EX-99.1 2 rkt-earningsrelease12312022.htm EX-99.1 Document
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Rocket Companies Announces Fourth Quarter and Full Year 2022 Results

•Generated Full Year 2022 revenue of $5.8 billion and net income of $700 million
•Reached 25.4 million Rocket Accounts1 across our ecosystem, as of December 31, 2022
•Rocket Rewards, our loyalty program, grew its user base to 1 million clients

DETROIT, February 28, 2023 – Rocket Companies, Inc. (NYSE: RKT) (“Rocket Companies” or the “Company”), a Detroit-based fintech platform company consisting of tech-driven mortgage, real estate and financial services businesses – including Rocket Mortgage, Rocket Homes, Rocket Loans and Rocket Money – today announced results for the quarter and full year ended December 31, 2022.

“Last year marked a period of transformation for Rocket. We right-sized our business to respond to a challenging market; we also made key investments to serve our clients better on every step of their home ownership journey,” said Jay Farner, CEO of Rocket Companies. “With foundational pieces of our client engagement program in place, we are focused on expanding our top of funnel, lifting conversion and lowering our client acquisition cost, with the ultimate goal of growing our purchase market share and extending client lifetime value.”


Fourth Quarter 2022 Financial Summary2

ROCKET COMPANIES
($ amounts in millions, except per share)

Q4-22Q4-21YTD 22YTD 21
(Unaudited)(Unaudited)
Total Revenue, net$481 $2,593 $5,838 $12,914 
Total Expenses$986 $1,737 $5,097 $6,730 
GAAP Net (Loss) Income$(493)$865 $700 $6,072 
Adjusted Revenue$683 $2,435 $4,628 $12,427 
Adjusted Net (Loss) Income$(197)$637 $(137)$4,502 
Adjusted EBITDA$(204)$901 $59 $6,200 
GAAP Diluted (Loss) Earnings Per Share$(0.14)$0.32 $0.28 $2.32 
Adjusted Diluted (Loss) Earnings Per Share$(0.10)$0.32 $(0.07)$2.26 

1 A Rocket Account holder is defined as a consumer who opens an account with any of our Rocket services, including Rocket Money. Each Rocket Account holder has unique account credentials across collective Rocket services through our single sign-on solution. A Rocket Account holder continues to be counted as one unless they delete or request that we remove their account information.
2 "GAAP" stands for Generally Accepted Accounting Principles in the U.S. Please see the sections of this document titled "Non-GAAP Financial Measures" and "GAAP to non-GAAP Reconciliations" for more information on the Company's non-GAAP measures and its share count. Certain figures in the tables throughout this document may not foot due to rounding.

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(Units in '000s, $ amounts in millions)

Q4-22Q4-21YTD 22YTD 21
Select Metrics(Unaudited)(Unaudited)
Closed loan origination volume$19,030 $75,857 $133,129 $351,193 
Gain on sale margin2.17 %2.80 %2.82 %3.13 %
Net rate lock volume$15,012 $68,378 $117,757 $333,790 
Amrock closings (units)38.7 244.5 344.0 1,115.1 

Fourth Quarter and Full Year 2022 Financial Highlights
During the fourth quarter of 2022:

•Generated total revenue, net of $481 million and net loss of $493 million, or a loss of 14 cents per diluted share. Generated total adjusted revenue of $683 million and adjusted net loss of $197 million, or an adjusted loss of 10 cents per diluted share.

•Rocket Mortgage generated $19 billion in mortgage origination closed loan volume. Gain on sale margin was 2.17%, which was largely impacted by higher than expected demand for Inflation Buster, our promotional purchase product.

•Reduced total expenses by $202 million dollars from Q3 2022 to Q4 2022, higher than initial expectations of $50 to 100 million.

•Total liquidity was approximately $8.1 billion, as of December 31, 2022, which includes $3.3 billion of available cash, $3.1 billion of undrawn lines of credit, and $1.7 billion of undrawn MSR lines.

•Grew servicing book unpaid principal balance to $535 billion at December 31, 2022. As of December 31, 2022, our servicing portfolio includes 2.5 million clients and generates approximately $1.5 billion of recurring servicing fee income on an annualized basis.

