Rocket Companies books $9.4 billion profit in 2020

Jordyn Grzelewski
The Detroit News

Rocket Companies Inc. rode the success of its technology platform and a housing market boom to a nearly $9.4 billion profit in 2020, according to financial results released by the company Thursday.

The Detroit-based holding company, which includes mortgage lending giant Rocket Mortgage as well as other real estate and e-commerce businesses, reported $9.4 billion in net income on total net revenue of more than $15.7 billion for the year, and net income of more than $2.8 billion on net revenue of nearly $4.7 billion in the fourth quarter.

A Rocket Companies sign is displayed on the exterior of the New York Stock Exchange, Thursday, Aug. 6, 2020, in New York.

Meanwhile, CEO Jay Farner announced the company's board of directors had approved a special dividend of $1.11 per share, payable to holders of Rocket's Class A common stock as of close of business March 9. The dividend will be paid out March 23.

"Rocket Companies' record-breaking fourth quarter and full year 2020 results demonstrate the sheer power of the technology platform we have built and refined for more than two decades," Farner said in a statement. "In the midst of a pandemic, we successfully drove growth in every segment of our business, while never losing focus on meeting the needs of our team members, clients and communities."

Rocket's stock at market's close Thursday was $19.90 per share. It was up about 6.5% in after-hours trading shortly after 5 p.m.

Rocket — which went public in August — posted record results amid a banner year for the U.S. housing market. In just one measure of the market's strength, the National Association of Realtors reported last month that 2020 existing-home sales in the U.S. reached their highest levels since 2006, as many homebuyers took advantage of historically low interest rates and stock market gains, and sought out properties that suited their pandemic-era needs.

The average commitment rate for a 30-year, conventional, fixed-rate mortgage was 3.11% in 2020, NAR reported, citing Freddie Mac. The 30-year, fixed rate hit 2.97% Thursday, according to Freddie Mac. 

"We're seeing strong consumer demand, especially in the housing market," Farner said. "It's the strongest that it's been in a decade."

Jay Farner

In the fourth quarter, Rocket's total net revenue grew to $4.7 billion from $1.9 billion in the fourth quarter of 2019. Net income grew 277% to $2.8 billion. The company's closed loan origination volume — a key metric of success in the mortgage industry — of $107.2 billion was an 111% year-over-year increase from 2019, and more than what executives had projected in Rocket's last earnings report in November

"Multiple drivers contributed to the out-performance in Q4," said chief financial officer Julie Booth. "In particular, we are seeing a consumer that is increasingly comfortable completing large, complex transactions online."

For the year, Rocket's total net revenue of $15.7 billion was up from $5.1 billion in 2019. Net income was up a whopping 948%, from $897 million in 2019 to $9.4 billion in 2020. In 2020, closed loan origination volume was up 121% to more than $320 billion.

Rocket reported that its liquidity position remains "strong" with total liquidity of $7.7 billion, including cash on-hand of $2 billion.

The company, which employs some 24,000 people mostly based in Detroit, recorded a gain on sales margin of 4.41% in the fourth quarter and 4.46% for the year. Expenses totaled $1.8 billion in Q4 and $6.2 billion for the year.

Meanwhile, unique visitors to Rocket's platform grew 61% year-over-year to 153 million.

The Rocket Cos. umbrella covers numerous businesses, including an automotive retail marketplace that was launched in 2017. Rocket Auto in 2020 reached more than $750 million in gross merchandise value, a number that Farner said the company expects to double this year.

Amrock LLC, Rocket's title company, saw revenue grow 124%, to $1.3 billion for the year. And Rocket Homes, the company's digital real-estate platform, assisted clients with nearly $1.6 billion of real estate transactions in the fourth quarter.

Executives announced a new partnership with Morgan Stanley under which Rocket Mortgage will originate and service conforming mortgages for Morgan Stanley and E-Trade clients.

They also announced the creation of a new business dubbed Rocket Labs, whose mission will be "incubate new businesses within Rocket Companies that leverage our platform and provide our clients with services that complement our existing core products," Farner said. "Our approach is to empower small, independent teams to work on big ideas and concepts, which will form the core of our future products." 

Rocket executives also are optimistic about the first quarter of 2021. The company is projecting closed loan volume of between $98 billion and $103 billion in Q1, an increase of at least 90% over the same quarter in 2020.

Twitter: @JGrzelewski