that employ licensed mortgage professionals that find value in our client experience, technology and efficient mortgage process, where mortgages may not be their primary offering. We also enable clients to start the mortgage process through the Rocket platform in the way that works best for them, including through a local mortgage broker. Rocket Pro TPO works exclusively with mortgage brokers, community banks and credit unions. Rocket Pro TPO’s partners provide the face-to-face service their clients desire, while tapping into the expertise, technology and award-winning process of Rocket Mortgage.

We measure the performance of the segments primarily on a contribution margin basis. Contribution margin is intended to measure the direct profitability of each segment and is calculated as Adjusted revenue less directly attributable expenses. Adjusted revenue is a non-GAAP financial measure described above. Directly attributable expenses include Salaries, commissions and team member benefits, General and administrative expenses, Marketing and advertising expenses and Other expenses, such as direct servicing costs and origination costs. For segments, we measure gain on sale margin of sold loans and refer to this metric as ‘sold loan gain on sale margin’. A loan is considered sold when it is sold to investors on the secondary market. Sold loan gain on sale margin reflects the gain on sale revenue of loans sold into the secondary market divided by the sold loan volume for the period. By contrast, ‘gain on sale margin’, which we reference outside of the segment discussion, measures the gain on sale revenue, net divided by net rate lock volume for the period. See below for our overview and discussion of segment results for the three and nine months ended September 30, 2024 and 2023. For additional discussion, see Note 11, Segments of the notes to the unaudited condensed consolidated financial statements of this Form 10-Q.

Direct to Consumer Results


	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2024			2023			2024			2023
Sold loan volume	$	14,006,460		$	11,981,059		$	36,087,369		$	33,238,462
Sold loan gain on sale margin	4.10		%	4.03		%	4.16		%	3.81		%
Revenue
Gain on sale of loans, net	$	665,825		$	460,559		$	1,783,221		$	1,326,953
Interest income	58,549			50,644			167,237			134,250
Interest expense on funding facilities	(55,068)			(36,124)			(126,430)			(89,516)
Service fee income	372,363			342,719			1,070,022			1,050,264
Change in fair value of MSRs	(878,311)			12,765			(934,744)			(343,137)
Other income	167,794			153,868			447,048			426,542
Total revenue, net	$	331,152		$	984,431		$	2,406,354		$	2,505,356
Change in fair value of MSRs due to valuation assumptions, net of hedges	676,073			(201,248)			383,036			(219,746)
Adjusted revenue	$	1,007,225		$	783,183		$	2,789,390		$	2,285,610
Less: Directly attributable expenses (1)	551,248			479,307			1,615,101			1,514,113
Contribution margin	$	455,977		$	303,876		$	1,174,289		$	771,497

(1) Direct expenses attributable to operating segments exclude corporate overhead, depreciation and amortization and interest and amortization expense on non-funding debt.

Three months ended September 30, 2024 summary

Direct to Consumer Adjusted revenue was $1.0 billion, an increase of $224.0 million, or 29%, compared to $783.2 million for the same period in 2023, primarily driven by Gain on sale of loans, net. Gain on sale of loans, net increased $205.3 million, or 45%, due to an increase in net rate lock volume during the current period.

Direct to Consumer Directly attributable expenses was $551.2 million, an increase of $71.9 million, or 15%, compared to $479.3 million in 2023, driven by an increase in variable compensation and other variable costs associated with higher origination volume, as well as increased third-party credit report costs per unit.

Direct to Consumer Contribution margin was $456.0 million, an increase of $152.1 million, or 50%, compared to $303.9 million for the same period in 2023. The increase in Contribution margin was primarily driven by an increase in Gain on sale of loans, net, partially offset by higher Directly attributable expenses, as described above.

Nine months ended September 30, 2024 summary

Direct to Consumer Adjusted revenue was $2.8 billion, an increase of $503.8 million, or 22%, compared to $2.3 billion for the same period in 2023, primarily driven by Gain on sale of loans, net. Gain on sale of loans, net increased $456.3 million, or 34%, due to higher net rate lock volume and gain on sale margin during the current period.

Direct to Consumer Directly attributable expenses was $1.6 billion, an increase of $101.0 million, or 7%, compared to $1.5 billion during the same period in 2023, driven by an increase in variable compensation and other variable costs associated with higher origination volume, as well as increased third-party credit report costs per unit.

Direct to Consumer Contribution margin was $1.2 billion, an increase of $402.8 million, or 52%, compared to $771.5 million during the same period in 2023. The increase in Contribution margin was primarily driven by an increase in Gain on sale of loans, net, partially offset by higher Directly attributable expenses, as described above.

