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Segments | 6 Months Ended
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Jun. 30, 2024
Segment Reporting [Abstract] |
Segments | Segments The Company’s Chief Executive Officer, who has been identified as its Chief Operating Decision Maker (“CODM”), has evaluated how the Company views and measures its performance. ASC 280, Segment Reporting establishes the standards for reporting information about segments in financial statements. In applying the criteria set forth in that guidance, the Company has determined that it has two reportable segments - Direct to Consumer and Partner Network. The key factors used to identify these reportable segments are the Company’s internal operations and the nature of its marketing channels, which drive client acquisition into the mortgage platform. This determination reflects how the CODM monitors performance, allocates capital and makes strategic and operational decisions. Direct to Consumer In the Direct to Consumer segment, clients have the ability to interact with Rocket Mortgage online and/or with the Company’s mortgage bankers. The Company markets to potential clients in this segment through various brand campaigns and performance marketing channels. The Direct to Consumer segment derives revenue from originating, closing, selling and servicing predominantly agency-conforming loans, which are pooled and sold to the secondary market. The segment also includes title insurance, appraisals and settlement services complementing the Company’s end-to-end mortgage origination experience. Servicing activities are fully allocated to the Direct to Consumer segment and are viewed as an extension of the client experience. Servicing enables Rocket Mortgage to establish and maintain long term relationships with our clients, through multiple touchpoints at regular engagement intervals. Revenues in the Direct to Consumer segment are generated primarily from the gain on sale of loans, which includes loan origination fees, revenues associated with title insurance, appraisals and settlement services, and revenues from sales of loans into the secondary market, as well as the fair value of originated MSRs and hedging gains and losses. Loan servicing income consists of the contractual fees earned for servicing loans and other ancillary servicing fees, as well as changes in the fair value of MSRs due to changes in valuation assumptions and realization of cash flows. Partner Network The Rocket Professional platform supports our Partner Network segment, where we leverage our superior client service and widely recognized brand to grow marketing and influencer relationships, and our mortgage broker partnerships through Rocket Pro TPO (“third party origination”). Our marketing partnerships consist of well-known consumer-focused companies that find value in our award-winning client experience and want to offer their clients mortgage solutions with our trusted, widely recognized brand. These organizations connect their clients directly to us through marketing channels and a referral process. Our influencer partnerships are typically with companies that employ licensed mortgage professionals that find value in our client experience, technology and efficient mortgage process, where mortgages may not be their primary offering. We also enable clients to start the mortgage process through the Rocket platform in the way that works best for them, including through a local mortgage broker. Revenues in the Partner Network segment are generated primarily from the gain on sale of loans, which includes loan origination fees, revenues associated with title insurance, appraisals and settlement services, and revenues from sales of loans into the secondary market, as well as the fair value of originated MSRs and hedging gains and losses. Other Information About Our Segments The Company measures the performance of the segments