During the full year of 2022:

•Generated total revenue, net of $5.8 billion and delivered net income of $700 million, or 28 cents per diluted share. Generated total adjusted revenue of $4.6 billion and adjusted net loss of $137 million, or an adjusted loss of 7 cents per diluted share.

•Rocket Mortgage generated $133.1 billion in mortgage origination closed loan volume and gain on sale margin of 2.82%.

•Executed a disciplined and prudent approach to cost management and reduced overall cost structure by nearly $3 billion dollars an annualized basis, comparing Q4 2021 to Q4 2022, or more than 40% of total cost base.

•Repurchased 32.1 million shares cumulatively at an average price of $12.73. In total, we have returned $409.3 million to Class A common stockholders under the $1 billion share repurchase program renewed in November 2022.

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Company Highlights
Rocket Platform

•As of December 31, 2022, Rocket Accounts reached 25.4 million total accounts. Rocket Accounts, a key north star metric, represents clients who have taken the action to create an account with us and with whom we may have visibility on credit worthiness, spending behavior, finances, home buying intent and more. Through these deeper, data-driven insights, we are able to deliver richer and more personalized experiences to Rocket Account holders and build ongoing relationships with them.

•On January 2, 2023, Rocket Money took the top spot for daily downloads in the iOS app store Finance category and also reached top 10 in the overall iOS app store. Rocket Money also had a record month of premium member growth in January 2023, the highest in its 8-year operating history.

•Rocket Rewards (www.myrocket.com/rewards), our loyalty program with more than 1 million clients, has shown strong client adoption and engagement since its launch in October 2022. Clients have already redeemed nearly $600,000 dollars in point value. In January, we introduced Rocket Rewards to our 2.5 million servicing clients.

•Rocket Mortgage net client retention rate was 95% over the 12 months ended December 31, 2022. There is a strong correlation between this metric and client lifetime value, and we believe our net client retention rate is unmatched among mortgage companies and on par with some of the best performing subscription business models in the world.

Technology and Product

•In November 2022, we launched a pilot Home Buying Plan to a test demographic. Home Buying Plan is a guided digital experience that helps our clients prepare for home ownership and stay informed throughout their home buying journey. Clients can set home buying milestones, engage with personalized financial tools and credit score improvement resources, search for their dream home, and receive advice on how to stay on track to be more confident home buyers.

•In December, Rocket Mortgage introduced a special purpose credit program that offers credits for first-time homebuyers to use toward their mortgage costs, available in specific census tracts in Atlanta, Baltimore, Chicago, Detroit, Memphis and Philadelphia.

•Through our partnership with Q2, Fourth Capital, a Tennessee-based community bank, became the first Q2 customer to add Rocket Mortgage’s digital home loan application to its mobile and online banking app and expand its financial offerings to its account holders.

Rocket ESG: For-More-Than-Profit

•In December, the Rocket Community Fund and Local Initiatives Support Corporation (LISC) announced a $2 million investment to support the “Rocket Wealth Accelerator Program.” The program provides financial coaching to income-qualified families in Detroit, Cleveland, Atlanta and Milwaukee and aims to help families meet emergency needs, build credit and grow generational wealth. Participants are also eligible to receive up to $500 in matching dollars for large-dollar goals such as purchasing a home or vehicle, and up to $300 for short-term or emergency savings goals.


First Quarter 2023 Outlook
In Q1 2023, we expect adjusted revenue of between $700 million to $850 million.

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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.

DIRECT TO CONSUMER3
($ amounts in millions)
Q4-22Q4-21YTD 22YTD 21
(Unaudited)(Unaudited)
Sold loan volume$11,919 $50,392$84,142$213,889
Sold loan gain on sale margin4.03 %4.32 %4.14 %4.75 %
Revenue, net$325 $2,181$4,780$10,581
Adjusted Revenue$527 $2,023$3,569$10,094
Contribution margin$46 $1,134$1,051$6,396

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. 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.

