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Good morning, my name is Abby and I'll be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation First Quarter 2025 Earnings Conference Call. [Operator Instructions] Thank you. And Mr. Blake Kolo, you may begin your conference.

Good morning. This is Blake Kolo, Chief Business Officer and Head of Investor Relations. Thank you for joining us and welcome to the first quarter 2025 UWM Holdings Corporation earnings call. Before we start, I would like to remind everyone that this conference call includes forward looking statements. For more information about factors that may cause actual results to differ materially from forward looking statements, please refer to the earnings release that we issued this morning. Our commentary today will also include non-GAAP financial measures. For information on our non-GAAP measures and metrics and the reconciliation between the GAAP and non-GAAP metrics for the reported results, please refer to the earnings release issued today as well as our filing with the SEC. I will now turn the call over to Mat Ishbia, Chairman and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Thanks, Blake, and thank you everyone for joining today. I'm very excited for what we accomplished this quarter on many fronts and for what lies ahead here at UWM. We will continue investing in technology to widen the gap between us and our competition. Regardless of how the industry or markets may change due to technology rates, we will continue to lead the way. Since 2022, the mortgage broker channel share of the industry is up almost 40%, from about 19.7% to almost 28%, the highest level we've seen since 2008, I believe. This is incredible growth that we are very excited about. I say this a lot, but I would ask all of you to go back and listen to our earnings call from early 2023, or even 2022 or 2021, but 2023 when we talk about game on pricing and how we are going to invest in the business and invest in the channel to grow. Many people were concerned about lowering the margins like we did. However, I knew and we knew it would be best for the broker channel long term. The current numbers proved that we made the right decision and we're just getting started with all the success from that decision years ago. Switching gears, I want to address a topic that many of you recently inquired about. Last week, we announced a strategic decision to bring servicing in-house. This is something we've been contemplating for many years. However, we believe now is the time to make this investment. By leveraging the latest technology and AI, our plan is to be the most efficient servicer in America. We are excited to control this part of the process and look forward to the cost savings that we will achieve, which some people can estimate between $40 and $100 million a year. We're very excited about that opportunity once we get this fully done and going. During our past few earnings calls, we discussed how UWM is uniquely prepared to win in any type of market. And with the significant volatility of the past couple months, we've showcased that preparation several times. When there were brief periods of low rates, our refined operational excellence enabled us to double our daily production levels without sacrificing speed, quality, or service. And when the rates moved higher, we demonstrated our continued dominance on the purchase market. The numbers tell an even better story, so let's get into them. We closed $32.4 billion of production for the quarter, obviously within guidance, and that's a 17% growth year over year, which outperformed the whole industry. We also delivered about $10.6 billion of refined value, almost double what we delivered in the first quarter of 2024. A large portion of that came in a small window between the end of February and the beginning of March, really illustrating the power of our business. The gain margin was 94 basis points. While we posted a $247 million net loss, I want to make sure everyone realizes that this is inclusive of a $388 million reduction of fair value of our MSR portfolio. As we've discussed several times, we have zero control over this MSR value, whether it goes up or down, so it's really not that relevant to me. But we did have an amazing quarter, and we're profitable on all the measures we look at. I want to highlight two other key operational metrics. First, our submission to close for the quarter was 12.7 days. While some of the best in the industry are still running 40 to 45 days, 12.7 is outstanding. Beyond that, we improved this metric by over a day from 13.9 in the first quarter of 2024, despite doing almost 20% more business. As you see, our AI initiatives and things that we've been rolling out are actually impacting the business day-to-day by seeing that speed and success. Second, our net promoter score for the quarter was 87.3. You know companies with NPS in their 60s and 70s are viewed as world-class. This is one of the best NPS scores in the last couple of years and reflects our industry-leading service levels, which you know from our experience will continue to drive more volume in the second quarter and beyond. As you can see, this is another really strong quarter for UWM. While the macro environment may remain choppy, we will continue investing and winning, and I can promise you there's no other mortgage lender that is better equipped and prepared to help brokers, borrowers, regardless of what the market does, and we're excited to show it to you as soon as the opportunity shows. I'll now turn the call over to our CFO, Rami Hasani. He's our new CFO here at UWM and has been a key member of our finance team since 2020, and he was the obvious choice to become our next CFO. So I'll turn it over to you, Rami.

