Earnings call transcript Q3 2022

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Guild Holdings Company Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session with instructions to follow at that time.

As a reminder, this call will be recorded today.

I would now like to turn the conference over to Michael Kim, Investor Relations. Michael. ahead, go Please

Michael Kim

good and afternoon, you, everyone. Thank

are for statements begin, on periods Form or Factors differ those from expressed this we that regarding in are materially company's U.S. financial based I'd These other Exchange company's to risks industry certain results other number like comments that of the for in XX-Q performance and operating Securities expectations. by under everyone on remind forward-looking or expected periods detail conference statements may statements and trends. to Commission. the forward-looking in Before a due these Risk factors filed the XX-K future current described greater titled call with Actual reports and and implied the contain section and may future a Guild's

Additionally, Reconciliations will Investor and GAAP our measures. the today certain of the Relations non-GAAP can with non-GAAP earnings be today's financial corresponding refer on Guild's to in also available found filed measures measures remarks website. to release are financial SEC

McGarry; call the Ann Officer, Mary President, Terry Chief Schmidt. Executive in today are Participating and

I'd turn like over call Mary McGarry. Now Mary the Ann Ann? to to

Mary Ann McGarry

joined thank Schmidt; David Thank everyone, Michael. afternoon, Today, President, for and Neylan. our and Good us. joining I'm our you, Chief Officer, by Terry you Operating

recently Officer, twins to is Chief and family. out she Kramer, to Amber announce welcomed Our I'm her Financial on maternity excited leave, growing

Mortgage the remained quarter. during Market limited. challenging rates to dynamics trend across industry the and third continued higher inventories remained

across As ongoing profitability competitive pressure weighing overcapacity industry. with a issues remained trends shifting industry-wide dynamics under result, and on volumes origination the

our cycles and reinforces for competitive the and decentralized the financial business strong benefits which quarter, delivered across performance we Guild backdrops. shifting model believe differentiated of However,

and share per and the GAAP quarter, originations compelling net XX% the a generated quarter grew quarter-over-quarter for basis, return income, on for maintaining by and income adjusted basis, sale growth earnings both third sequential declines reflecting net while strong a headwinds. per in share while of earnings macro gain we On despite a margins, in net north GAAP profitability third quarter posting XX% We quarter. ongoing income on equity sequential on

execution fair excluding adjusted in changes this $XX compared earnings results. for per of MSRs came to share, adjusted higher income share per local million markets our management across liabilities, the tenured strong and net the at infrastructure and third contingent quarter in and after XX% culture, Even to year, value $X.XX related retail country, second We believe respectively, team, expertise of both quarter through enable drive during of and through market across our shifts XX, XX manage profits successfully nearly return the September adjusted year market quarter been XXXX. for cycles, X% on of Because equity able strategic this focus third to us and trailing months to sustainable recent consistent delivered downturns. ended long-term long-term the and and experience we've

is platform markets. and model From local business nationwide partners referral our strong loan distribution a maintain perspective, and relationships customers different. in who build leverages and Guild's with in-house officers scale-enabled retail

that point, To Focusing year. remain to our as relates recruits. this technology, goals we thus of resonate officers hiring's it our on new mix, ahead servicing product capability well loan and talent, far with of net

for prior originated markets. to in on of a purchased Association. of are third quarter for XX% the the the believe XX% market. We loans In sidelines from quarter, purchase according in meaningfully the leader up and are Furthermore, is challenges affordability waiting the our the mortgages, return XX% volatility Guild current stable buyers were estimates to a and Mortgage Bankers industry from looking above because and

serving and first-time focused underserved the on we in opportunity remain market, As markets. we manage through and this homebuyers dislocation see

or dealing business and smaller attractive acquisition ongoing by healthy track to capitalizing firms believe continue either Turning accretive organically is opportunities. successful dynamics to on maintain ample and for ratios diminishing to to We our leverage record with M&A and our profitability. balance pressures, fund our revenue liquidity growth We sheet. and competitive long invest shifting

profitability and acquisition and opportunities. us financially returning model share to cycles business evaluating across focused meantime, potential selective excess to when be shareholders consistent disciplined position In remain we capital repurchases. through differentiated ongoing Our on the