Partner Network Results


	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2024			2023			2024			2023
Sold loan volume	$	12,405,423		$	10,278,349		$	31,469,664		$	26,432,862
Sold loan gain on sale margin	1.47		%	1.22		%	1.53		%	1.02		%
Revenue
Gain on sale of loans, net	$	168,159		$	102,088		$	486,686		$	282,662
Interest income	50,017			43,404			142,724			107,119
Interest expense on funding facilities	(47,074)			(30,836)			(108,126)			(71,916)
Other income	5,795			3,431			13,731			11,245
Total revenue, net	$	176,897		$	118,087		$	535,015		$	329,110
Change in fair value of MSRs due to valuation assumptions, net of hedges	—			—			—			—
Adjusted revenue	$	176,897		$	118,087		$	535,015		$	329,110
Less: Directly attributable expenses (1)	64,611			59,686			182,061			191,470
Total Contribution margin	$	112,286		$	58,401		$	352,954		$	137,640

(1) Direct expenses attributable to operating segments exclude corporate overhead, depreciation and amortization and interest and amortization expense on non-funding debt.

Three months ended September 30, 2024 summary

Partner Network Adjusted revenue was $176.9 million, an increase of $58.8 million, or 50%, compared to $118.1 million for the same period in 2023, primarily driven by Gain on sale of loans, net. Gain on sale of loans, net increased $66.1 million, or 65%, due to higher net rate lock volume and gain on sale margin during the current period.

Partner Network Directly attributable expenses was $64.6 million, an increase of $4.9 million, or 8%, compared to $59.7 million for the same period in 2023, driven by an increase in variable compensation and other variable costs associated with higher origination volume, as well as increased third-party credit report costs per unit.

Partner Network Contribution margin was $112.3 million, an increase of $53.9 million, or 92%, compared to $58.4 million for the same period in 2023. The increase in Contribution margin was primarily driven by an increase in Gain on sale of loans, net, as described above.

Nine months ended September 30, 2024 summary

Partner Network Adjusted revenue was $535.0 million, an increase of $205.9 million, or 63%, compared to $329.1 million for the same period in 2023, primarily driven by Gain on sale of loans, net. Gain on sale of loans, net increased $204.0 million, or 72%, due to higher net rate lock volume and gain on sale margin during the current period.

Partner Network Directly attributable expenses was $182.1 million, a decrease of $9.4 million, or 5%, compared to $191.5 million for the same period in 2023. The decline during the period was driven by less compensation expense due to fewer team members directly attributable to the segment, partially offset by increased third-party credit report costs per unit.

Partner Network Contribution margin was $353.0 million, an increase of $215.3 million, compared to $137.6 million for the same period in 2023. The increase in Contribution margin was primarily driven by an increase in Gain on sale of loans, net, as described above.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have included:

• cash flow from our operations, including:

• sale of whole loans into the secondary market;

• sale of mortgage servicing rights and excess servicing cash flows into the secondary market;

• loan origination fees;

• servicing fee income;

• interest income on loans held for sale; and

• other income

• borrowings, including under our funding facilities; financing facilities; unsecured senior notes; and

• cash and marketable securities on hand.

Historically, our primary uses of funds have included:

• origination of loans;

• interest expense;

• repayment of debt;

• operating expenses;

• acquisition of mortgage servicing rights; and

• distributions to RHI including those to fund distributions for payment of taxes by RHI shareholders.

We are also subject to contingencies which may have a significant impact on the use of our cash.

In order to originate and aggregate loans for sale into the secondary market, we use our own working capital and borrow or obtain money on a short-term basis primarily through committed and uncommitted funding facilities, generally established with large global banks.

Our funding facilities are primarily in the form of master repurchase agreements. We also have funding facilities directly with the GSEs. Loans financed under these facilities are generally financed at approximately 97% to 98% of the principal balance of the loan (although certain types of loans are financed at lower percentages of the principal balance of the loan), which requires us to fund the balance from cash generated from operations. Once closed, the underlying residential mortgage loan that is held for sale is pledged as collateral for the borrowing or advance that was made under these funding facilities. In most cases, the loans will remain in one of the funding facilities for only a short time, generally less than 45 days, until the loans are pooled and sold. During the time the loans are held for sale, we earn interest income from the borrower on the underlying mortgage loan. This income is partially offset by the interest and fees we have to pay under the funding facilities.

