Rocket Companies Inc

NYSE:RKT

Earnings Call Transcript 2021-Q2

[Operator]

Good day, and welcome to the Rocket Companies Incorporated Second Quarter 2021 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I'd now like to turn the conference over to Sharon Ng, Vice President of Investor Relations. Please go ahead.

[Sharon Ng, Vice President of Investor Relations]

Good afternoon, everyone and thank you for joining us for Rocket Companies earnings conference call covering the second quarter of 2021. With us this afternoon are Rocket Companies CEO, Jay Farner; our CFO, Julie Booth; and our President and COO, Bob Walters. Before I turn things over to Jay, let me quickly go over our disclaimers.

On today's call, we will provide you with information regarding our second quarter 2021 performance as well as our financial outlook. This conference call includes forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions we mentioned today. We encourage you to consider the risk factors contained in our SEC filings for a detailed discussion of these risks and uncertainty. We undertake no obligation to update these statements as a result of new information or further events, except as required by law. This call is being broadcast online and is accessible on our IR Website. A recording of the call will be available later today. Our commentary today will also include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics for our reported results can also be found in our earnings release issued earlier today, as well as in our filings with the SEC.

And with that, I'll turn it over to Jay Farner to get us started. Jay?

[Jay Farner, Chief Executive Officer]

All right, well cood afternoon, and welcome to the Rocket Companies earnings call for the second quarter of 2021. We had a strong second quarter as we continued to execute on our growth strategy and leverage our platform across real estate, auto and financial services. In real estate, revenue was driven in part by record purchase volume, putting us on track to reach our goal of becoming the largest retail home purchase lender in the nation by the end of 2023.

Many of the accomplishments that we've achieved are results of our technology and of course our people, who bring their best to work each and every day. This tremendous combination was recently rewarded with Rocket Mortgage again being named the #1 company for client service in mortgage servicing by J.D. Power. The accolade marks the eighth consecutive time our company has earned this honor and it's our 19th J.D. Power award overall and it includes the 11th straight #1 rankings we've received for mortgage origination.

Our servicing team put our clients first, helping them through the difficult and certain times during the pandemic. While clients at other lenders experienced several hour wait times at the onset of the pandemic, Rocket Mortgage clients were able to navigate a digital solution, complete with educational resources and easily apply for forbearance plans online. This approach resulted in Rocket's forbearance rate being 41% lower in the industry. Innovative technology-driven client risk [ph] solutions such as these are a testament of our ability to scale and to quickly pivot to meet the demands of unpredictable markets without the need to add headcount and ultimately deliver unmatched client experiences.

As we turn back to the second quarter results, 2020 accelerated the shift to an all digital experience, an opportunity that Rocket has planned to capture. The demand for digital experiences has only expanded providing true momentum for Rocket Companies across all our core markets; real estate, auto, and financial services. Consider this, when we look back at 2019, we have now more than doubled the size of our business from pre-COVID levels.

Rocket Companies generated $84 billion in closed loan volume and $2.8 billion of revenue in the second quarter of 2021. Loans more than doubled from second quarter of 2019 and more volume than we did the entire year of 2018. Our Q2 EBITDA of $1.3 billion was more than triple the same period two years ago demonstrating the sheer power and scalability of the Rocket platform.

On today's call, I'll highlight the flexibility of the Rocket platform to capture the growth ahead, including our strategy to revolutionize the homebuying experience, also touch on our increasingly important relationship with B2B partners across the Rocket ecosystem. As we've shared with you in past calls, the Rocket platform is built to win. Our initiatives provide certainty in life's most complex moments. We removed the friction and pain points for major events, like buying a home, getting a personal loan, or purchasing a car, all from a scalable centralized platform. This flexibility allows us to stay nimble and go after the areas of greatest opportunity optimizing revenue for our companies and driving value for our investors.

In today's environment, consumer demand is incredibly strong in each of our markets. In fact, the markets are so hot that there are significant inventory challenges in both real estate and automotive sectors. Even under these conditions, we achieved she records for home purchase volume as well as Rocket auto gross merchandise value and unit sales. Based on the strength of demand at the top of our funnel really both record purchase volume and record auto results would have been even higher if not for inventory challenges.

As today's mortgage market shifts for home purchase in 2021, Rocket is geared to capture more purchase volume driven by our superior technology- driven client experience, product innovation and our integrated end-to-end homebuying ecosystem. We mentioned last quarter that our company has set a goal to become the largest retail home purchase lender in the country by 2023. Continuing to transform the homebuying experience is the single biggest opportunity for Rocket Companies today. We spent years creating a complete end-to-end experience that puts the power of choice back into the hands of the consumer.

From credit monitoring to home search, connections with better local agents, centralized services or comprehensive ForSaleByOwner process and our recently announced iBuying services to provide a back-up offer to sellers. We have the suite of services that allow consumers to create a bespoke process tailored to their individual needs while driving extremely strong conversion rates. When paired with the power of America's largest mortgage lender and Rocket Mortgage, and with the largest title providers and Amrock, no other company can provide the same level integrated one-stop services that Rocket delivers. Our iBuying program facilitated through third-party partner companies will be released over the next several quarters.

Just last month Rocket Homes announced an important milestone posting home listings in all 50 states. Rocket Companies is now the only residential real estate ecosystem that has mortgage licenses, real estate broker licenses, home search listings, real estate agents and real estate agent partners spanning all 50 states. With nationwide coverage, Rocket Homes is performing at scale with traffic growing six-fold year-over-year to reach nearly 2 million unique monthly visitors in the second quarter.