PARTNER NETWORK
($ amounts in millions)
Q4-22Q4-21YTD 22YTD 21
(Unaudited)(Unaudited)
Sold loan volume$9,132$30,289$60,499$138,803
Sold loan gain on sale margin0.95 %0.79 %1.05 %1.20 %
Revenue, net$71$267$639$1,766
Adjusted Revenue$71$267$639$1,766
Contribution margin$12$113$276$1,079

3 We measure the performance of the Direct to Consumer and Partner Network 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. Directly attributable expenses include salaries, commissions and team member benefits, general and administrative expenses, and other expenses, such as direct servicing costs and origination costs. A loan is considered "sold" when it is sold to investors on the secondary market. We previously referred to "sold" loans as "funded" loans. See "Summary Segment Results" section later in this document and the footnote on “Segments” in the “Notes to Consolidated Financial Statements” in the Company’s forthcoming filing on Form 10-K for more information.
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Balance Sheet and Liquidity

We remain in a strong liquidity position, with total liquidity of $8.1 billion, which includes $0.7 billion of cash on-hand, $2.6 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, $3.1 billion of undrawn lines of credit from non-funding facilities, and $1.7 billion of undrawn MSR lines. As of December 31, 2022, our available cash position was $3.3 billion, which includes cash on-hand and corporate cash used to self-fund loan originations, combined with the $6.9 billion of mortgage servicing rights, representing a total of $10.2 billion dollars of asset value on our balance sheet. As of December 31, 2022, our total equity was $8.5 billion and reflects the impact of the special dividend of $1.01 per share that was paid during the first quarter of 2022 to Class A shareholders and funded through a $2.0 billion distribution.

BALANCE SHEET HIGHLIGHTS
($ amounts in millions)
December 31, 2022December 31, 2021
(Unaudited)
Cash and cash equivalents$722 $2,131 
Mortgage servicing rights (“MSRs”), at fair value$6,947 $5,386 
Funding facilities$3,549 $12,752 
Other financing facilities and debt$4,701 $5,994 
Total equity$8,476 $9,760 


Fourth Quarter and Full Year 2022 Earnings Call

Rocket Companies will host a live conference call at 4:30 p.m. ET on February 28, 2023 to discuss its results for the quarter and full year ended December 31, 2022. A live webcast of the event will be available online by clicking on the "Investor Info" section of our website. The webcast will also be available via rocketcompanies.com.

A replay of the webcast will be available on the Investor Relations site following the conclusion of the event.


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Consolidated Statements of Income (Loss)
($ In Thousands, Except Shares and Per Share Amounts)


Three Months Ended December 31,Years Ended
December 31,
2022202120222021
(Unaudited)(Unaudited)
Revenue
Gain on sale of loans
Gain (loss) on sale of loans excluding fair value of MSRs, net$(7,498)$993,588 $1,166,770 $6,604,215 
Fair value of originated MSRs288,281 926,842 1,970,647 3,864,359 
Gain on sale of loans, net280,783 1,920,430 3,137,417 10,468,574 
Loan servicing income (loss)
Servicing fee income370,633 355,880 1,458,637 1,325,938 
Change in fair value of MSRs(407,126)(133,232)185,036 (689,432)
Loan servicing income (loss), net(36,493)222,648 1,643,673 636,506 
Interest income
Interest income85,101 118,233 350,591 430,086 
Interest expense on funding facilities(35,812)(56,146)(166,388)(261,146)
Interest income, net49,289 62,087 184,203 168,940 
Other income187,213 387,601 873,200 1,640,446 
Total revenue, net480,792 2,592,766 5,838,493 12,914,466 
Expenses
Salaries, commissions and team member benefits519,024 804,136 2,797,868 3,356,815 
General and administrative expenses196,342 315,779 906,195 1,183,418 
Marketing and advertising expenses175,413 305,584 945,694 1,249,583 
Depreciation and amortization23,987 19,243 94,020 74,713 
Interest and amortization expense on non-funding debt38,333 125,968 153,596 230,740 
Other expenses33,111 166,711 199,209 634,296 
Total expenses986,210 1,737,421 5,096,582 6,729,565 
(Loss) income before income taxes(505,418)855,345 741,911 6,184,901 
Benefit from (provision for) income taxes12,763 9,971 (41,978)(112,738)
Net (loss) income(492,655)865,316 699,933 6,072,163 
Net loss (income) attributable to non-controlling interest475,039 (817,265)(653,512)(5,763,953)
Net (loss) income attributable to Rocket Companies$(17,616)$48,051 $46,421 $308,210 
(Loss) earnings per share of Class A common stock
Basic$(0.14)$0.36 $0.39 $2.36 
Diluted$(0.14)$0.32 $0.28 $2.32 
Weighted average shares outstanding
Basic121,751,798 132,607,997 120,577,548 130,578,206 
Diluted121,751,798 1,985,285,921 1,971,620,573 1,989,433,567 