In summary, has challenging third in the proud I'm in of delivered for very results what industry. quarter environment a the the we been

given ahead, our strong our liquid as we model the and the in capitalize growth about opportunity excited and balanced balance Looking I'm sheet. on dislocation business market

that, it to to turn with Terry? Schmidt. like I'd So Terry over our President,

Terry Schmidt

Thanks, Mary Ann.

will financial comparisons. sequential practice, standard results our my on is quarter comments on As focus our

generated For second the $X.X the quarter. XXXX, XX% in-house representing sequential a originations, quarter loan of from total in billion we third $X.X of billion decline

disappointed XX% quarter-over-quarter according with to on volumes when relative our was in an sequential constructive basis, the from Association. quarterly down industry on Bankers absolute more a as While dip drop the latest volumes basis viewed were Mortgage estimates the

compared $XXX per earnings profitability totaled In the prior income prior income per per decline adjusted the in million adjusted net income, per quarter, million and million, respectively, and comparison, $X.XX while net earnings to earnings the or share. share, $XX EBITDA improved third second were quarter. $X.XX Despite and share, share net respectively. in the adjusted while adjusted originations to $X.XX diluted totaled totaled Net million, revenue $XX and relative revenue, million EBITDA Adjusted share $XX adjusted and quarter $XXX $XX million $XX meaningfully sequential totaled per in and million. quarter adjusted

was most rate effect the a X.X% related quarter XX.X% previous acquisition. for recent decrease for permanent Our to the tax The quarter was in to estimated a tax compared benefits to of our prior due quarter. rate the effective the primarily third in tax

the remain near to to the XX% rate term. in tax year-to-date our close expect We

a Adjusted figures for largely the value prior function rate million a with interest of excluded the change markup third of the favorable a $XX.X $XX.X million quarter fair to quarter MSRs compared backdrop. the in in variance

cash rates holding typically in result flows time. prepayments nature, adjustments and over longer in related higher these which point-to-point in noncash While prolong isolation slower are periods,

segment. our origination Focusing on

Our to on points gain total second XXX sale third $X.X came funded in margin billion originations at of on basis the funded quarter the $X.X XXX quarter. basis for originations billion in points on of compared

gain billion points volume sale on versus basis in locked the in origination the prior adjusted declining points locked industry. in $X.X billion to quarter, the volume totaled adjusted XXX basis prior pull-through on was third margin Pull-through consistent Our $X.X with volumes across quarter. the compared XXX quarter

up and principal operating million lower primarily servicing growth continued million adjustments, generated fees For our the of $XX higher reflecting in third MSR from $XX the servicing the prior valuation in quarter, quarter segment, on expenses. increase with income favorable net more balances in unpaid we

The we the quarter reflected in for for $X.X $X.X compared of reversal In the a moving foreclosure booked million in a loans addition, fewer losses from expectations average prior to quarter. to provision provision our losses. foreclosure forbearance lower-than-anticipated the reversal million and third

engagement well on at for our our of servicing believe holding reinforcing while loans up recapture our with ongoing originations billion, sourced Furthermore, and of growth XX% in primarily quarter, steady service our servicing rights of for focus most channel, with retained purchased through rate the retail balance our quarter. quarter-over-quarter principal consisting X.X% sold boding to client client retention in $XX.X enhances the business. the XX% for third customer total fees, we synergies nearly MSRs recent portfolio, unpaid The was and we servicing

spend I moment differentiated servicing here business. discussing our a want to

of to economies lower. our creates model servicing service which scale, have cost driven Our

strong portfolio a cash originations, we allows as discipline, growth growth borrowing Our to balanced low cash and as financial opportunities I flow increases for discuss and servicing loan flexibility further. in remain Due with leverage, supports our model our origination will MSR arise. ongoing business position

sequential our have our base realized quarter, income savings efforts conditions compensation. expense step-up linked annualized approximately of driver quarter EBITDA was market Through the dictate. staff adjusted net our $XX expense million we and related and to primarily adjusted key A reductions to in ongoing third flex of as

macro as focus on somewhat continue on expense trends. with near-term levels We volume dependent to headwinds persist optimizing profitability