primarily on a contribution margin basis. The accounting policies applied by our segments are described in Note 1, Business, Basis of Presentation and Accounting Policies. Directly attributable expenses include Salaries, commissions and team member benefits, General and administrative expenses and Other expenses, such as servicing costs and origination costs. The Company does not allocate assets to its reportable segments as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources. The Condensed Consolidated Balance Sheets is managed on a consolidated basis and is not used in the context of segment reporting. The Company also reports an “All Other” category that includes operations from Rocket Money, Rocket Loans, Rocket Homes and includes professional service fee revenues from related parties. These operations are neither significant individually nor in aggregate and therefore do not constitute a reportable segment. Key operating data for our business segments for the periods ended:
Three Months Ended June 30, 2024 |  | Direct to Consumer |  | Partner Network |  | Segments Total |  | All Other |  | Total
Revenues |  |  |  |  |  |  |  |  |  |
Gain on sale |  | $ | 577,231 |  |  | $ | 169,020 |  | $ | 746,251 |  |  | $ | 12,305 |  |  | $ | 758,556 |
Interest income |  | 59,806 |  |  | 52,609 |  | 112,415 |  |  | — |  |  | 112,415 |
Interest expense on funding facilities |  | (43,128) |  |  | (37,948) |  | (81,076) |  |  | (217) |  |  | (81,293) |
Servicing fee income |  | 353,299 |  |  | — |  |  | 353,299 |  |  | 1,378 |  |  | 354,677 |
Changes in fair value of MSRs |  | (112,941) |  |  | — |  |  | (112,941) |  |  | — |  |  | (112,941) |
Other income |  | 147,057 |  |  | 4,156 |  | 151,213 |  |  | 118,095 |  |  | 269,308 |
Total U.S. GAAP Revenue, net |  | 981,324 |  |  | 187,837 |  |  | 1,169,161 |  |  | 131,561 |  |  | 1,300,722 |
Change in fair value of MSRs due to valuation assumptions, net of hedges |  | (72,566) |  |  | — |  | (72,566) |  |  | — |  |  | (72,566) |
Adjusted revenue |  | 908,758 |  |  | 187,837 |  |  | 1,096,595 |  |  | 131,561 |  |  | 1,228,156 |
Less: Directly attributable expenses |  | 534,049 |  |  | 61,506 |  |  | 595,555 |  |  | 88,650 |  |  | 684,205 |
Contribution margin |  | $ | 374,709 |  |  | $ | 126,331 |  |  | $ | 501,040 |  |  | $ | 42,911 |  |  | $ | 543,951 |
Six Months Ended June 30, 2024 |  | Direct to Consumer |  | Partner Network |  | Segments Total |  | All Other |  | Total
Revenues |  |  |  |  |  |  |  |  |  |
Gain on sale |  | $ | 1,117,396 |  |  | $ | 318,527 |  | $ | 1,435,923 |  |  | $ | 21,859 |  |  | $ | 1,457,782 |
Interest income |  | 108,688 |  |  | 92,707 |  | 201,395 |  |  | — |  |  | 201,395 |
Interest expense on funding facilities |  | (71,362) |  |  | (61,052) |  | (132,414) |  |  | (322) |  |  | (132,736) |
Servicing fee income |  | 697,659 |  |  | — |  |  | 697,659 |  |  | 2,764 |  |  | 700,423 |
Changes in fair value of MSRs |  | (56,433) |  |  | — |  |  | (56,433) |  |  | — |  |  | (56,433) |
Other income |  | 279,254 |  |  | 7,936 |  | 287,190 |  |  | 226,817 |  |  | 514,007 |
Total U.S. GAAP Revenue, net |  | 2,075,202 |  |  | 358,118 |  |  | 2,433,320 |  |  | 251,118 |  |  | 2,684,438 |
Change in fair value of MSRs due to valuation assumptions, net of hedges |  | (293,037) |  |  | — |  | (293,037) |  |  | — |  |  | (293,037) |
Adjusted revenue |  | 1,782,165 |  |  | 358,118 |  |  | 2,140,283 |  |  | 251,118 |  |  | 2,391,401 |
Less: Directly attributable expenses |  | 1,063,853 |  |  | 117,450 |  |  | 1,181,303 |  |  | 177,741 |  |  | 1,359,044 |
Contribution margin |  | $ | 718,312 |  |  | $ | 240,668 |  |  | $ | 958,980 |  |  | $ | 73,377 |  |  | $ | 1,032,357 |
Three Months Ended June 30, 2023 |  | Direct to Consumer |  | Partner Network |  | Segments Total |  | All Other |  | Total
Revenues |  |  |  |  |  |  |  |  |  |
Gain on sale |  | $ | 476,052 |  |  | $ | 108,580 |  | $ | 584,632 |  |  | $ | 9,837 |  |  | $ | 594,469 |