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Consolidated Balance Sheets
($ In Thousands, Except Shares and Per Share Amounts)

December 31,
2022		December 31,
2021
Assets(Unaudited)
Cash and cash equivalents$722,293 $2,131,174 
Restricted cash66,806 80,423 
Mortgage loans held for sale, at fair value7,343,475 19,323,568 
Interest rate lock commitments (“IRLCs”), at fair value90,635 538,861 
Mortgage servicing rights (“MSRs”), at fair value6,946,940 5,385,613 
Notes receivable and due from affiliates10,796 9,753 
Property and equipment, net 274,192 254,376 
Deferred tax asset, net537,963 572,049 
Lease right of use assets366,189 427,895 
Forward commitments, at fair value22,444 17,337 
Loans subject to repurchase right from Ginnie Mae1,642,392 1,918,032 
Goodwill and intangible assets, net1,258,928 1,296,926 
Other assets799,159 818,888 
Total assets$20,082,212 $32,774,895 
Liabilities and equity
Liabilities:
Funding facilities$3,548,699 $12,751,592 
Other financing facilities and debt:
Lines of credit— 75,000 
Senior Notes, net4,027,970 4,022,491 
Early buy out facility672,882 1,896,784 
Accounts payable116,331 271,544 
Lease liabilities422,769 482,184 
Forward commitments, at fair value25,117 19,911 
Investor reserves110,147 78,888 
Notes payable and due to affiliates33,463 33,650 
Tax receivable agreement liability613,693 688,573 
Loans subject to repurchase right from Ginnie Mae1,642,392 1,918,032 
Other liabilities393,200 776,714 
Total liabilities$11,606,663 $23,015,363 
Equity
Class A common stock$1 $1 
Class B common stock— — 
Class C common stock— — 
Class D common stock19 19 
Additional paid-in capital276,221 287,558 
Retained earnings300,394 378,005 
Accumulated other comprehensive income69 81 
Non-controlling interest7,898,845 9,093,868 
Total equity8,475,549 9,759,532 
Total liabilities and equity$20,082,212 $32,774,895 
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Summary Segment Results for the Three Months Ended and Years Ended December 31, 2022 and 2021,
($ amounts in millions)
(Unaudited)

Three Months Ended December 31, 2022Direct to
 Consumer		Partner
 Network		Segments TotalAll OtherTotal
Total U.S. GAAP Revenue, net$325 $71 $396 $84 $481 
Plus: Decrease in MSRs due to valuation assumptions (net of hedges)202 — 202 — 202 
Adjusted Revenue$527 $71 $598 $84 $683 
Directly attributable expenses480 60 540 54 594 
Contribution margin(1)
$46 $12 $58 $31 $89 

Three Months Ended December 31, 2021Direct to ConsumerPartner NetworkSegments TotalAll OtherTotal
Total U.S. GAAP revenue, net$2,181 $267 $2,449 $144 $2,593 
Less: Increase in MSRs due to valuation assumptions (net of hedges)(158)— (158)— (158)
Adjusted Revenue$2,023 $267 $2,291 $144 $2,435 
Directly attributable expenses889 154 1,044 78 1,121 
Contribution margin(1)
$1,134 $113 $1,247 $66 $1,314 