In addition, Rocket Homes drove a record $2 billion in second quarter real estate transaction value, representing the value of homes purchased and sold through our real estate agent network. Rocket Homes is still in the early innings in a very long runway for growth. Rocket Homes also drives purchase volume for Rocket Mortgage and we expect a momentum in purchase to continue.

Rocket Homes draws in-process clients into the rocket ecosystem even earlier in the funnel and then regularly engages with our pool of nearly 2.4 million servicing clients, representing $0.5 trillion in servicing value. This significantly increases our lifetime value in recurring revenue with potential and existing clients. From the beginning of year, roughly 70% of Rocket Homes' transactions involve both an agent in the Rocket Homes real estate agent network and in Rocket Mortgage, representing an attach rate among the highest in the industry.

We also have a high attach rate between Rocket Mortgage and Amrock. In fact, Amrock serves as the appraisal management company for approximately 65% of appraisals order for our direct consumer mortgages, illustrating the power of our ecosystem. We are also extending our value proposition of creating simple, seamless experiences to now include residential solar. Solar energy adoption is at a growth inflection point.

According to third-party research, the current solar energy demand is expected to quadruple by 2030, with roughly one in eight homes adopting solar power. Our dedicated highly trained group of team members from the Rocket Cloud Force will serve as Rocket's solar advisers to our clients. The team will help clients to determine if solar panels are the best choice for their home and connect homeowners to our simple, digital financing application.

Once financing is complete, the Rocket Cloud Force will facilitate the installation of a new solar solution. We will also be well positioned to help consumers who may not have started with Rocket Solar consolidate their solar loan and mortgage for significant cost savings. We launched Rocket Solar with a regulatory [ph] finance product in late July and expect to be operating at scale in 2022.

Our entry in solar is yet another example of Rocket Companies maximizing the lifetime value of our clients by adding complementary services that we are uniquely positioned to deliver, thanks to the versatility and scalability of the Rocket platform.

Looking at Rocket Auto the company drove record performance in the second quarter with both auto unit sales growth of 140% and gross merchandise value more than tripling year-over-year. And considering the auto inventory shortages facing the industry, we are particularly proud of these results. Rocket auto continues to add new partners who are interested in connecting their inventory with our new perspective buyers.

During the quarter, one of the largest online sellers of used cars joined Rocket Auto's partnership network, giving Rocket Auto access to tens of thousands of additional used cars to sell through its constantly expanding platform and providing significant more fuel to Rocket Auto's growth story. Technology and data are the cornerstones of our platform. From the use of data science to optimize every aspect of our client marketing funnel, the use of ethical AI, to aid in client service, to sophisticated pricing models, just to name a few. Technology and data fundamentally drive our business, financing client experience through speed and personalization, increasing efficiency through streamline workflows and decisioning and improving our pull-through and lead conversion.

During 2021 intelligent client targeting models were deployed to more than 80% of our client contact, ensuring that our Rocket Cloud Force is reaching out to clients at the exact moment they are most ready to engage with us. By tailoring the experience to client we have lifted conversion resulting in approximately $4 billion in incremental application volumes so far this year. The beauty of our platform is its flexibility to meet clients where they are and scale across multiple products and verticals regardless of the market environment.

Our company started as the direct consumer mortgage lender, Rocket Companies is increasingly being multi-product, multichannel platform. In addition to consumers, the Rocket platform works closely with three important B2B constituents; real estate agents, mortgage brokers, and premier enterprise partners. Each of these audiences play a crucial role as trusted advisors, leveraging the patent products and tools that Rocket has developed to help deliver additional value to empower our clients and to reach their goals.

Real estate agents, they play a critical role in the homebuying process and we are empowering agents in our network with new leads, products and tools to win in today's competitive environment, through innovative tools like our verified approval process which fully underwrites buyers and allows them to make offers that compete with cash buyers through our overnight underwrite, which ensures purchase loans are underwritten in mere hours, we arm real estate professionals and their clients with the tools to ensure that they win.

Another Rocket Mortgage innovation that's proven popular with realtors is Rocket Pro Insight, which we unveiled last year to help real estate agents create [indiscernible] letters through our office, track the status of their client's mortgage and receive real time updates. The number of real estate agents leveraging Rocket Pro Insight more than tripled to 15,000 up from just 14,000 two quarters ago. For the thousands of mortgage brokers in our Rocket Pro TPO network we arm them with the industry knowledge and tools to work smarter and grow their business.

In the second quarter we began our revamp of our builder partner portal starting with our newly enhanced pricing calculator, providing greater ease of use for our partners to run different scenarios for their clients. From the past month more than 20,000 unique mortgage professionals relied on our interactive broker tools to move mortgage applications to the finish line and their clients to closing too. Our Pathfinder tool that we created in partnership with Google, provides simple answers to even the most complicated mortgage qualification and underwriting questions and has become one of the top resources for mortgage brokers.

We continue to add new premier enterprise partners to our network and we deepened our integration with our existing partners. We recently launched our new integration with Credit Karma allowing more than 110 million users to apply for a Rocket mortgage directly inside their app. We also continued to grow and expand our relationship with partners including Mint, Charles Schwab and realtor.com, just to name a few. We are excited to serve a broader range of clients through deep integrations with our partners and deliver the trusted high-quality experiences their customers expect. It is also my pleasure to announce a new relationship with MassMutual. This new relationship will allow the company's 9000 plus agents to originate home loans through Rocket Mortgage.

