UWM - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered the best quarter since 2021: originations $39.7B (+18% YoY), total revenue $758.7M, GAAP net income $314.5M, gain margin 113 bps; adjusted diluted EPS was $0.16 and GAAP diluted EPS $0.11.
• Street consensus was EPS $0.0565* and revenue $632.1M*, implying a significant beat; Street focus appeared to be adjusted EPS, consistent with “EPS $0.16 beats by $0.10” noted in third-party summaries.
• Guidance: Q3 production $33–$40B (lower vs prior $38–$45B) but gain margin raised to 100–125 bps (vs prior 90–115 bps). Dividend maintained at $0.10 per share (19th consecutive quarter).
• Catalysts: Demonstrated AI-driven productivity (Mia, LEO) and in-house servicing strategy (ICE MSP) underpin share gains and margin discipline; stock traded up ~8% on the day per industry press.

What Went Well and What Went Wrong

What Went Well

• Record performance since 2021 driven by originations $39.7B, revenue $758.7M, net income $314.5M, with gain margin expanding to 113 bps; CEO: “outstanding quarter…best since 2021…not because of any market tailwinds”.
• AI initiatives delivering measurable results: launch of Mia (AI-powered virtual assistant) and LEO (Loan Estimate optimizer) to help brokers win more loans and improve engagement.
• Non-GAAP profitability improved: adjusted EBITDA $195.7M vs $57.8M in Q1, despite MSR valuation headwinds, aided by $208.9M gain on other interest rate derivatives.

What Went Wrong

• MSR valuation headwinds continued: change in fair value of MSRs was a $(111.4)M drag in Q2 (vs $(388.6)M in Q1), reflecting rate/assumption dynamics.
• Total equity remains below year-ago: $1.75B at 6/30/25 vs $2.33B at 6/30/24; non-funding debt-to-equity ratio at 1.90 (up vs 0.91 YoY).
• Q3 outlook implies sequential production moderation ($33–$40B vs Q2’s $39.7B), though margin guidance is higher, highlighting a potential volume trade-off.

Transcript

Speaker 4

Hello everyone and good morning. My name is Jim and I will be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation Second Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If at any time you would like to remove yourself from the queue, please repress star and one. Thank you. Blake Kolo, you may begin your conference.

Speaker 5

Good morning. This is Blake Kolo, Chief Business Officer and Head of Investor Relations. Thank you for joining us and welcome to the Second 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 metrics and the reconciliation between GAAP and non-GAAP metrics for the reported results, please refer to the earnings release issued earlier today, as well as our filings with the SEC. I will now turn the call over to Mat Ishbia, Chairman, President, and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Speaker 6

Thanks, Blake, and thank you everyone for joining today. You know, UWM's strong, consistent, and differentiated values continue to be the foundation for everything we do here. Every day, our team of more than 9,000 people delivers the best products and services to the broker community, which in turn benefits homeowners with significant cost savings and a world-class mortgage experience. Our operating profile and relentless drive to deliver results lend themselves to a consistent message for the investment community. UWM is uniquely positioned to win in any market environment. While others have pulled back, UWM has doubled down, proving that we can and will dominate the purchase market regardless of market cycles. When the rates come down, we'll leverage our world-class operating system and industry-best technology that we develop for brokers to scale and dominate. Over the last several years, we've built scalability in our business by investing in technology.

While you hear many other companies using AI as a buzzword, the difference is actually at UWM, we have products and services that are powered by AI that are actually impacting our business today and will impact our business even more when rates drop and just going forward in the future. Years ago, we invested heavily to build our AI-based underwriting system, BOLT. While underwriters at most lenders can do two or three loans per day, maybe even four, we can do two, three X, or more per day than anywhere else in the country. Our loan quality is better because of this technology and will continue to improve. Here at UWM, we can say AI is making a big impact on our business today. Another example of AI actually working is Chat UWM, which is similar to Chat GPT, but for mortgages.

Our brokers and team members now use this as a primary resource for accessing job aids, guidelines, and other information that arises that they need on a mortgage transaction. Within this is LEO, Loan Estimate Optimizer, which we launched at UWM Live on May 16th. LEO helps brokers compete and win by showing exactly how they can beat a competitor's loan estimate. All they need to do is drag and drop the borrower's loan estimate into LEO, and they get a detailed analysis of tips on how to win this specific loan. Finally, the big noise and big opportunity is around Mia. Mia has been a huge, huge success. It's an AI loan officer assistant. Mia is designed to help loan officers do more loans and get more business. She is the ultimate loan officer assistant. She works 24/7, 365. She doesn't get days off.