When we sell a pool of loans in the secondary market, the proceeds received from the sale of the loans are used to pay back the amounts we owe on the funding facilities. We rely on the cash generated from the sale of loans to fund future loans and repay borrowings under our funding facilities. Delays or failures to sell loans in the secondary market could have an adverse effect on our liquidity position.

As discussed in Note 5, Borrowings, of the notes to the unaudited condensed consolidated financial statements, as of September 30, 2024, we had 16 different funding and financing facilities in different amounts and with various maturities together with the Senior Notes. At September 30, 2024, the aggregate available amount under our facilities was $21.5 billion, with combined outstanding balances of $8.6 billion and unutilized capacity of $12.9 billion.

The amount of financing actually advanced on each individual loan under our funding facilities, as determined by agreed upon advance rates, may be less than the stated advance rate depending, in part, on the market value of the mortgage loans securing the financings. Each of our funding facilities allows the bank providing the funds to evaluate the market value of the loans that are serving as collateral for the borrowings or advances being made. If the bank determines that the value of the collateral has decreased, the bank can require us to provide additional collateral or reduce the amount outstanding with respect to those loans (e.g., initiate a margin call). Our inability or unwillingness to satisfy the request could result in the termination of the facilities and possible default under our other funding facilities. In addition, a large unanticipated margin call could have a material adverse effect on our liquidity.

The amount owed and outstanding on our funding facilities fluctuates significantly based on our origination volume, the amount of time it takes us to sell the loans we originate and the amount of loans being self-funded with cash. We may from time to time use surplus cash to “buy-down” the effective interest rate of certain funding facilities or to self-fund a portion of our loan originations. Buy-down funds are included in Cash and cash equivalents on the Consolidated Balance Sheets. We have the ability to withdraw these funds at any time, unless a margin call has been made or a default has occurred under the relevant facilities. We will also deploy cash to self-fund loan originations, a portion of which can be transferred to a warehouse line or the early buy out line, provided that such loans meet the eligibility criteria to be placed on such lines.

We remain in a strong liquidity position, with total liquidity of $8.3 billion as of September 30, 2024, which includes $1.2 billion of Cash and cash equivalents, $1.8 billion of corporate cash used to self-fund loan originations, a portion of which could be transferred to funding facilities (warehouse lines) at our discretion, $3.3 billion of undrawn lines of credit from financing facilities, and $2.0 billion of undrawn MSR lines. Margin cash held on behalf of counterparties is recorded in Cash and cash equivalents, and the related liability is classified in Other liabilities in the Condensed Consolidated Balance Sheets. Margin cash pledged to counterparties is excluded from Cash and cash equivalents and instead recorded in Other assets, as a receivable, in the Condensed Consolidated Balance Sheets.

Our funding facilities, early buy out facilities, MSRs facilities and unsecured lines of credit also generally require us to comply with certain operating and financial covenants and the availability of funds under these facilities is subject to, among other conditions, our continued compliance with these covenants. These financial covenants include, but are not limited to, maintaining (1) a certain minimum tangible net worth, (2) minimum liquidity, (3) a maximum ratio of total liabilities or total debt to tangible net worth and (4) pre-tax net income requirements. A breach of these covenants can result in an event of default under these facilities and as such allows the lenders to pursue certain remedies. In addition, each of these facilities, as well as our unsecured lines of credit, includes cross default or cross acceleration provisions that could result in all facilities terminating if an event of default or acceleration of maturity occurs under any facility. We were in compliance with all covenants as of September 30, 2024 and December 31, 2023.

September 30, 2024 compared to September 30, 2023

Cash Flows

Our Cash and cash equivalents and Restricted cash were $1.2 billion at September 30, 2024, an increase of $256.7 million, or 26%, compared to $991.9 million at September 30, 2023. The increase was primarily driven by less corporate cash used to self-fund loan originations, partially offset by the increase in MSR purchases during the period.

Equity

Equity was $8.4 billion as of September 30, 2024, a decrease of $154.0 million, or 2%, compared to $8.5 billion as of September 30, 2023. The decrease was primarily a result of net loss of $245.5 million, partially offset by share-based compensation expense of $141.2 million.

Distributions

During the three and nine months ended September 30, 2024 and 2023, the Company had no material dividend or tax distributions. Except for tax distributions, these distributions are at the discretion of our board of directors.

