Varun Krishna : Yeah. Thank you for the question, Kyle. I want to — I’ll just start with Rocket Money. And Rocket Money, obviously, is a part of our Personal Finance division, and the team has done a fantastic job. I believe they’ve grown almost twice the volume since the acquisition. This is an area on a personal note that I’m very passionate about, given my background. The business has over 5 million members. They’ve saved our clients over $1 billion in savings. And quite frankly, it’s the best personal finance app there is. We’ve seen impressive top line growth. I believe in December, they were the number one app in the App Store in the finance category, and they’re on track, as Brian said, for the best quarter ever. And as we think about AI, the thing I would say before handing it over to Brian is this is really about supercharging everything we do around homeownership.
It’s about making sure that our team members can be orders of magnitude, more productive which is what we need when we’re trying to go after a massive market and go after share. And so this is really about allowing us to do more with the same and to allow us to basically take share and grow in a market that’s incredibly fragmented and there are multiple places in which we’re investing in AI across the board at every level of the organization. And so a huge strategic imperative for us. And I’ll ask Brian to comment on some of the more specifics.
Brian Brown : Yeah, Kyle. Just to jump in a little bit on your fixed versus variable. I want to be clear because we think we’re in a really good spot on expense reductions after the past two years in those tough efforts. We focused, of course, mostly on the fixed expenses and we feel really good about that. I mean this business is a beautiful thing, is volume and revenue is growing and operating leverage continues to expand. Again, not — we don’t know exactly what will happen in 2024. But to Varun’s earlier comments, most of the industry forecasters are predicting about a 30% to 35% increase. So if you slap something like that on the same fixed cost base, you’ll really like the outcome. The beauty of this business is once you cover those fixed costs, that next loan, a huge chunk of that drops to the bottom line.
We still focus on, of course, the variable side and lowering that aspect of the business. But from a fixed cost side, we feel good about where we’re at. We’ll continue to monitor and watch the market and respond to conditions as any good business leader would but as we sit today with a strong Q1 guide and a decent forecast from the market of what ’24 could look like, we feel good.
Kyle Joseph : Great. Thanks for taking my questions.
Operator: Your next question comes from the line of Don Fandetti from Wells Fargo. Your line is open.
Don Fandetti : Yeah. I guess on the capacity coming down in the industry, are you — is the trend strong enough in your view that you can sort of get back to like the 300-plus basis point gain on sale margin ultimately? And is Q1, I guess, will we see progression through the year? Is that kind of your sense where it’s not just like a kind of peak in Q1 on the margin?
Brian Brown : Yeah. It’s hard to say exactly what will happen in terms of the rest of ’24 because obviously, there’s a lot of factors like interest rates and things that go into that. But what I can say is we’re sitting here two thirds of the way through the first quarter. And we’re building on the high point of last year, those Q3 gain on sale margins. So it feels good. Like we had mentioned earlier, we do believe the primary reason for that is capacity coming out of the system. We saw that through 2023, really elevated in the second half of 2023. And now we’re starting to actually see it flow through in terms of pricing competitiveness. So it’s hard to say exactly what will happen. But I’ll tell you what, as we sit here in the first quarter, guiding up and we sit here looking at the overall mortgage forecast and it’s both coming from volume increases and gain on sale margin increases, it feels pretty good to us.
Don Fandetti : Okay. Thank you.
Operator: Your next question comes from the line of Ryan McKeveny from Zelman & Associates. Your line is open.
Ryan McKeveny : Hey, thank you. Exciting times even with this macro. So I want to ask on Rocket Homes. Always a lot of buzz around the online search portals. There’s some new competitors. There’s always a lot of innovation. Can you maybe talk to us about how you feel Rocket Homes is positioned within that online ecosystem? What’s your view around the differentiation of your platform and ultimately, maybe tie it to some of the long-term vision, either specific to the Rocket Homes business or even the interplay with purchase market share over time? Thanks.
Varun Krishna : Yeah. Thank you for the question, Ryan. I’ll start by just saying that it’s critical. And one of the reasons we have this amazing aspect of our company structure and organization is that home search is the first part of the journey. And it’s no secret that hundreds of millions of consumers use home search apps multiple times daily because it’s the starting point of the journey. And so that part of the experience is critical to drive a disruptive experience in purchase, which is why this is such an important part of our strategy. And I’m very proud of the Rocket Homes team because they continue to innovate past the bleeding edge. Two examples I will give you is the recent release that they launched with CarPlay, which allows you to have a local driving experience as you’re driving around looking for homes.