We rolled this out at UWM. The broker feedback was incredible. We rolled it at UWM Live back in May. We've been using it every single day, and it's having so much success where it's scheduling meetings and helping brokers get more business. That's really the game. Now, you know, a stat that we are big on here at UWM is about 97% of all consumers that work with a mortgage broker give a five-star review, which is phenomenal. Unbelievable information. Only 10% of those people remember who the mortgage broker is when they go to refinance their mortgage because so much time has gone by. Until now, brokers haven't had great tools to stay in front of their business and for their past borrowers. Mia changes all of that. She'll stay in front of them.

We think that 10% number could go to 30%, 40%, maybe even 50% of them know who their mortgage broker is, which just guarantees more business for brokers, which helps UWM and the broker channel continue to grow. She makes thousands of outbound calls every single day. She takes inbound calls. She sets appointments. All this is happening today. It is not something that we plan on doing and some cool thing that we're going to tell you that's going to happen in 2028. It's happening today, and it's impacting business today. If rates tick down a little bit more, it will impact business greatly today and this year. Supplying brokers with the best tools and technology helps them win, and the channel continues to post higher and higher overall market share. Broker share of all direct lending has more than doubled since 2016, reaching about 30%.

Our goal is for brokers to be number one. In my mind, that means 50.1%. I don't know if that'll take five years or 15 years, but we're going to grind it out and make sure it happens. It's best for consumers. It's best for real estate agents. It's best for loan officers, which is why the channel continues to grow. I'm super excited about the opportunity as we continue to build this together. A lot of the AI things I talked about will help brokers scale, help UWM scale, and we're going to all win together. Okay, let's get into the quarter. We closed $39.7 billion of production, our best quarter since 2021, and almost 20% higher than last year's second quarter.

We did about $12.4 billion of refi volume, which is double what we did last year's second quarter, and represents about 11% of the volume in the industry, which is really interesting because most people think you need to have the client in your servicing book to refinance them. First, we don't refinance any borrowers. Our brokers do. Second, we only own about 2% of the industry servicing market. For us to do 11% plus really disproves the age-old theory that you must have the service to do the refi. When you deliver world-class experience, you get 97% of borrowers giving a five-star rating. It really doesn't matter how big your servicing book is. It gives brokers the ability to excel on refinances, and you're seeing that in real time here with UWM. Additionally, we originated $27.3 billion of purchases.

This is our third best purchase quarter of all time, and this big number in the market that we're in right now, and it's tracking to do over $100 billion this year. Gain on sale margin was 113 basis points, which is up a lot since the first quarter. We also had a pretty good quarter of earnings, $314.5 million in net income, demonstrating the earning power of our business. That also included a $111 million decline in fair value of our MSRs. Our playbook won't change. Invest in our business, win, grow the broker channel, and repeat. I'll now turn the call over to our CFO, Rami Hasani, to go over some more numbers.

Speaker 1

Thank you, Matt. Q2 was a strong quarter for us. Net income of $314.5 million and adjusted EBITDA of $195.7 million. Production volume of $39.7 billion, up $7.3 billion from Q1, and gain margin of 113 basis points, up by 19 basis points from Q1. Consistently maintaining a strong MSR portfolio of $211.2 billion in unpaid principal balance and WACC of 5.51%. All this while never skipping a beat on service, with best-in-class net promoter score of 87. Again, a strong and successful quarter by all measures. To support our growth, we continue to invest in our people, processes, and develop innovative technology to prepare us and our broker partners for growth in 2025 and beyond. We remain on strategy with our investments to be prepared for significant market opportunities for us and our broker partners.

As we said before, we believe our business is positioned to handle twice our current production volume with minimal impact to fixed costs. We are prepared and excited for the future. We also remain well-capitalized with total equity of $1.7 billion, up from $1.6 billion in Q1, and continue to be in a strong liquidity position. Cash of $490 million, total available liquidity of $2.2 billion, and an MSR portfolio of $3.4 billion. We continue to assess and evaluate the opportunistic refinancing of our $800 million unsecured notes maturing in November of 2025. Given the current market conditions and strong investor demand for our last offering, we expect a favorable outcome in refinancing these notes. In support of all this, we continue to maintain capital and liquidity leverage ratios within what we believe to be acceptable ranges in the current market environment.

In summary, Q2 was a great quarter for us with strong production, gain margin, and net income performance. We continue to invest to be the most prepared mortgage company in America. We are also prepared from a capital equity perspective and believe that we're well-positioned operationally and financially for any market cycle. I will turn things back over to our Chairman, President, and CEO, Mat Ishbia, for closing remarks.