Contractual Obligations, Commercial Commitments and Other Contingencies

There were no material changes outside the ordinary course of business to our outstanding contractual obligations as of September 30, 2024 from information and amounts previously disclosed as of December 31, 2023 in our Annual Report on Form 10-K under the caption “Contractual Obligations, Commercial Commitments and Other Contingencies”. Refer to Notes 5, Borrowings and 9, Commitments, Contingencies and Guarantees, of the notes to the condensed consolidated financial statements for further discussion of contractual obligations, commercial commitments and other contingencies, including legal contingencies.

New Accounting Pronouncements Not Yet Effective

See Note 1, Business, Basis of Presentation and Accounting Policies of the notes to the unaudited condensed consolidated financial statements for details of recently issued accounting pronouncements and their expected impact on our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the Company's exposure to market risks since what was disclosed in the Company's December 31, 2023 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of September 30, 2024, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in our management’s evaluation pursuant to Rules 13a-15(d) and 15d-15(d) of the Exchange Act during the period covered by this Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Because of inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may be involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, matters pending or threatened against us are not expected to have a material adverse effect on our business, financial condition and results of operations. Refer to Note 9 Commitments, Contingencies and Guarantees, to the condensed consolidated financial statements under the heading Legal included in this Quarterly Report on Form 10-Q for legal proceedings and related matters.

Item 1A. Risk Factors

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. We included a detailed discussion of our risk factors in “Part I – Item 1A. – Risk Factors” of our 2023 Form 10-K. Our risk factors have not changed significantly from those disclosed in our 2023 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report 2024 Form 10-Q. Any of the risks described in our 2023 Form 10-K could materially affect our business, condensed consolidated financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. The risk factors described in our 2023 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, condensed consolidated financial condition and/or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Authorization

On November 10, 2020, our board of directors approved a share repurchase program of up to $1.0 billion of our Common Stock, including both Class A and Class D, which authorized repurchases, from time to time, in privately negotiated transactions or in the open market, in accordance with applicable securities laws (the “Share Repurchase Program”). The Share Repurchase Program was renewed on November 11, 2022 and expired on November 11, 2024. During the Share Repurchase Program period, Rocket Companies repurchased 32.1 million shares at a weighted average price of $12.73. There were no share repurchases during the three and nine months ended September 30, 2024.

We returned $409.3 million to shareholders in aggregate under the $1.0 billion Share Repurchase Program. At the time of its expiration, approximately $590.7 million remained available under the Share Repurchase Program.

Item 5. Other Information

During the three months ended September 30, 2024, no director or "officer" (as defined in Rule 16a-1(f) under the Exchange Act) of the Company informed the Company of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K under the Exchange Act.

Item 6. Exhibits


Exhibit Number						Description
3.1						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Rocket Companies, Inc., dated June 18, 2024, and the Amended and Restated Certificate of Incorporation of Rocket Companies, Inc., dated August 5, 2020 (incorporated herein by reference to Exhibit 3.1 to the Company ’s Quarterly Report on Form 10-Q, filed on August 6 , 2024)
3.2						Amended and Restated Bylaws of Rocket Companies, Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed on September 2, 2020)
10.1*#						Sixth Amendment to Lease, dated July 19, 2024, by and between 615 W Lafayette Master Tenant LLC, successor landlord to 615 West Lafayette LLC, and Rocket Mortgage, LLC (formerly known as Quicken Loans, LLC, successor-by-conversion to Quicken Loans Inc.), as tenant
10.2*#						Master Repurchase Agreement and Securities Contract, dated as of October 2, 2024, by and between Wells Fargo Bank, N.A., as buyer, Rocket Mortgage, LLC, as pledgor, and RCKT Mortgage SPE-B, LLC, as seller
10.3*						Amendment No. 7 to Amended and Restated Master Repurchase Agreement, dated as of October 3, 2024, by and between Bank of America, N.A., as buyer, RCKT Mortgage SPE-A, LLC, as seller, and Rocket Mortgage, LLC, as guarantor
10.4#						Revolving Credit Agreement, dated as of July 2, 2024, by and among Rocket Mortgage, LLC, as borrower, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, filed on August 6, 2024)
31.1*						Certification of CEO, pursuant to SEC Rule 13a-14(a) and 15d-14(a)
31.2*						Certification of CFO, pursuant to SEC Rule 13a-14(a) and 15d-14(a)
32.1*						Certification by the CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification by the CFO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*						Filed herewith.
#						Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Rocket Companies, Inc.

November 12, 2024

By:

/s/ Brian Brown

Date

Name: Brian Brown

Chief Financial Officer and Treasurer

(Principal Financial Officer)