It’s a very natural experience that is cultivated around home search. It’s a way to build intent. It’s the way to use location services, AI and data to really create a personalized experience that meets clients where they are. The second thing I would share is the team isn’t stopping there. We just talked about a beta that we released with the new Apple Vision Pro that changes the game when it comes to things like spatial computing and being able to tour homes, publish listings and really using the next generation of virtual and augmented reality. And so home search is a big, big part of our strategy because it’s kind of the beginning point of the journey of the purchase experience and if we can build intent with clients and we can build readiness with a combination of assets like Rocket Homes, Rocket Money, leveraging technology, we can bring them into the home purchase journey in a way that’s more personalized, that’s more streamlined and ultimately drives speed, certainty and value.
So it’s a big part of our strategy. It’s a big part of the top of the funnel and the team has done a good job, and we’re continuing to invest.
Ryan McKeveny : Thanks, Varun. That’s helpful. Second question, on the marketing side of things. I guess, big picture, you guys have always innovated there. You’ve been very prominent as a brand in this industry. I guess, anything you can share with us on how things evolve with Jonathan as CMO, what changes in terms of the focus, what remains the same? Any thoughts there?
Varun Krishna : Yeah. I mean I would start by just saying that the best is yet to come. We’ve hired a pretty kickass new CMO, and we have big, big plans for our brand. The great thing about Rocket is it already is a household brand but we’re scratching the surface on what’s possible. And so we’re continuing to invest. I think we have big plans for the near future and buckle up and stay tuned is what I would say.
Ryan McKeveny : Sounds, great. Thank you.
Operator: Our next question comes from the line of Doug Harter from UBS. Your line is open.
Doug Harter: Thanks. In prior quarters or I think last quarter, you purchased MSR. Can you talk about how your appetite — what your appetite is today for using that as a potential customer acquisition channel?
Brian Brown : Hey, Doug, it’s Brian. Yeah. Thanks. I’ll take a shot at that. Servicing continues to be an important asset. It’s a strategic asset for us. We really like the returns, of course. You’re looking at double-digit returns just when you look at the cash flows alone. But as you know, when you add in the recapture rates, that’s where the returns get really exciting. And just for the record, we think about the servicing asset a bit differently than some others in the space. We think we’re pretty good at collecting the cash flows efficiently and a lot of that drops to the bottom line. But more importantly, is building that lifetime relationship with the client and capturing that next mortgage transaction because we know that next mortgage transaction is worth more than almost all the actual cash flows that you’re collecting combined.
So we have been active in the market. We have been actively bidding. In terms of supply, there is supply out there. I wouldn’t call it great supply right now. The bids are fairly aggressive. You have players out there that have publicly stated that they need to grow the servicing portfolio. So of course, you see a lot of those players show up. In terms of us, the stuff that’s interesting for us is a couple fold. One, we like the higher note rates out there, the on-the-run production because rates or when rates were to drop, those clients getting the money pretty fast and we’d love to take care of them and save them some money on their monthly payment. But it’s also just about onboarding new clients to our servicing experience, which is J.D. Power award-winning and letting them experience Rocket experience in taking care of them.
It’s a lifetime value lens. It’s not just a servicing lens.
Doug Harter: Great. And just to follow up on that last point. I mean, I guess, what are the steps that you can do to kind of increase your ability to kind of retain that customer versus if they might have more loyalties elsewhere versus the customer that kind of chose to come in with Rocket on the initial mortgage?
Brian Brown : Yeah. Well, it starts with a great onboarding experience. Switching services can be a difficult and painful experience, if you’ve ever had that happen to you. So it starts with a great onboarding experience and it starts with a great servicing platform and a great product and making sure that you’re building a relationship with the client and getting in front of them at the right time without getting in front of them too often. So that — if you think about our wheelhouse in terms of performance marketing, sharing a great experience in our brand with clients, there’s no better way of doing it than when we have an excuse, at least on a monthly basis to interact with them and show off some of the products and features that we have built into the experience.
Doug Harter: Thank you.
Operator: And we have reached the end of our question-and-answer period. I will now turn the call back over to CEO, Varun Krishna, for some final closing remarks.
Varun Krishna: Well, thank you, everyone, for joining our call, and we look forward to seeing you next quarter and just a special invite to come to our Investor Day. Stay tuned for details.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