Thank you, Mat. I appreciate it. Jumping into the numbers, Q1 2025 revenue of $613 million, net loss of $247 million, inclusive of $388 million reduction in the fair value of our MSR portfolio, and adjusted EBIT of $58 million. As we've discussed before, our focus continues to be on investing in our people, processes, and technology, as well as our broker partners to prepare UWM and our brokers collectively for continued growth in 2025 and beyond. We continue to invest in growing our operations, underwriting, and technology teams to support increased production volume, which we experienced in Q1 of 2025 compared to Q1 of 2024, a 17% increase. We continue to originate more than $20 billion a quarter in purchase volume for eight quarters in a row, and we view that as our base, a base that no other lender can approach. We almost doubled our refi volume year over year, from $5.5 billion to $10.6 billion, despite the rate environment being less than optimal. While our costs have increased compared to Q1 of 2024, our costs are substantially aligned to Q4 of 2024, which is our strategy for investing for continued growth. More specifically, we believe our business is currently in a position to handle twice our 2024 origination volume with minimal impact to our fixed costs. We also maintain our liquidity and capital and leverage ratios within what we believe to be acceptable ranges in the current environment. As of the end of Q1 of 2025, we had $485 million of cash, $2.4 billion of total accessible liquidity, and an MSR portfolio with a fair value of $3.3 billion. Overall, a strong liquidity position. In summary, Q1 of 2025 was a period of continued investment in operational capabilities to remain prepared for what we see as significant market opportunities for UWM and our broker partners. We have also continued to remain prepared for these opportunities from a capital and liquidity perspective, and we believe that we remain well positioned, operationally and financially, for any market cycle. I will now turn things back over to our Chairman, President, and CEO, Mat Ishbia, for closing remarks.

Thanks, Rami. So I'll close with a couple quick points before the Q&A. The way I think about the business is really simple; volume, gain margin, and expenses. And we're winning on all of these. The expenses part, we're investing in the business, and we feel great about it even though they're higher than Q1, because those are investments. Investments in the growth and success of our business. The gain margin was a little lower in Q1, but we were trending higher overall, and our volume was up 17% year over year. That's how we run the business. As long as we manage these three things, we will continue to dominate. We are the leaders, not just in the mortgage business, but also the leaders in tech here at UWM. The things that we are rolling out over the next few weeks and months are game changers. Just so you guys know, whatever you think you know about our business, how dominant we are, it's about to change in a big way. We're about to roll out some things, some of the best technology you've ever seen or heard of, and it's coming real soon, not 2030, but 2025 and 2026. The cool things we're going to be doing that will impact the business. Also, as I talk to a lot of our large shareholders and investors, I consistently get the message about getting more float in the market. As you guys know, I own about 87% of control, 87% of the shares. Back in March, I put out a 10B5 program that you'll see in the 10Q that will go into effect June 17th, to basically get more float and make it a consistent process, rather than some of the one-off things we've done to try to increase float, which we've done a good job. Now it will be consistent across the board, where you know exactly what to expect. There will be no more uncertainty and no more creative ways to get float out there. We're going to be consistent with the 10B5. Although I believe, even when I did the dockings back in March, it's undervalued, but I believe that if I sell enough float to get out there and get more float in the market that the other 80%, 81%, 82% of shares I own, still after this next year or two that we do this, will be worth much, much more. And so we're excited to hopefully serve what the shareholders want. On top of that, on the shareholder side, we're excited to announce our dividend again. We're going to consistently pay the dividends we have for four plus years now, as you guys know. And even at these share prices, it's a fantastic deal, but we always reward our shareholders, and we have been for years, and we're excited about rolling that out again this quarter of $0.10 or $0.40 for the year is what we've been doing. Lastly, I'm very excited that many of you on this call and over 5,000 of our clients from all 50 states are going to be here in Pontiac next week for UWM Live. It's going to be an informative and eventful two days that will hopefully change the industry in a huge way. I can't wait to share with what we got going. Now quickly on guidance, we expect our second quarter production to be between $38 billion and $45 billion. As a reminder, we did $33.6 billion in Q2 of 2024, and I think in the last three years since, I don't think we've done over $40 billion. I'm actually hoping we eclipse the $40 billion range and dominate this quarter as we see the purchase market being strong and opportunities for us to continue to grow here at UWM. Now with the gain margin, I expect it to be between 90 basis points and 115 basis points before. As I said, we control this and we decide what we think is best, and it will be between 90 basis points and 115 basis points in the second quarter as we continue to help our brokers win and grow their business as we continue to grow as well. Now I'm going to turn it over to Q&A, and I look forward to talking to all of you guys.