Turning to our community, from the beginning we have operated with a more than profit philosophy, along with Rocket Community Fund, our philanthropic partner company, we have executed numerous data-driven investments and initiatives to serve and support Detroiters and revitalize Detroit, our hometown and where we are the largest employer. At the end of June we sponsored a flagship event the Rocket Mortgage Classic, PGA tournament event held in Detroit. Rocket Mortgage Classic showcases the best talent in golf while raising funds to help bridge the digital divide and bring broadband connectivity to all Detroiters. As we continue to grow Detroit, it's critical that Detroiters have an equitable opportunity to grow with us.

In closing, we are entering the third quarter with tremendous momentum across our entire platform and we are poised to have a record year across our platform from Rocket Mortgage to Amrock, Rocket Homes and Rocket Auto. I'd like to think about this. Over the past several years Rocket Mortgage has grown volume and taken market share consistently. In 2018 we originated $83 billion in mortgage volume. In 2019 that grew to $145 billion and we ended 2020 with $320 billion in mortgage volume.

While industry forecasters expect a smaller market in 2021, we expect to grow volume from our 2020 record levels. We are going to gain market share and achieve record origination volume this year. In addition, we expect our servicing book to grow more than 30% this year to over $600 billion, driving recurring cash revenue stream of more than $1 billion. Rocket portfolio companies reinforce our ecosystem and contribute to our best in business retention rate, expanding client lifetime value. This year we are building on momentum from 2020 and we are proud of what our team has accomplished and I'm even more excited about what's ahead.

With that, I will turn things over to Julie to go deeper into the numbers. Julie?

[Julie Booth, Chief Financial Officer]

Thank you, Jay and good afternoon everyone. I’m pleased to report another quarter of strong financial results for Rocket Company. This continued success demonstrates our ability to leverage our flexible platform. I will be sharing some detail around the investments we're making to drive growth and provide insights into trends we are seeing for I will reference some longer term comparisons particularly comparing our 2021 performance on a two-year basis relative to 2019 levels.

2020 was an unusual year for the economy with a combination of historically low interest rate and constrained mortgage industry capacity. Under these market conditions, Rocket exhibited the scalability of our platform with our loan origination volumes growing 121% in 2020 year-over-year while our expenses grew only 47%. Given the unusual year 2020 represented, it is important to look at our growth and profitability relative pre-COVID results. We were successful in gaining market share in last year's environment and we continue to grow our business as we head into 2021.

During the second quarter of 2021 Rocket Companies generated $2.8 billion of adjusted revenue which represents a 110% increase from 2Q 2019 and $1.3 billion of adjusted EBITDA, up more than [indiscernible] 2Q 2019 representing a 46% adjusted EBITDA margin. We generated net income of $1 billion which exceeded full year 2019 net income and we generated adjusted net income of $920 million in Q2 2021, which was more than triple Q2 of 2019 levels, representing a 33% adjusted net income margin. Our adjusted earnings per share was $0.46 for the quarter.

Rocket Mortgage generated [indiscernible] volume during the quarter, up more than 160% from $32 million in Q2 2019 and in line with the midpoint of our Q2 guidance due to products which include home purchases, term reductions, and cash out refinances represented more than half our closed loan volume in the second quarter.

Turning to home purchase in particular, purchase volume nearly doubled year-over-year and we set a new company record in the second quarter. We estimate that the largest retail purchase lender did $60 billion of purchase origination volume in 2020 excluding correspondent volume. With the success we have had during the first half of 2021, and the momentum we have going into the third quarter, we expect that our full year 2021 purchase volume will exceed $60 billion dollars. This growth, in combination with the recently announced Rocket Homes initiatives, are bringing us closer to our goal of becoming the number one retail purchase lender by 2023.

For the quarter, our rate lock down sale margin was 278 basis points which is in line with our expectations at the midpoint of our guidance and substantially higher than most multichannel mortgage originators. Our strong results extend across the Rocket Companies platforms. Despite a relatively low level of auto inventory impacting the industry, Rocket Auto continued to accelerate its growth generating $484 million of gross merchandise value during the second quarter, up nearly 35% as compared to Q1 2021.

Through the first half of 2021 we have generated $844 million of GMV and are on track to more than double 2020 levels. With on boarding of new inventory partnerships, including just recently, one of the largest online sellers of used cars, we expect to further accelerate growth in the second half of 2021.

Rocket Homes faced similar inventory constraint, however was successful in generating record real estate transaction value of $2 billion, which represents the value of homes purchased and sold through our real estate agent network during the second quarter. We also saw record traffic to rockethomes.com during the second quarter or nearly 2 million monthly unique visitors expanding an important top of the marketing funnel.

Rocket Companies plan here [ph] is based on leveraging our profitability advantages to constantly reinvest in our business, further strengthen our competitive position, expanding to new areas of growth and extend client lifetime value. With the opportunities we see ahead, and to fully realize the potential of our platform and unique real estate ecosystem, we will continue to invest for the long term, particularly in technology, marketing and our most valuable resource, our team members.

We plan to grow our technology, product strategy, and data intelligence teams. Within Rocket, we have more than 3000 team members dedicated to building proprietary technology. Key priorities for investment are continuing to deliver great client experiences, driving operational efficiency and extending our platform to partners. Increasing the lifetime value of our clients is another core component of our growth strategy. Our business is profitable on the first transaction with the client, we then maintain ongoing loan servicing relationships with 2.4 million clients representing over $500 billion in outstanding loan principal.