Speaker 6

Thanks, Rami. Appreciate it. I'll close with a few points before the Q&A. First, our work to bring servicing in-house is progressing nicely. As I told you before, we'll have that done in the first quarter of next year. We'll have some positive financial impact to our business in 2026 and beyond. More importantly than that, this gives UWM complete control of the borrower experience. We'll deliver the same world-class service we're known for on the servicing side, which will drive increased loyalty to brokers and UWM. Right now in the market, it's not done that way on the servicing side, and UWM will be best in class. We recently partnered with a company called Built, which will help make an amazing front-end experience for the consumers in a lot of places, which I'll explain very soon. It will make a huge impact.

I'm really excited about bringing servicing in-house and helping UWM dominate on this part of the business, just like we do in origination. All right, turning to guidance. Based on where rates are and where they've been, I expect the third quarter production to be around $33 billion to $40 billion. Now I'm actually going to improve the guidance on the margin up two levels, to 100 to 125 basis points. Based on the markets they've been in, I feel confident that it's the first time in four years to move the margins up to those levels. I'm excited about what's going to happen in the future, even in this tough market. We see some reasons to believe that the market's going to open up in a positive way going forward.

I really believe that UWM is positioned to be great in the third quarter, the fourth quarter, and into 2026. We're really excited about our business. I'll turn it over to questions from all of you guys now.

Speaker 4

Ladies and gentlemen, at this time, I'd like to remind everyone that if you would like to ask a question, please press star then the number one on your telephone keypad. If at any time you would like to remove yourself from the queue, please press star one once more. At this time, we'll pause momentarily to assemble our roster. We will now begin the Q&A session. Your first question today comes from Bose George at KBW.

Hey everyone, good morning. Just first on the guidance and the higher gain on sale margins. Does that reflect market trends, or are you prioritizing higher margins a little more, or can you put a few skull around that?

Speaker 6

Yeah, just understanding the market. We obviously have a view of the market and understanding what we're doing and what our clients need and what's going on in the markets that maybe others don't have that same view. As you see, our margins sometimes look a lot different than everybody else's. I feel very confident in my guidance and that we'll hit in that range. Obviously, we had a good quarter from a volume and margin perspective, and we expect to do the same in the second quarter, or third quarter, excuse me.

Okay, great, thanks. That actually went one on the bringing servicing in-house. Does the cost related to that, like the OpEx number this quarter already, does that already include costs related to that? Should we see any change, or does that already kind of incorporate what's happening there?

No, you'll see some of those costs come out in some savings and some opportunity for us in 2026. I think a lot of the stuff that we're doing right now, there's actually some increasing costs in the servicing side tied to we moved it all to one sub-servicer. We modify, we're in the process of building out technology tied to the servicing. We're partnering with a lot of different things to make it all happen in a very short timeframe. You'll see some of the costs come out in a positive way in 2026. We're going to get the servicing up internally by early 2026, first quarter. You'll see the costs come out throughout the year and obviously beyond.

Okay, great, thanks.

Thank you.

Speaker 4

Your next question comes from Eric Hagen at BTIG. Your line is open.

Good morning, guys. Good quarter. Do you feel like the speed to close loans has room to fall further while keeping your margin the same? What are the processes or catalysts that would support an even faster return time from here?

Speaker 6

Yeah, thanks, Eric. I mean, our speed to close loans, yeah, with the AI investments and the things we've done, it will continue to get faster. There are laws that you can't actually close it quicker than like eight days. There are actually some laws in place that, but we talk about how quickly you get the quarter to close, purchase, and refi. Obviously, refis are even faster and easier. The truth is, what's going to happen is when rates do go down a little bit more and there are more refinancing in the market, everyone else's turn times are going to get longer and they're going to slow down more and we won't. Based on our AI investments, based on our team and our ability to scale, that's what I've been talking about for probably three or four quarters now that we're ready. That will not impact us.

What it will do is create a competitive advantage, which then gives us the opportunity to get more business, more margin, or both.

Love it. Thank you. Has the playbook or the parameters around selling MSRs changed at all for you guys? Do you think the market has the capacity to buy more than you're currently selling at these interest rates? How much capacity do you think would be available for MSRs if rates fall? Do you think the market can handle that?