[Operator Instructions] Your first question comes from the line of Eric Hagen with BTIG. Your line is open.

Good morning, guys. Hope you're doing well. On moving the servicing in-house, what kind of timeline are you looking at? Can you talk about any one-time costs, other resources or investments you need to make that happen? And then how does it maybe improve the recapture effort as a result of bringing it all in-house? Thanks, guys.

Thanks a lot, Eric. Appreciate it. Like you know, everything we do, we do fast, so our expectation is to bring servicing in-house and start boarding loans at the beginning of ‘26, and hopefully have it all in-house by the end of next year, if you think of it that way. So we'll be able to see those significant expense reductions. And at the same time, as you pointed out, the more important part is; one, the recapture rate, but two, the service levels we can provide the consumers. The consumers get such amazing service working with the mortgage broker, with UWM, and then maybe they don't get that same feel all the way through the process when they're paying their mortgage payment for the next couple of years. They'll have that now because we'll control that process 100%. In addition to that, recapture will be even easier to help communicate with the borrowers on behalf of our brokers and make sure our brokers can stay in front of their clients. But recapture's actually not been a huge issue for us. It's actually pretty good. Our brokers are doing better and better with that. But the big thing is cost savings, control the process, make it so it's a better experience for consumers, and then thus, they're going to want to work with UWM even more. So we're excited about that change and that investment we're making, but there are no huge one-time expenses or costs that are going to change anything that would make it even hit the radar on the financial side.

Definitely support that move from you guys. Imagine almost all of the production last quarter was fixed rate loans, but at what point do you think ARMS may make a comeback? Do you see that being a compelling affordability product for borrowers, especially like right now? And are you in a position to competitively offer ARMS? And then how do you think a shift to adjustable-rate loans could maybe get valued in the MSR market if the intention is to sell those loans?

Obviously as rates go up, ARMS becomes more exciting, especially with the yield curve being more normalized. But with that being said, people still think ARMS is a four-letter word, and people are scared of ARMS. And so I don't think many people... How much ARMS will it be? Could it be 10%? I mean, 15%? I don't think it gets close to those numbers. And so I don't think it's relevant. I don't think it's really that important. We do have some ARMS programs. We do some a little bit here and there. But most consuming rates, the 10-year goes down to 410 or 405 [ph], and no one will touch an ARMS again. It just depends on the situation in the market. ARMS are probably more of a refi program. We're doing some temporary buy-downs, which is an interesting thing on a purchase, which kind of gives them a little bit lower rate for the first 12 or 24 months and then it sets them up for future refinance down the road if rates go down like everyone expects. So ARMS are interesting, but I don't think they're as viable and as big of an opportunity as maybe they were five, seven, eight years ago from my perspective. But we are prepared, and we do a little bit of it, and we will probably do a little bit more, but it won't be meaningful enough that it will hit your guys' radar.

Yep. Got you. Thank you for the call, and I look forward to seeing you guys next week.

And your next question comes from the line of Bose George with KBW. Your line is open.

Actually, I just wanted to follow up on the MSR question. Actually, given the change with servicing in-house, could that change how you dispose of MSRs? Could you hold more MSRs to capture more value that way as well?

Yeah, absolutely. So we look at all those things all the time. You know, we were not selling MSRs because we were subservicing, and we're not going to hold them because we're servicing ourselves. We're going to be opportunistic like we always have. Now, the fact that we control the process and we can control the experience even more, it makes me lean a little more towards retaining more of it. But it's all dependent on the opportunities. Once again, people want to offer me 6.5, 7.5 multiples on MSRs. I have a lot of MSRs, and those opportunities are there. But the reality of it is understanding what's best for the business is what we always think about, what's best for our clients, as in the brokers, what's best for consumers, what's best for our team members, and what's best for our shareholders. We look at all those things. We think bringing servicing in-house is best for us at this point. It's been a deflection point. We've been 50-50 for a while on it, and we kind of pushed over the edge recently. We're excited about that savings that experience enhancement. Once again, could it make us hold MSRs differently or think of it? Absolutely, but we're looking at all things at all times.