Years Ended December 31, 2022Direct to ConsumerPartner NetworkSegments TotalAll OtherTotal
Total U.S. GAAP revenue, net$4,780 $639 $5,419 $420 $5,838 
Less: Increase in MSRs due to valuation assumptions (net of hedges)(1,211)— (1,211)— (1,211)
Adjusted Revenue$3,569 $639 $4,208 $420 $4,628 
Directly attributable expenses2,518 362 2,880 359 3,239 
Contribution margin(1)
$1,051 $276 $1,327 $61 $1,388 
Years Ended December 31, 2021Direct to ConsumerPartner NetworkSegments TotalAll OtherTotal
Total U.S. GAAP revenue, net$10,581 $1,766 $12,347 $567 $12,914 
Less: Increase in MSRs due to valuation assumptions (net of hedges)(487)— (487)— (487)
Adjusted Revenue$10,094 $1,766 $11,860 $567 $12,427 
Directly attributable expenses3,698 686 4,384 275 4,659 
Contribution margin(1)
$6,396 $1,079 $7,475 $293 $7,768 
(1) 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 below. 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.
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GAAP to non-GAAP Reconciliations

Adjusted Revenue Reconciliation ($ amounts in millions)

Three Months Ended December 31,Years Ended December 31,
2022202120222021
(Unaudited)(Unaudited)
Total revenue, net$481 $2,593 $5,838 $12,914 
Change in fair value of MSRs due to valuation assumptions (net of hedges) (1)202 (158)(1,211)(487)
Adjusted Revenue$683 $2,435 $4,628 $12,427 

(1) Reflects changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, and the effects of contractual prepayment protection associated with sales of MSRs.

Adjusted Net (Loss) Income Reconciliation ($ amounts in millions)

Three Months Ended December 31,Years Ended
December 31,
2022202120222021
(Unaudited)(Unaudited)
Net (loss) income attributable to Rocket Companies$(18)$48 $46 $308 
Net (loss) income impact from pro forma conversion of Class D common shares to Class A common shares (1)(474)818 656 5,766 
Adjustment to the benefit from (provision for) income tax (2)120 (226)(139)(1,429)
Tax-effected net (loss) income (2)(372)640 563 4,646 
Share-based compensation expense (3)48 40 234 164 
Change in fair value of MSRs due to valuation assumptions (net of hedges) (4)202 (158)(1,211)(487)
Loss on extinguishment of Senior Notes— 87 — 87 
Litigation accrual (5)— — — 15 
Career transition program (6)— — 81 — 
Change in Tax receivable agreement liability(7)(10)19 (34)19 
Tax impact of adjustments (8)(65)8 226 55 
Other tax adjustments (9)1 1 4 4 
Adjusted Net (Loss) Income$(197)$637 $(137)$4,502 

(1) Reflects net (loss) income 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 December 31, 2022 and 2021.

(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 of Holdings. The Adjustment to the benefit from (provision for) income tax reflects 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. The effective income tax rate for Adjusted Net (Loss) Income was 26.31% and 24.29% for three months and year ended December 31, 2022, respectively, and 25.21% and 24.92% for the three months and year ended December 31, 2021, respectively.

(3) The year ended December 31, 2022 amounts exclude the impact of the career transition program.

(4) Reflects changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, and the effects of contractual prepayment protection associated with sales of MSRs.

(5) Reflects legal accrual related to a specific legal matter.

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

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(7) Reflects changes in estimates of tax rates and other variables of the Tax receivable agreement liability.

(8) Tax impact of adjustments gives effect to the income tax related to share-based compensation expense, change in fair value of MSRs due to valuation assumptions, loss on extinguishment of Senior Notes, litigation accrual, career transition program and the change in Tax receivable agreement liability at the effective tax rates for each period.

(9) 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.

Adjusted Diluted Weighted Average Shares Outstanding Reconciliation ($ in millions, except shares and per share)

Three Months Ended December 31,Years Ended December 31,
2022202120222021
(Unaudited)(Unaudited)
Diluted weighted average Class A Common shares outstanding 121,751,7981,985,285,9211,971,620,573 1,989,433,567 
Assumed pro forma conversion of Class D shares (1)1,848,879,483—— — 
Adjusted diluted weighted average shares outstanding1,970,631,2811,985,285,9211,971,620,573 1,989,433,567 
Adjusted Net (Loss) Income$(197)$637 $(137)$4,502 
Adjusted Diluted (Loss) Earnings Per Share$(0.10)$0.32 $(0.07)$2.26 

(1) Reflects the pro forma exchange and conversion of non-dilutive Class D common stock to Class A common stock.