Mortgage servicing drives a recurring cash revenue stream for Rocket Companies that now exceeds $1 billion on an annual basis, reserved ph unpaid principal balance of 34% in the last 12 months and net retention north of 90%. Based on our strong relationships with clients, we continue to expand our platform to address more of the important transactions in their lives. Whether that's real estate, auto, personal loan or new products, like Residential Solar, incremental products on our platform position us to increase the lifetime value of our client relationships.

Looking ahead to Q3 we are seeing strong fundamental tailwinds for our business. The housing market remains active. Homeowners are sitting on the highest levels of home equity in more than a decade and the investments we have been making are gaining traction across the platform. Our price point for both purchase and refinance remains robust.

As Jay mentioned, we expect to set a new company record with full year 2021 closed loan origination volume on pace to exceed the previous record achieved in 2020. While the Mortgage Bankers Association and other public industry forecasts predicted overall mortgage borrowings will decrease as compared to last year, we expect to drive growth and market share gains in 2021.

For the third quarter, we currently expect closed loan volumes in the range of $82 billion to $87 billion and rate loss volume between $83 billion and $90 billion. We expect third quarter gain on sale margins should be in the range of 270 to 300 basis points. Regarding our expenses, at this time we believe the run rate of operating expenses for the first and second quarters of 2021 is a good reference for the third quarter with expenses roughly flat even as we are growing mortgage origination.

We exited the second quarter with $2 billion of cash on the balance sheet and an additional $2.4 billion of corporate cash used to self-fund loan originations for total available cash of $4.4 billion. Total liquidity stood at $7.8 billion as of June 30, including available cash plus undrawn lines of credit and undrawn MSR lines.

Our business is capital light and our balance sheet is extremely strong. This year we expect to generate more than $320 billion in closed loan volume exceeding last year's record. Keep in mind even at these origination levels we need less than $1 billion of cash on hand to properly operate our business. With $7.8 billion in available liquidity, a $4.4 billion in total cash is largely held for investments, dividends and share buybacks.

As we've said before, our capital priorities always start with proper capitalization and reinvesting in the business. We continue to look for acquisitions that would be additive to our platform by bringing new clients into our ecosystem, enhancing operational efficiencies or enhancing our product offerings. Beyond that we look to return capital to shareholders.

At current price levels we believe our stock is undervalued. Over the past 24 months we have generated $16.3 billion in adjusted EBITDA, our MSR portfolio has a fair value of $4.6 billion and our balance sheet has total equity of $8.2 billion. With our current levels of capital, we have the opportunity to repurchase shares and return capital to shareholders via dividends as we've done in the past, while still being able to invest in the business and consider acquisition opportunities. We will deploy our capital in a strategic and disciplined manner to generate long-term shareholder value.

With that, we are ready to turn it back to the operator for questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Ryan Nash from Goldman Sachs. Please go ahead.

[Ryan Nash, Goldman Sachs]

Hi, good afternoon, everyone.

[Jay Farner, Chief Executive Officer]

Hello.

[Ryan Nash, Goldman Sachs]

So, Jay, Julie, you noted in the release that this is the strongest purchase quarter ever and you said you expect to exceed $60 billion this year and you're on target to be the largest retail purchase lender in the nation by '23. Can you maybe just talk about what you're doing strategically to accelerate purchase originations? I know, Jay, you mentioned capturing them earlier in the funnel, and maybe can you just help us understand how is capturing purchase varying by channel, and how are you able to do this and still maintain margins that are decently in excess of the industry?

[Jay Farner, Chief Executive Officer]

Yes, as we talked about - we think purchase represents probably the biggest opportunity here at Rocket Companies. Although our purchase volume this year will exceed what was the record purchase volume, I think last year in retail excluding corresponded, there is still huge upside for us there.

We just recently issued a press release describing our Rocket Homes platform and all that we're building there, and really we are the only organization that has put together every component required to streamline the purchase experience for anyone in America starting with credit, reports and credit education, moving to a really robust home search website in all 50 states.

Our traffic is primarily organic there, so very high-quality traffic, which of course helps with conversion. We've launched our Centralized Real Estate Services, which make a more cost effective transaction for people selling their property. Our FSBO, ForSaleByOwner website is growing rapidly to bring in folks into this marketplace. There are many Americans who can sell their homes ForSaleByOwner. We've got a very robust real estate network in all 50 states for clients who require that level of support from real estate agents. And of course, tying that all into Rocket Mortgage with our verified approvals are overnight underwrite that empowers real estate agents to know that their client is ready to buy the property.

And then our Agent Insight the portal that we now have, I think north of 50,000 agents using good visibility to update offer letters - approval letters, I should say. All of those components on the retail side will allow us to bring traffic in and convert traffic at levels, that I think the industry has not seen. We talked about - I talked about our attach rate of 70%, of course our title company Amrock and our appraisal services company participate in that as well. And then, we've got our TPO program, which is growing.

Our market share growth, I think we've seen 18% growth in the last 12 months in TPO, the highest in the industry of any TPO player. As that shifts to purchase, those brokers who are aligned with us will also shift to purchase. They are leveraging a portal that we're investing heavily in, the new Pricing Calculators that we've built, the Pathfinder tool that we built in partnership with Google to give them the answers that they need on the spot. So it's really all of these tech and marketing investments that we can create a competitive advantage and really our unique value proposition to the consumer that others are not able to provide. And as I said we keep in mind, all of that's been - been really done internally thus far.