Then, in terms of GST reform, obviously there's a lot of noise on potential privatization. Can you just talk about what you're hearing and anything you might be doing in terms of preparing for that potentially happening?

Yeah. I mean, I think that that stuff's way, way far in the future if it even happens. Here's what I'd say about it. I think you've got great leaders now running the mortgage market from FHFA Director Bill Pulte to HUD Director Scott Turner. You've got people on top of the mortgage business. Obviously, all that goes up through the President. I think people that actually care and understand it, so I think they're going to make the right decisions for all of us. My view on it is, whatever happens, we will win with it because we are nimble, we react quickly, we make changes, and we impact the business and our brokers in a positive way. If nothing changes, we'll continue to win that way. Nothing's changing as of now. I think the best part is you have great leaders in the FHFA Director, the Head of HUD, and people that actually care and want to do what's best for consumers and the mortgage lending landscape and the housing market in general, and they understand it, which is a little bit different than maybe we've had in the past.

Okay, great. Thanks a lot. Looking forward to next week.

Look forward to seeing you there, too.

And your next question comes from the line of Jeff Adelson with Morgan Stanley. Your line is open.

Hey, good morning, guys. Thanks for taking my questions. Mat, I was wondering if you could just maybe help us understand what's sort of embedded in the second quarter outlook. I know you mentioned the hope where you can get over the $40 billion mark, but I'm just wondering, is that more of a stable environment, a great environment for where we're sitting today, or just maybe help us understand what else is steeping into that?

Hey, thanks, Jeff. Nice to connect with you, buddy. So I guess I would say this. It's not like interest rates are real low and I'm saying let's do $40 billion plus. I'm saying we've been building. We've been investing. All these things are happening. The broker channel is now at its highest it's been since 2008. So all the things that we've been talking about for years are starting to happen. Now, have rates dropped a little bit, and we won't talk about $40 billion, we'll talk about $60 billion. There's opportunities right there and we're ready to do that tomorrow if the 10-year drops rate. So the way I look at it is, but I am trying to guide you guys towards that, hey, we haven't hit over $40 billion since the refi boom's time. And we are going to do that this quarter. And I know I got it $38 billion to $45 billion, but I expect us to do over $40 billion. And that's a big statement compared to what we did last year in the second quarter, compared to what we did even in this first quarter this year, where everyone else is kind of hovering. Our investments have been working. Our broker channel is winning. And then on top of that, the technology stuff that's going to come out in the second quarter, Jeff, I think you're going to be here at UWM Live along with a lot of people out on this call. It's going to blow your mind. And it's just the beginning. Just the beginning of what we're doing. So you'll understand the strategy even more as you see the things we're doing. Broker's going to grow. UWM's going to grow. And we're all going to win together. And watch out. Because if rates drop, I've got bigger numbers and different things. But if they don't, you see where we're trending and how we're doing things, and that's what we're going to keep doing.

Okay, great. Thanks. And obviously there's been a big deal announced in this space. I'm just sort of wondering, do you guys have a view of how that might change competition in this space, if at all. What's United's own view on M&A as well as it looks going forward, in addition to all the tech enhancements you're looking at here? Is there anything that you'd be looking to maybe bolster your own tech ambitions in this space?

Yeah, you broke up a little bit in the beginning. You said because of M&A?

Yeah, I was just saying there's obviously a big transaction in this space from one of your competitors. So I'm just sort of wondering your reaction to the impact on competition in this space.