Importantly, and our the we loan branch rightsizing functions should remain region. risk of key dynamics, insights local below support market levels the in with further by attrition balance That expense officer provides cognizant to we need boots-on-the-ground sales said, which thresholds. when of infrastructure factor reductions fall into

down long-term. growth and continue also business cycles invest position the for We the even sustainable during accelerating to to over in ourselves

Next, our differentiating dislocation. factor, key remains balance liquid of particularly market periods a during sheet strong and

September of credit lines of down funds equivalents pay capacity and with totaled cash warehouse excluding to cash warehouse of while As $X.X unused billion. XXth, our $XXX.X billion million, totaled lines $X.X

we XXXX compared XX, as leverage equity, of total XXXX. ratio, X.Xx define tangible debt as and Our XX, at declined September XX, X.Xx by September which XXXX X.Xx June funding to stockholders' of to divided as including

sheet. Moreover, and across track Guild the ongoing via the quality maintain Stepping well headwinds strong back, shareholder giving a to flight to value M&A industry enhancing in an our growth positioned drive a record of balance strength transactions. upturn accretive of continue consolidation with to capitalize on long-term we macro

opportunity focused per during remain Beyond on of set, We shareholder average an the we $XX.XX M&A creating at approximately quarter. shares price third repurchased XXX,XXX share stock an expanding value.

value by value quarter We continue per book $XX.XX, value ended attractive a to basis capital. below X% at stock use at sequential is tangible levels on share an grew $XX.XX. back meaningful book per of believe while buying share Book the to we

we billion competition October. fourth of Turning reflecting billion to anticipate gain the limited and on inventories. originations From adjusted We capacity, in quarter our heightened in of softness quarter-to-date a locked $X.X loan perspective, volume margin generated update. $X.X excess pull-through and further sale

We and on mortgage continue will sale to pressure experience to in on the competition continue put market, and profitability. gain this expect competition intense we margins

up And with call open questions. we'll that, for Operator? the

Operator

will Don Fandetti the begin question Fargo. question-and-answer will ahead. We [Operator now from go Instructions] our with come And first Wells session. Please

Donald Fandetti

quarter your Hi. of you we're the to the of thoughts talk Is see what little sector. that acquisitions? of Mary around kind a Ann, a profitability bit margins you Can towards timing this into good on near-term about how about also, you you more an of to the you thinking then on or further seeing certainly sort relative past think are And as little get out term? I you QX? look do year? path next as a -- intermediate margins see a sale higher mean, a there's gain

Mary Ann McGarry

Don. Hi

we yes, opportunity will and acquisitions, first think stronger the XXXX a -- XXXX. it now in great get right quarter think For even that that's of

is that then on next consistency in it'll MBA we're what's see as just sale, little we can't very I will volatile, the and give half we're our about might going better stabilizes, sitting gain accordingly. to be year, second bit And you a -- sideline see borrowers on market that the And as to happen and continues projections, opportunity. forward-looking lot a to as waiting of so market the manage feel we for the And happening. all can far excited more predicting but very the be

Donald Fandetti

Done. you. Thank

Terry Schmidt

Terry. Yes, this is

has volume think down I gone as on the on sale MBA. track we to every question, And the projections. gain as the far quarter, their

And should some compression, But normalizing. if likely volume would see point, the goes type point, so some to down, start we've Mary things seen. we as what at of historically Ann's

Operator

[Operator Instructions].

from next question Shane here JPMorgan. ahead. come Our Rick Please will with go

Richard Shane

function Thanks that I gain customer price equilibrium. and realize was nature that obviously, for gain you that listening question. and relationship But Amber's much and a my of stable bit guidance. that little the of because I'm is curious you're is provide not think am position And sensitive? I so sale on hope sale probably on if fact of asked of to less on purchase curious, reestablishing the absolute congratulations. about supply/demand the The a I a and more given the gain is of question sale, competition taking in driven erosion

Terry Schmidt

I Terry. is This would…

Mary Ann McGarry

Terry.