As we touched on in our press release, as we get into the later part of 2021 and into 2022, we will have many of those programs at scale, the iBuyer program at scale and then you -- we'll be able to be more visible with those programs to grow them substantially. So that's why we're so excited about our opportunity to continue to grow purchase.

[Ryan Nash, Goldman Sachs]

Got it. Thanks for all the color. If I could squeeze in one follow-up maybe for Julie, so Julie the 3Q guide cultural gain on sale on the 378% [ph] range, which at the midpoint implies a slight - a tiny uptick from where we were this quarter. And maybe just talk about expectations by channels, do you think we've seen the bottom in the partner channel and do you think you could maintain retail margins on a go forward basis? Thanks.

[Julie Booth, Chief Financial Officer]

Yes, our gain on sale margin in Q2 came in at 278 [ph] kind of right in the middle of our guidance range there. And as you said our expectations for Q3 are between 270 and 300 basis points, so a consistent and slightly improved over the last quarter. And we do expect both channels to be above where they were in the second quarter from a gain on sale margin perspective.

The mix that we expect to see in Q3 is similar to what we saw in Q2 as well. So it is in both channels that we're seeing that. On the retail side of things, the direct to consumer, we also feel very good about our gain on sale margins in that channel and seeing those strong as I mentioned, so feeling really good about where we are in both channels.

[Ryan Nash, Goldman Sachs]

Thanks for the color.

[Operator]

The next question comes from Doug Harter from Credit Suisse. Please go ahead.

[Timothy Chiodo, Credit Suisse]

Thank you. Actually it is Tim Chiodo from Credit Suisse, but same team and I wanted to talk a little bit about Rocket Homes. So you did a great job of covering a lot of those during the prepared remarks, I don't mean to rehash any of it, but I just wanted to see if we could elaborate a little bit more on not only how it drives top of funnel purchase leads, but also helps in converting what I understand is that there is not a lack of purchase leads coming into the Rocket ecosystem. It's just that sometimes they have longer lead time and there is other factors that could come into play, maybe you could just elaborate on how Rocket Homes helps us bring all that together?

[Jay Farner, Chief Executive Officer]

Yes, it's a great question. I think it's an important and a strategic shift in thinking about the purchase lead marketplace. As you mentioned, there's not a shortage at Rocket or in the industry when it comes to purchase leads. The real question is, how do you incubate those leads over a longer time period and to the conversion levels that you need. And to make them work, you've got to have conversion level not just with mortgage, but the combination of mortgage, real estate, title, appraisal and of course, think about the lifetime value.

So our viewpoint is different than others, because as we think about a purchase transaction we also know our 90% retention rate and think about the subsequent refinance transaction. And so -- I think, that's again one of those things, we can't - we don't think about it as a standalone business, we think about it as part of the ecosystem that we've built and that allows us to not only lean in where others cannot, but also get higher conversion rates when others aren't receiving them.

The Rocket Pro Insight portal having that information with our real estate partners, so they can see what's going on, there are more confident with us and the conversion rate goes up. The Rocket agents across the country are familiar with Rocket Mortgage, know how to work with us. And so that means information is flowing and the conversion rate goes up and so all of those things give us a unique advantage.

And maybe I'll turn it over to Julie, because maybe to put a little bit more color around how we think about our unit here and the economics around that unit, when we're making decisions to invest in technology or invest in marketing to drive those purchase units. Julie, so do you want to kind of go through that a bit?

[Julie Booth, Chief Financial Officer]

Yes, an example probably helpful here in thinking about ecosystem and kind of how it all comes together. If you think about a client who is purchasing a new home say for $300,000 within our ecosystem, if you look at a gain on sale margin in our direct-to-consumer channel, let's say it's a 450 basis points gain on sale margin, we would generate $13,000 -- $15,500 of revenue for this purchase.

And then if that client is using an agent in our Rocket Homes real estate network, we would generate an additional $3,000 in revenue, assuming a 1% commission fee and then in addition to that, if you add earmark appraisal closing and title services, and they provide us another opportunity there to earn an additional $1,500.

So as you look at this in total and think about all of the opportunities we have, that transaction would generate $18,000. And it really doesn't stop there too. If you think about the other things in our business, we've got Rocket Auto, Solar is coming, we've got personal loans, which are all really natural extensions of that home buying experience and these businesses do have a high correlation to the real estate opportunities getting the reach to the client, the right time to serve their needs, throughout their entire home ownership journey. So these newer business areas that we're adding really help us leverage our platform strength, especially from a marketing, a technology and in clients services.

[Jay Farner, Chief Executive Officer]

So, it's putting all these things together, not only does it increase the conversion, which makes our marketing dollar more valuable to us than I think others, but it's also the viewpoint of the lifetime value of that client. And I know something we touched on that I think will be beneficial as we move into the 2022 and beyond is the iBuyer program, we're viewing it again a little differently.

We've got 2.4 million folks in our servicing book and we're talking to clients every day, who want to buy a property and are thinking about, can they sell theirs. And so by having that back up offer through iBuyer, we're empowering our client base to move forward with the purchase of a new properties. So it's another exciting component of the ecosystem that we're adding that we will see I think add value and help improve its transactions as we get into 2022.

[Operator]

The next question comes from Arren Cyganovich from Citi. Please go ahead.

[Arren Cyganovich, Citi]

Thanks. Jay, I was hoping you could tell us a little bit more about the solar financing opportunity just in terms of what your expectations are in terms of the total addressable market economics and how quickly you'll be rolling out with the product?