Yeah, so I guess my take, and I think in general, my take is we look at everything in opportunities from an M&A perspective. But we're a build versus buy type of company. I can buy something and then make you guys feel really good, and you guys can try to pump my stock price for a little bit. But it wouldn't be the right decision for our long-term business. Now, there are things that we look at and we could buy. But from a technology stuff, I mean, I'm not going to go out and buy a bunch of these companies and try to pump my stock, whatever words you want to use, and spend billions and billions of dollars potentially just to get a couple more leads. Our business is organic. It's been dominant, and it will continue to be dominant. Now, we're opportunistic. If an opportunity comes up, we always look at it. But that's really not the strategy right now. The strategy is let's dominate. Same thing on the tech side. The tech side, people want me to go buy this company that could do this that could come up with some AI stuff or I'm just going to sit here with my almost 2,000 technology people and build the best stuff in the world. And so that's kind of how I lean on that stuff. But we're open to everything, and everyone has their own strategy, and we're going to keep doing it our way. But we're always opportunistic if the right thing came up.

Okay, great. Thanks for taking my questions. See you next week.

And your next question comes from the line of Mikhail Goberman with Citizens. Your line is open.

Hey, good morning, guys. Thanks for taking the question. Excited to hear about these technological changes coming up. Just wondering how do you guys expect those changes to affect the expense base going forward? Thanks.

The technology enhancements, the AI investments, how's it going to impact expenses? I mean, we're going to continue to invest. And so will our costs go down? Absolutely. Will our revenue go up? Absolutely. So if those are the things you care about and focus on, then you'll probably be happy with all the things we're doing. With that being said, I can roll out or explain what I'm doing now on this call, but we look at all these things. On the expense side, the fixed costs are kind of at a peak based on where we think of things. But realize that you think they're higher. The way I look at it is I'm just investing, and other people can't, they can't afford to invest right now. And we are prepared. Like I just said on, I think, a question or two ago, we're going to do $35 billion, $40 billion, $45 billion a lot of these quarters, and we're going to do some great things. But then rates drop a little, we'll do $60 billion. Nobody else can do that. And our gain on sale margin will be higher, and our volume will be higher, and our expenses will basically stay the same from a fixed perspective. And so imagine that, and that's how we were built for business. Nobody else can prepare for that. So we feel good. I think our expenses, as you will say, are up 25% from last year's first quarter. Oh, my goodness. Our volume is up 17%. So there's an 8% delta. I think that's pretty good, to be honest with you, based on the amount of investments and stuff that we've been working on. So I focus on investing in the business in the future. I'm not focused on expenses. If I was focused on expenses as my primary thing, we would not be prepared to dominate as we are right now. And so when that domination continues, I mean, we've been dominating for three, four years now, as you guys have seen, but it's a whole other level what you'll see in the near future.

All right. Thank you, Mat. I appreciate it.

And your final question comes from the line of Doug Harter with UBS. Your line is open.

Thanks. In your prepared remarks, you talked about being comfortable with the leverage range that you're in right now. Can you just maybe put some numbers around that? What is kind of the target non-funding debt-to-equity range that you're looking at?

Doug, that stuff is not the focus of the business. We're really in a great position on that stuff. I know you like to focus on things that are not relevant, but that's not relevant. What's relevant is the domination of our business. We're built to succeed and win every single ratio. Our ratios are in a great position, and I can let Rami speak to that stuff, but the truth is that's just like someone that looks at a spreadsheet all day is asking me that question, not someone that actually understands the mortgage business in our industry and what we're trying to do. And so come out to UWM Live. I think you're going to be there, so you'll understand the tech investments, what we're doing. Our non-funding debt ratios, all those things are in a great position. We feel really good about our cash position, our net worth, all of our ratios, and we have a lot of room in there to continue to grow. And I think you'll see that stuff after this second quarter, and I think you'll be excited to see those numbers go the ways you might like.

Great. Thanks.

And that will wrap up the Q&A portion. I would like to turn the call back over to Mat Ishbia for closing remarks.

Thanks, everyone, for the questions. We're really happy with the quarter, to be honest with you, and I'm actually even more excited about the second quarter. So we feel like we're in a great, great position as a company. I like to say never been stronger, because I know what we're about to roll out and how we're going to do different things over the next 3 to 12 months. But in general, I appreciate all your support. I look forward to seeing a lot of you at UWM Live. It really means a lot to us. I look forward to spending time with you guys there and talking about the business, and when I can open up a little bit more about all the great things we're doing here. It's going to be a lot of great things coming out soon, and then soon after that as well. So thank you for the time. Have a great day, and I look forward to seeing you guys soon.