• Total Production: $39.5 billion for Q3 2024, the largest in three years.
• Purchase Production: Over $26 billion in Q3 2024.
• Refinance Production: $13.3 billion in Q3 2024.
• Gain Margin: 118 basis points in Q3 2024.
• Net Income: Nearly $32 million in Q3 2024.
• Total Production Volume Year-to-Date: $100.8 billion, a 20% increase from the same period in 2023.
• Year-to-Date Gain Margin: Increased to 111 basis points from 92 basis points last year.
• Total Cash: Over $600 million at the end of Q3 2024.
• Outstanding Lines of Credit: $300 million at the end of Q3 2024.
• Net Cash Proceeds from MSR Sales Year-to-Date: Approximately $2.6 billion.
• MSR Portfolio: Approximately $212 billion at the end of Q3 2024.
• Total Accessible Liquidity: Approximately $2.5 billion at the end of Q3 2024.

• Warning! GuruFocus has detected 6 Warning Signs with UWMC.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• UWM Holdings Corp (NYSE:UWMC) achieved its largest quarterly production in three years with $39.5 billion, surpassing guidance.
• The company reported a significant increase in purchase market share, growing approximately 300% since 2019.
• UWM Holdings Corp (NYSE:UWMC) maintained profitability with a net income of nearly $32 million despite a $446 million decline in MSR fair value.
• The company has been the number one lender for three consecutive years and the top purchase lender for four years.
• UWM Holdings Corp (NYSE:UWMC) has a strong liquidity position with over $600 million in cash and $2.5 billion in accessible liquidity.

Negative Points

• The anticipated refi boom has not fully materialized, impacting potential revenue growth.
• The company experienced a $446 million decline in the fair value of MSRs due to changing interest rates.
• Market interest rates have impacted MSR values, affecting overall financial performance.
• The mortgage market remains challenging with 2024 on track to be the lowest year for existing home sales since 1995.
• UWM Holdings Corp (NYSE:UWMC) faces increased competition in the broker channel, although it maintains a strong position.

Q & A Highlights

Q: In the EBITDA bridge, is the line item gain on other interest rate derivatives related to hedging the MSR? A: Andrew Hubacker, CFO, explained that they do not hedge MSRs. The interest rate derivative is not a hedge but a strategic decision made with the risk committee to address market conditions.

Q: What were the factors affecting gain on sale margins in the quarter? A: Andrew Hubacker noted that a brief period of favorable interest rates allowed for increased refi activity, boosting margins and volume. This situation provided a glimpse into potential future performance if rates decline further.

Q: Can you discuss trends in gain on sale margins for the fourth quarter with the recent rate changes and seasonality? A: Mat Ishbia, CEO, stated that the guidance of 85 to 110 basis points reflects current market conditions. He emphasized that UWM is prepared to handle increased volume and margins when rates drop.

Q: How is the traction on ancillary products like TRAC+ and PA+? A: Mat Ishbia mentioned that these products are performing well, helping brokers differentiate themselves and save consumers money, although they are not expected to significantly impact gain on sale margins immediately.

Q: Can you elaborate on the impact of recent rate movements on your margin guidance? A: Mat Ishbia confirmed that the current guidance incorporates recent rate changes. He reiterated that margins will increase as rates decrease, and UWM is well-prepared to capitalize on such opportunities.

Q: How does the adjusted EBITDA reflect cash earnings, and is MSR sale cash flow included? A: Andrew Hubacker clarified that MSR capitalization is not excluded from adjusted EBITDA, but sales of MSRs contribute to a cash flow metric.

Q: What are your expectations for MSR sales going forward? A: Mat Ishbia stated that MSR sales are opportunistic, based on business needs and market conditions. UWM continues to produce a high volume of MSRs, making them attractive to buyers.

Q: How do you view the competitive dynamics within the broker channel? A: Mat Ishbia expressed confidence in UWM's dominance in the broker channel, emphasizing their commitment to supporting brokers and maintaining competitive pricing.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.