Interest income |  | 45,484 |  |  | 36,043 |  | 81,527 |  |  | (770) |  |  | 80,757 |
Interest expense on funding facilities |  | (33,084) |  |  | (26,331) |  | (59,415) |  |  | (97) |  |  | (59,512) |
Servicing fee income |  | 342,328 |  |  | — |  |  | 342,328 |  |  | 1,263 |  |  | 343,591 |
Changes in fair value of MSRs |  | 42,377 |  |  | — |  |  | 42,377 |  |  | — |  |  | 42,377 |
Other income |  | 150,101 |  |  | 4,196 |  | 154,297 |  |  | 80,248 |  |  | 234,545 |
Total U.S. GAAP Revenue, net |  | 1,023,258 |  |  | 122,488 |  |  | 1,145,746 |  |  | 90,481 |  |  | 1,236,227 |
Change in fair value of MSRs due to valuation assumptions, net of hedges |  | (234,556) |  |  | — |  | (234,556) |  |  | — |  |  | (234,556) |
Adjusted revenue |  | 788,702 |  |  | 122,488 |  |  | 911,190 |  |  | 90,481 |  |  | 1,001,671 |
Less: Directly attributable expenses |  | 529,222 |  |  | 66,425 |  |  | 595,647 |  |  | 69,591 |  |  | 665,238 |
Contribution margin |  | $ | 259,480 |  |  | $ | 56,063 |  |  | $ | 315,543 |  |  | $ | 20,890 |  |  | $ | 336,433 |
Six Months Ended June 30, 2023 |  | Direct to Consumer |  | Partner Network |  | Segments Total |  | All Other |  | Total
Revenues |  |  |  |  |  |  |  |  |  |
Gain on sale |  | $ | 866,394 |  |  | $ | 180,574 |  | $ | 1,046,968 |  |  | $ | 17,064 |  |  | $ | 1,064,032 |
Interest income |  | 83,606 |  |  | 63,715 |  | 147,321 |  |  | 180 |  |  | 147,501 |
Interest expense on funding facilities |  | (53,392) |  |  | (41,080) |  | (94,472) |  |  | (152) |  |  | (94,624) |
Servicing fee income |  | 707,545 |  |  | — |  |  | 707,545 |  |  | 2,431 |  |  | 709,976 |
Changes in fair value of MSRs |  | (355,902) |  |  | — |  |  | (355,902) |  |  | — |  |  | (355,902) |
Other income |  | 272,673 |  |  | 7,814 |  | 280,487 |  |  | 150,825 |  |  | 431,312 |
Total U.S. GAAP Revenue, net |  | 1,520,924 |  |  | 211,023 |  |  | 1,731,947 |  |  | 170,348 |  |  | 1,902,295 |
Change in fair value of MSRs due to valuation assumptions, net of hedges |  | (18,498) |  |  | — |  | (18,498) |  |  | — |  |  | (18,498) |
Adjusted revenue |  | 1,502,426 |  |  | 211,023 |  |  | 1,713,449 |  |  | 170,348 |  |  | 1,883,797 |
Less: Directly attributable expenses |  | 1,034,805 |  | 131,784 |  | 1,166,589 |  |  | 146,433 |  |  | 1,313,022 |
Contribution margin |  | $ | 467,621 |  |  | $ | 79,239 |  |  | $ | 546,860 |  |  | $ | 23,915 |  |  | $ | 570,775 |
The following table represents a reconciliation of segment contribution margin to consolidated U.S. GAAP Income (loss) before income taxes for the three and six months ended:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Contribution margin, excluding change in MSRs due to valuation assumptions | $ | 543,951 |  |  | $ | 336,433 |  |  | $ | 1,032,357 |  |  | $ | 570,775 |
Change in fair value of MSRs due to valuation assumptions, net of hedges | 72,566 |  |  | 234,556 |  |  | 293,037 |  |  | 18,498 |
Contribution margin, including change in MSRs due to valuation assumptions | 616,517 |  |  | 570,989 |  |  | 1,325,394 |  |  | 589,273 |
Less expenses not allocated to segments: |  |  |  |  |  |  |
Salaries, commissions and team member benefits | 209,271 |  |  | 222,645 |  |  | 397,599 |  |  | 443,527 |
General and administrative expenses | 123,785 |  |  | 145,595 |  |  | 268,851 |  |  | 288,708 |
Depreciation and amortization | 28,009 |  |  | 25,357 |  |  | 55,026 |  |  | 56,042 |
Interest and amortization expense on non-funding debt | 38,364 |  |  | 38,333 |  |  | 76,729 |  |  | 76,667 |
Other expenses | 25,046 |  |  | 689 |  |  | 36,777 |  |  | 1,946 |
Income (loss) before income taxes | $ | 192,042 |  |  | $ | 138,370 |  |  | $ | 490,412 |  |  | $ | (277,617) |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 48 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482785/280-10-55-48 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards 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