[Jay Farner, Chief Executive Officer]

Yes good question and there are quite a few different facets to this program. So taking a step back, I think we've more than 2 million solar installations in the U.S. in 2020. They're saying that that will quadruple by 2030. So that means, one in eight Americans will be adopting residential solar power.

So remember, we're really in the saving money - helping people save money business as much as we're in the helping people buy homes business. And so, we're talking to clients each and every day, about how they can save money. In many cases that's refinancing the mortgage, but there are other opportunities and we already engaged in those discussions. And of course our discussion is about the bills people pay including their utility bills.

And so it's a really natural pivot to have the discussion around what solar might do and so we'll be doing a few different things as we grow this out. Our Rocket Cloud Force will really service solar advisors to our clients. So they'll be using technology to help determine if someone is eligible solar, how it would work and roughly how much money they can save.

Then we'll partner with folks who do the actual panel installation and then our Rocket Homes - Rocket Loans technology will be used to - to do the financing. So it's really two options for our clients, one is doing the financing using their mortgage, which we have programs for and the other is doing the financing that we will be providing through our Rocket Loans solution and so that's kind of the second component.

And the third, of course, is that to really capture the full value, clients who have already done solar may need to consolidate their solar loan into their mortgage. We've already started that program and of course we will make that program more robust as we continue to move forward. So clients will be refinancing their solar loan, if it's appropriate back into their mortgage as well.

So we can help and all three of those areas and we're uniquely positioned because we're already talking to them about their bills, we're already talking to them about their property, we're already in many cases have an appraisal, we understand the size of the property, the roof in many cases. So a lot of this data that others in this industry require or need to really bring value to the client, we already possess. And so, the market is going to grow rapidly and we'll be taking our brand and our Cloud Force and our technology to make sure that we can be a market leader.

[Arren Cyganovich, Citi]

Thank you.

[Operator]

The next question comes from James Faucette from Morgan Stanley. Please go ahead.

[James Faucette, Morgan Stanley]

Yes. Thanks a lot. I wanted to touch on -- you made the comment a couple of minutes ago, where you expect the gain on sale margin for both your channels will improve sequentially. Wondering if you can talk a little bit about, like what you would think will be the drivers there and why that is? And I guess, I would imagine you're probably already seeing evidence of that, but just want to confirm that?

And then, I guess as a follow-up, what we've heard from others in the industry is, there seems like there's a lot of overcapacity at least of headcount you're seeing some of your competitors already making moves to address that, but I wanted to get kind of what your sense is and how you think this plays out for the competitors and what Rocket's response is going to be as we kind of go through this adjustment period right now?

[Jay Farner, Chief Executive Officer]

I know, Julie touched on where our expenses were in Q1 and Q2 and kind of using that as a reference point for Q3 and beyond, and that's because, although we're growing market share and volume and doing more purchase transactions, our efficiencies in our platform continue to be evident and so we're able to see that growth without having increase in expenses.

We also know that continuing to have a platform that's scalable is very important to us. As Julie's always touched on, we're profitable in the first transaction. And so as we see competitors maybe think about reducing the size of their operation, this creates opportunity for us to grow our market share, which is what we believe we will see and what we said here in 2021.

We think about this - the play I'll guess I'll use that, we've been running for 36 years and in particular over the last three or four years, is that we set our strategy for growth over the course of many years. A three-year plan is what we really operate off of and we stick to that strategy. And there'll be changes in interest rate of course throughout that period of time, but I think Q2 serves as a good solid proof point that we're able to achieve records.

We had - we doubled our purchase size in Q2 of '21 over where we've been in 2020, regardless of interest rate movement, I think Julie's guidance towards where we'll be from a midpoint in rate lock volume also demonstrates our ability to stick to our plan regardless of whether markets are going up or going down.

And then the third that I'll say and we touched on this as well, our ability not only through our multiple channels, but our multiple marketing vehicles that we use, really allows us to capture different types of mortgage volumes. Julie touched on the fact that over 50% of the volume that we did during Q2 was not rate sensitive. So, cash out, term adjustment, purchase, as we continue to lean into those things in Q3 and beyond to ensure that we stick to our three-year plan of growth. Julie, I don’t know if you want to touch on any other portions of that question?

[Julie Booth, Chief Financial Officer]

Yes, I think you hit it really well, Jay. I think on gain on sale margins, like I said, we are seeing the strength in those channels and we are now excited about where we're at and Jay, I think you covered it well.

[Jay Farner, Chief Executive Officer]

Okay, great.

[James Faucette, Morgan Stanley]

Thanks guys.

[Operator]

The next question comes from Mark DeVries from Barclays. Please go ahead.

[Mark DeVries, Barclays]

Yes, thanks. I had a follow-up question about the purchase originations. Can you give us a sense of where that's coming from, what percentage is coming through direct-to-consumer versus your partner channel? And to reach that goal of becoming the top purchase originator, do you need to become the largest wholesale lender or do you think a meaningful percentage of that comes from direct-to-consumer? And then finally of the 70% kind of retention you're getting from Rocket Homes on the originations, is that coming to you through direct-to-consumer or is it coming through the partner channel?

[Jay Farner, Chief Executive Officer]

Yes. So I normally don't break down the specifics between TPO and direct-to-consumer, but remember the things that we can really control from a mix perspective are more on the direct-to-consumer side. The broker will originate the loan that the broker is able to originate and we're happy to assist in any way we can.