Terry Schmidt

say that's more not quite done, partners, concerned about as the stickiness been transaction referral I with And customer the price. case for fulfillment then sensitive to Yes, that our related traditionally and model. your and they're historically, they're that would the getting

Mary Ann McGarry

the still still the there Rick, But competition. in of overcapacity And market, pressure gain sale with on remains lot a and pressure. on there's

we win pressure we but have experiencing that think I and we competitive. often, to are alone be more

Richard Shane

it. Got

the And approach much conservative than the now? and in Okay. more probably Thank for Or environment, about beginning there the willingness rapidly -- acquisition of shrinking. the you. what is imbalances pricing expanding little year I'm and attractive theoretically the and that? your then how opportunities platform presumably, a at of more the asked more given are in And risks How platform curious, currency market had is bit given Don do current is you is acquisitions. the it today your the was

Terry Schmidt

would I that's Yes, say true.

model, we're a and thinner. typically. cash looking when acquisitions in environment, are the at of modeling out, we're today's cash looking flows flow at to Just course, discounted be going much And

on so And bit yes, we're a I say, being little more would cautious pricing.

Richard Shane

a bit the it. Got phone more? ringing is And

Terry Schmidt

It been a lot. is. quite ringing It's

Richard Shane

Fair enough.

you. Thank Okay.

Operator

Joseph Kyle from come will Jefferies. question with Please next our And go ahead.

Kyle Joseph

me question. Hey, And thanks and my afternoon. on for good having taking

were -- big see your is we and industry. 'XX? share to take taking declined You to share into of much continue there guys we than that able look the as How as removed guys the opportunity less originations referenced continue from you that market an to capacity how

Terry Schmidt

Marry Ann that or do answer you David? want to

David Manuel Neylan

can I David. is This that. answer Sure.

So to a in QX from QX, regards XX%. to we the average versus sequential the XX% decline decline to at closer MBA saw

up see we're which continue purchase in our to environment, history, focusing we and environment market pick particular, traditional go-forward business type homebuyers, able in a this in basis, a did first-time we opportunity. an So market to On large share. our pick purchase given typically up share of focus on as a on

need of to as making and capacity gains to going sustained where unfavorable to focused industry. have rightsized. the as instead the market purchase Mary sure to, for Ann make And are economic we're a growth, that us, believe, traditionally we for short-term Terry that be market is can sake that share, not both on forward, outperform alluded of we the continues but We in lot there do still we move long-term

Kyle Joseph

But Very what's helpful. and servicing macro of Obviously, that's a portfolio. kind lot follow-up and in reversal. broader on for And economy as me a of Got forward? of a very kind uncertainty a going your sign it. the provision outlook there, about the out book of you the just of terms foreclosures think then healthy

Mary Ann McGarry

and we well, in think -- seeing increase has our an our any sign And -- that have been we reserve. what think I in reasonable, aren't foreclosures it's of today we hardship. Well, the performance

strong. As economy reports economy of the many still showing a -- matter are of fact, in the economy that underlying is

Kyle Joseph

Oh, sorry. it. Got Helpful.

Mary Ann McGarry

so So that's good for our that's portfolio. -- just

Terry Schmidt

forbearance Yes, be would it reversal of we to thought we -- going into foreclosure, we expected out coming number our with higher. actually took We loans some getting that fruition. just on isn't that provision. to And and

property, they're homeowners of rather able ways had have their in the than issues, example. that their for any that equity the other Just to foreclosure with property selling dispose

we're And thought just we we issues so not that would seeing that see. the

on business pretty outlook that looks the of side the So favorable.

Mary Ann McGarry

that they much were add are than efforts years would mitigation the I so better XX loss And ago.

maintain opportunities, and it borrowers homeownership. pandemic, more many helps stay And many their So it it this especially in really after homes. helped so borrowers

Kyle Joseph

for been questions. makes Thanks sense a this here and really That Understood. too. my somewhat lot answering

Mary Ann McGarry

welcome. You're

Operator

were There Instructions]. [Operator no remaining questions.

over question-and-answer would our for to We the Mary any will like to conclude back Ann closing McGarry turn session. conference I remarks.

Mary Ann McGarry

and us you Well, our look on updating thank Thank for you. call. joining today. Have a forward next evening, we great you to

Operator

now has attending Thank conference The you for concluded. today's presentation.

now disconnect lines. may your You

Guild (GHLD) 3 Nov 222022 Q3 Earnings call transcript