Yeah, the market's very robust in it. Honestly, we got new buyers coming in. We have people coming in and aggressively trying to buy our servicing. Once again, we're one of the few people that actually originated anything at scale. If you want to get in the servicing game, you got to come to UWM because we originate a volume that makes sense. Also, a lot of people think that the way to refinance people is to buy servicing. As I pointed out earlier, that's not how it really works anymore. You know, don't tell the servicing buyers. It's fine for them to continue to buy loans. There's a lot of people that, and they also look at things. There are some of them that aren't buying them to refinance. They're buying them to hedge other parts of their portfolio. We've seen a good strong market.

We're opportunistically selling, but at the same time, we can shut it down and not sell any. We'll look at all those options, and we look at every single deal before we make the trade at all those. We feel good about what we're doing on the MSR side.

Great stuff. Thank you guys very much.

Thank you.

Speaker 4

Next question today comes from Terry Ma at Barclays.

Hey, thank you. Good morning. I just wanted to follow up on expenses. Your non-interest expense growth has been quite elevated in the last six quarters, but it did moderate the last two. I'm just curious, how should we think about the trajectory of that non-interest expense growth as we look out to the back half of the year, particularly as you start to build out in-house servicing?

Speaker 6

Yeah, no, it's a good question, Terry. I look at the, we look at the fixed expenses. That's really what we manage and monitor and understand. A lot of them are investments, right? I look at them as investments into the scalability, into the AI, into the servicing. Do I think those will moderate? As you already pointed out, yes, and they will continue to moderate going forward. Now, the variable expenses, if we double our volume as an example, if that happens, obviously the variable expenses will go up. We're in a really good position from an ability to handle the volume and then a lot more volume than we have today, along with the investments we've made from a perspective of broker business, along with servicing, along with technology tied to AI. A lot of that stuff you see through there.

I do think that we're, I won't say it will never go up again, but I feel pretty good that we're in a place that's not going to be going up significantly.

Got it. That's helpful. I guess maybe just on the 10B5, that's been active since about mid-June. Any updated thoughts on how you're kind of thinking about that and how much longer it will be active? What's the endpoint? Thank you.

Yeah, I mean, the 10B5 is a plan out there that obviously you can't change once you start it. The stock price is way too low to be doing it, but I don't get to choose that anymore. We feel fine about it because I know it's a long-term play. It's the right thing for the long-term, build the float. All of you guys that are on the call tell me that we need more float. I'm selling it at a massive discount to provide that for all of our investors. My strategy and our strategy, based on feedback from you guys, is that the expectation is that the other 85% or 83% of what I own will be worth more because I'm getting more float on the market.

Great. Thank you.

Speaker 4

Our next question will come from the line of Doug Harter at UBS. Please go ahead.

Thanks. Mat, you gave a little update on Mia, but hoping you could talk a little bit more about, you know, kind of broker reaction to it, consumer reaction to it, and any metrics on, you know, kind of, you know, around the success of that rollout.

Speaker 6

Yeah, thanks a lot. It's been great. It's been, you know, we've not, it's not been 100,000 calls a day because the market hasn't needed that yet, but it's ready. She's been making a lot of calls. I actually played a couple in the sales huddle to all of our brokers, you know, 10,000 people, almost 10,000 people watched that, and let them hear Mia talking with borrowers calling inbound, and she's answering and setting up an appointment for the broker. Or she's making outbound calls. Hey, it looks like your rate should be dropped, could drop. Do you want to talk to Johnny Smith, your LO? The person's like, yeah, I'd love to schedule an appointment. How about 5:00 P.M. tomorrow? They literally schedule an appointment. The broker calls, and the broker does a loan. It's really cool.

Now just doing it at scale, which we already are doing at scale, like thousands and thousands a day. I think scale is, you know, 50,000, 100,000. It doesn't go on scale until rates drop a little bit more to where it's going to drive more business. I think that's close to happening right now where the 10-year is and where the market and mortgage-backed securities are trading right now. We're getting closer and closer. Mia will be making a lot of calls today and, you know, driving a lot of refinance activity, along with, in general, just keeping the broker's name and information in front of the borrower for the referral-based system. Brokers are not good at that in general. We are helping, and we are seeing brokers get more business and have more upside because of what we're doing. Mia has been a great success.

It's only going to continue, but it's not like in theory he hopes you make some calls in 2027. We're actually doing this today. I don't use AI as a buzzword like everybody else. We actually are doing stuff, and it's actually working, and we're getting more business, and we're more efficient because of the artificial intelligence that we've invested in and we built out here at UWM with our over 2,000 technology people.

Great. I appreciate that, Mat, to shift, can you talk a little bit about the derivative gain in the quarter? Was that kind of opportunistic, or is that a change in how you're using derivatives?