So you can kind of look at, I think probably industry mix to get a feeling of what that looks like. For us, our ability to market directly to the real estate network, the 50,000 plus that I referenced, our ability to reference directly to the consumer about the value that we can bring in purchase with Rocket Homes, with the ecosystem, that's really our lever to pull, to continue to influence our growth there. And so, although I believe purchase - the growth of purchase we'll see across all channels, we have a larger opportunity when we think about our direct-to-consumer and partner networks to achieve the purchase growth that we're looking for and that's what we've seen before.

And as you asked the second question about the attach rate, although we're just now starting to really leverage the ecosystem with our broker partners in particular our Pinnacle partners, we started or have been in the past, more focused on how Rocket Homes ecosystem works with our direct-to-consumer channel.

[Mark DeVries, Barclays]

Okay, got it. Thank you.

[Operator]

The next question comes from Mihir Bhatia from Bank of America. Please go ahead.

[Mihir Bhatia, Bank of America]

Hi and thank you for taking my question. I actually wanted to maybe talk about capital allocation for a second. You're generating a fair amount of capital even in an environment where some of our peers are may be a little challenged. But at the same time your GAAP -- the capital you're generating, you seem to be making a fair amount of other bets in terms of non-mortgage businesses if you will and growing them. Maybe talk about how you prioritize between those versus returning capital? And just that particular areas where you should be maybe making larger bets on - or focusing on? I guess the question is are you spreading is up to [indiscernible] across all these various things that you're trying to invest and grow at the same time as prioritizing the return of capital? Thank you.

[Jay Farner, Chief Executive Officer]

I'll let Julie reiterate some of the things we said about our capital allocation strategy. I'll tell you one of the benefits - I've been in the company 26 years, we've been in business for 36 years, maybe 26, maybe 25 and a significant portion of our time is spent on team member and leadership development. And so as our organization continues to grow, we have thousands of leaders in our organization. And one of the questions you have to ask yourself is, how do you retain the top talent that you develop over time, as they search for new opportunities to grow? And so we're really fortunate to be able to leverage our brand, our client base and provide other services that are tied directly into the mortgage that we started with.

I'll give you an example, add to specific percentage, but the vast a significant portion of auto buying occurs within the first six months of the purchase or refinance of the home. So we have that data, we're talking to that client, we're servicing that client, we're skilled -- our Rocket Cloud Force is skilled at selling and now we've built the technology to tie those clients to inventory across the country.

We just announced that we aligned with some of the largest used car operations in the country. So we're really able to develop a whole new business channel, leveraging all of the things we already possess. So it's not -- I don't view it as like an ancillary or side business because it's so tied into the core of what we do and it allows us to keep our talent.

Solar is the same exact thing, which we touched on this, but it's about saving money with your home. It's exactly what we do for millions of people, have done for millions and millions of people and we're doing that at no additional cost to acquire and I am able to take a leader who has been with me for 25 years, who may without a new opportunity, say hey, Jay, now I'm thinking about looking somewhere else for the second part of my career, but instead I am looking to stay here, grow out that channel with all the best practices that that he or she has learned over the 25 years that they've been here and at an incredibly profitable product to our mix.

Same with homes, we've already spent half hour talking about homes and its natural synergies with mortgage. So, no, I'm not concerned about being spread too thin because these things are value add to our consumer, highly profitable and leverage the talent that we've got inside the organization. Now Julie, I'll maybe let you talk a bit about the capital portion, but I think some of the question was there, are you dedicating enough capital in all, do we have enough capital for all these things?

[Julie Booth, Chief Financial Officer]

Yes, I certainly will. You walked and hear about with lots of capital, yes you move up a little bit of a context around that and as you know we do operate in a capital-light business and our business model is highly cash generative. So we have consistently demonstrated a strong track record of profitability that has allowed us to maintain a very strong balance sheet. So this has given us a great flexibility to actually continue to be very opportunistic. So that's been a great outcome of our profitable business. And just to kind of reiterate how we think about capital, our framework is really very consistent with how we've been talking about it. First and foremost, we're going to look to reinvest in our business through brands, technology and investing in our team members.

Then we're going to look at M&A opportunities and if that is something beyond that, we still have additional capital, we look to return that capital to shareholders through either share repurchases or through dividends and currently, we believe, as I mentioned in my prepared remarks that our stock is currently undervalued and given that when we looked at our business and the capital it takes to operate our business, the cash that it takes to operate our business that's been a $1 billion just needed to operate our business.

So mining it as of June 30 as I said, we have about $4.4 billion dollars of available cash. So all in with $7.8 billion of total liquidity as we said, this puts us in a great position where we could potentially use both in terms of capital to shareholders either through repurchases or through a dividend as we've done in the past.

[Mihir Bhatia, Bank of America]

Yes.

[Jay Farner, Chief Executive Officer]

We're working through our model, but we're in a unique position to not have to choose one of the options, but have the ability to do all of the things that we would like to do.

[Mihir Bhatia, Bank of America]

And then just on that capital point, you do have a buyback in place yet already. Right? So, have you executed anything against it? And I'll get back in line, thank you.

[Julie Booth, Chief Financial Officer]

Yes, we have executed against that during the second quarter and you will see that in the 10-Q that's coming up tomorrow.

[Mihir Bhatia, Bank of America]

Understood, thank you.

[Operator]

The next question comes from Ryan McKeveny from Zelman and Associates. Please go ahead.

[Ryan McKeveny, Zelman]

Hey, congrats on the performance and thanks for taking my questions. I will ask one more about Rocket Homes. So just to dig in a little on the comments and the press release about on staff agents in Detroit, I guess, maybe if you could just share some thoughts around the idea of kind of centralizing agents in Detroit? Obviously on the mortgage side of the business, you've run that playbook very successfully. So when I think about kind of the real estate agent industry, obviously typically very distributed, very face-to-face interactions. So maybe just talk us through how you envision that happening from Detroit, but kind of operating across the country and curious here, how you kind of think through that in the context of how that, how that industry has typically been operated? Thank you very much.