Adjusted EBITDA Reconciliation ($ amounts in millions)

Three Months Ended December 31,Years Ended
December 31,
2022202120222021
(Unaudited)(Unaudited)
Net (loss) income$(493)$865 $700 $6,072 
Interest and amortization expense on non-funding debt38 126 154 231 
Income tax (benefit) provision (13)(10)42 113 
Depreciation and amortization24 19 94 75 
Share-based compensation expense (1)48 40 234 164 
Change in fair value of MSRs due to valuation assumptions (net of hedges) (2)202 (158)(1,211)(487)
Litigation accrual (3)— — — 15 
Career transition program (4)— — 81 $— 
Change in Tax receivable agreement liability (5)(10)19 (34)19 
Adjusted EBITDA$(204)$901 $59 $6,200 

(1) The year ended December 31, 2022 amounts exclude the impact of the career transition program.

(2) Reflects changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, and the effects of contractual prepayment protection associated with sales of MSRs.

(3) Reflects legal accrual related to a specific legal matter.

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

(5) Reflects changes in estimates of tax rates and other variables of the Tax receivable agreement liability.

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Non-GAAP Financial Measures

To provide investors with information in addition to our results as determined by GAAP, we disclose Adjusted Revenue, Adjusted Net (Loss) Income, Adjusted Diluted (Loss) Earnings 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 (loss) income, 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 (Loss) Income ” as tax-effected earnings before share-based compensation expense, the change in fair value of MSRs due to valuation assumptions (net of hedges), loss on extinguishment of Senior Notes, a litigation accrual, career transition program, change in Tax receivable agreement liability, and the tax effects of those adjustments as applicable. We define “Adjusted Diluted (Loss) Earnings Per Share” as Adjusted Net (Loss) Income divided by the diluted weighted average number of Class A common stock outstanding for the applicable period, which assumes the pro forma exchange and conversion of all outstanding Class D common stock for Class A common stock. We define “Adjusted EBITDA” as earnings before interest and amortization expense on non-funding debt, income tax, depreciation and amortization, share-based compensation expense, change in fair value of MSRs due to valuation assumptions (net of hedges), a litigation accrual, career transition program, and change in Tax receivable agreement liability. 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 allows us to add back certain cash and non-cash charges, and deduct certain gains that are included in calculating Total revenues, 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. During the year ended December 31, 2022, we revised our definition of Adjusted Net (Loss) Income and Adjusted EBITDA to also exclude the cash portion of share-based compensation expenses and the career transition program, respectively, and Adjusted EBITDA to include the Change in Tax receivable agreement liability, as these expenses do not directly affect what we consider to be our core operating performance. Comparative periods presented to the extent impacted were updated.

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
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available to us to meet our obligations. Some of these limitations are: (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 (Loss) Income 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 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.

Forward Looking Statements

Some of the statements contained in this document are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are generally identified by the use of words such as "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. These forward-looking statements reflect our views with respect to future events as of the date of this document and are based on our management’s current expectations, estimates, forecasts, projections, assumptions, beliefs and information. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. All such forward-looking statements are subject to risks and uncertainties, many of which are outside of our control, and could cause future events or results to be materially different from those stated or implied in this document. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the Securities and Exchange Commission. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this document and in our SEC filings. We expressly disclaim any obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.

About Rocket Companies

Founded in 1985, Rocket Companies is a Detroit-based fintech platform company consisting of personal finance and consumer technology brands including Rocket Mortgage, Rocket Homes, Amrock, Rocket Money, Rocket Loans, Rocket Auto, Rocket Mortgage Canada, Lendesk, Core Digital Media, Rocket Central and Rock Connections.

Rocket Companies' mission is to be the best at creating certainty in life's most complex moments so that its clients can live their dreams. The Company helps clients achieve the dream of home ownership and financial freedom through industry-leading client experiences powered by its simple, fast and trusted digital solutions. Rocket Companies ranked #7 on Fortune's list of the "100 Best Companies to Work For" in 2022 and has placed in the top third of the list for 19 consecutive years. For more information, please visit our Corporate Website or Investor Relations Website.

Investor Relations Contact:
Sharon Ng
ir@rocketcompanies.com
(313) 769-2058

Media Contact:
Aaron Emerson
aaronemerson@rocketcentral.com
(313) 373-3035
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