No, it's opportunistic. Understand the market, understand the situations. When the opportunity is there, we look at those things, right? As you saw, the 10-year dropped significantly over the last two weeks of the last quarter, which would have had a big hit on our MSR book, which is why we lost $111 million on our MSR book. We put out a trade to hopefully manage some of that, and we took advantage of the opportunity. That trade, we look at that. We have a lot of very analytical people here making those decisions, and we feel really good about that. We'll look at that sometimes, but it's all opportunistic.

Great. Appreciate it. Thank you.

Speaker 4

Our next question will come from the line of Jeff Adelson at Morgan Stanley. Your line is open.

Hey, morning, Mat. Morning, Rami. I wanted to follow up on the guidance for originations, you know, the $33 to $40 billion. If I look at the midpoint, it does seem to imply a bit of a decline versus this quarter and a year ago. I think when we look at some of the industry forecasts, it does look like there's a bit more of a positive outlook. Even with the weekly app data, it looks a little bit more positive. I was just wondering maybe what you can, what you're seeing that is causing you to maybe look for a little bit of a decline in the originations outlook versus prior periods.

Speaker 6

Yeah, no, it was just understanding the market right now with where rates were and where rates are in, you know, in June and July. It obviously impacts the purchase market a little bit. I feel confident in our guidance. Obviously, our margins are higher. Margin and volume is a combination to do things. We feel good about the guidance I provided. We're working to do as much volume and do margin and take care of brokers, help them grow. The market does dictate a little bit. I wanted to give you a little bit of a range, 33 to 40. I feel good about that. Overall, we're the leader in the market. On the purchase side, I feel really confident. Now, is there some tailwinds or headwinds based on how much refi happened? Yes. That's what we're trying to understand in the market.

We feel like it's going to be a great quarter across the board in the third quarter. I think you'll love our results this quarter, just like you guys did this quarter.

Okay, great. Just to follow up on the hedge, I know in the past you've talked a bit about, you know, you don't really hedge the MSR book. It sounds now like you're being a little bit more opportunistic. Is this something you think you'll kind of continue to evaluate and do more of going forward, or maybe just what's the strategy on the go forward here?

Yeah, I mean, we're opportunistic with everything we do here at UWM, from selling MSRs to derivative trade, to doing more loans, to margin, to volume, to helping brokers grow. We look at everything to win. We have a lot of smart people here that analyze things. It's not, I don't look at it as like, oh, we're going to hedge the MSR sometimes. That's not how I even look at it. I don't even look at it like that. It's not even tied to MSRs in my mind. My mind is understanding the market and understanding how we're going to do things. Obviously, when you sell MSRs, you have that hedges your position. Once again, I don't need to do that either. We look at all those things. We're opportunistic with everything we do.

Things go in a positive direction sometimes, as they have been over the last couple of quarters, tied to those things. We analyze it all and make the decisions on a day-by-day, week-by-week basis here with our strategy team.

Okay, perfect. Thanks, Mat.

Speaker 4

To our audience on the phones today, if you would like to ask a question, simply press star and one on your telephone keypad. Our next question will come from Mikhail Goberman at Citizens JMP.

Hey, good morning, Mat. Congrats on a great quarter. If I could just follow up real quick on a question about margins, the new margin guidance, what would you say is the biggest driver or drivers of that decision to bump that range up 10 basis points? Thanks.

Speaker 6

Yeah, thanks for the question. We feel, you know, I've been always aligned with what we say we're going to do on the margin side and volume side, as you guys have seen for whatever, 16, 18, 19, whatever quarters we've been public. I give you guys a range that I know that we'll be in, and I feel confident that we'll be in based on the market. The market, understanding every aspect of the market. It's not just, oh, what's going on with volume? It's tied to market, tied to inventory in the housing market, it's tied to interest rates, it's tied to the 10-year, it's tied to how bonds are trading. There's a lot of pieces to it to come up with that range for you.

For the first time in a long time, or first time ever, I guess, we've decided to move it up two levels because I feel very confident that that's the new range that will be from a margin perspective in the wholesale channel. We control that, and that's what we feel it will be. We feel confident that that's what the margins will be. At the same time, going forward, we feel good that 100 to 125 is a nice number until I change the levels again.

Speaker 4

That was the final question in our queue today. I'm happy to turn the floor back to management for any additional or closing remarks.

Speaker 6

Thank you for the time today. Appreciate the questions, and I look forward to talking to you guys again after another great quarter, after the third quarter. Have a great day.

Speaker 4

This does conclude today's teleconference, and we thank you all for your participation. You may now disconnect your lines.