[Jay Farner, Chief Executive Officer]

Yes, I think the best word is bespoke and that's what we've been using as we've watched in particular the last two years. And as you know with Rocket Mortgage in particular, first time homebuyers are a pretty large portion of that purchase market for us. That message has come through over-and-over again that I want it to be a streamlined process, I want it to be a digital process and I want to be in control of the process.

And so, as we think about that with Rocket Homes or Rocket Homes experience, it's exactly what we've built. And that means you have to have different ways for people to sell or buy homes. And we don't think that, that -- what I think that does is grow the pie. Because there are people today that are not selling their homes because they say well, I don't want to follow the traditional process. In other cases, we've got people who started through the process by owner process and run into a roadblock and would stop, but instead because of our ecosystem, we now refer them to an agent in their local network who can assist them.

So all of these things work together to open up, and what I want to tell you is open up inventory and you've heard Julie talk about this. We've got thousands and thousands of people who are verified, approved, ready to buy and the reason they're not buying is because they can't find a home. So how do we open up inventory for those clients? So the one way to do that is a centralized model. Some of our clients may not be ready do ForSaleByOwner, but they may not need be full services that are local in their neighbourhood agent can provide.

And so our centralized model allows for a licensed agent here in Michigan or in one of our other web centers across the country to assist that client, to help them determine how to get their home listed and getting on the MLS, but they don't necessarily need someone there to assist at all via the complexities. Oh, by the way, if they go down that path in a few weeks later, they determine that they still need more help, we'll simply refer them to an agent in their local network.

And so we've got all of these different opportunities to really ensure that any client that we talk to can be serviced in the way that they want to be serviced. And to your point about the way that we centralized with mortgage, we see the same opportunity here, but you'll notice, as we talked about before, we've got our direct-to-consumer mortgage, we've got our partners, we've got our TPO broker partners.

So what we've learned is as we grow and you understand the full market, different people require different things and as opposed to being a portion of the market, our goal is to have a solution for anyone in mortgage, in real estate and beyond. And so that's exactly what you'll see us do there as we keep building out the Rocket Homes ecosystem.

[Ryan McKeveny, Zelman]

That's great, thank you very much.

[Operator]

The next question comes from Kevin Barker from Piper Sandler. Please go ahead.

[Kevin Barker, Piper Sandler]

Thanks for taking my questions. You mentioned a new broker pricing platform that was introduced and it's been unveiled. Could you talk about how that has an impact at your volumes, particularly in the second quarter and as we flow into the third quarter? And then how we think about retail origination, I mean, direct-to-consumer originations in the third quarter? I believe your previous comments indicated that it seems like you're definitely taking significant market share just given most industry forecasts and have a meaningful decline going into the third quarter? Thank you.

[Jay Farner, Chief Executive Officer]

Well, I think you're referencing the brand-new Pricing Calculator that we have built for our broker partners, and it's one of quite a few things that we've been rolling out this year to ensure that our mortgage broker partners really have the best technology and the best experience. We've got, I think somewhere over 20,000 mortgage professionals a month using those broker tools, whether it's the Calculator that allows them to go side-by-side do comparisons to determine the best program for their clients, our Pathfinder tool, which really gives them the answers to underwriting product question, so they can take a very effective application upfront. Those things are drawing brokers in. I think we've seen somewhere here recently over 100 new brokers that have joined our platform here in the last 90 days or so.

So that demonstrates that we're drawing brokers to the Rocket Pro platform and I touched on this before, but from April to June in the second quarter, our market share as a total of the broker market, we were just below 18%, and now when we get to the end of June we are 21%. So we're seeing growth in that particular area, I think faster than anyone else and that's because of the technology, the tools that we're providing, the brand that we're providing to our broker partners.

It's - I guess the last thing I'll say there and move the things for a while, but you've heard me talk about a bespoke process for homes, giving our consumers choice, it's the same as that thing we'll be giving our Broker-Partners is choice, right. We're not demanding that they use just us or one system, we're saying, hey, use the best partner out there and we believe will continue to invest in technology and other things to give them that choice and draw them in and so far the market share numbers are proving that to be the right decision.

[Kevin Barker, Piper Sandler]

So is that -- and then also is there something in particular that is driving retail margin -- retail originations to be particularly strong going into the third quarter, given the market is showing some decline overall?

[Jay Farner, Chief Executive Officer]

I would say it's -- that's us. That's the history that we've demonstrated, the marketing machine that we have, the data science that we have, the brand that we've invested in, the ability to reach into non-interest rate sensitive products as we probably touched on before. This is how we think about executing on our business, as others sometimes decide to pull away or reduce investment as we touched on our expenses there -- that we're giving guidance so that they remain similar to where they were in Q1 or Q2 because we're not pulling away and now you're seeing our marketing machine continue to do what it does and so that's -- I think that, as a result of that is -- is our guidance that we provided for Q3.

[Kevin Barker, Piper Sandler]

Thank you.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Jay Farner for any closing remarks.

[Jay Farner, Chief Executive Officer]

I just appreciate everyone joining the call today. As always, we appreciate the support that we're receiving from the investor community and we really look forward to talking to all of you again when we get to the end of Q3. Have a great night.

[Operator]

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.