Rocket Companies CEO: Truebill acquisition provides 'engagement funnel' for mortgage platform

Jay Farner, Rocket Companies CEO, joins Yahoo Finance Live to explain why the mortgage and loan servicer acquired fintech platform Truebill for $1.3 billion.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Rocket Companies said today it will acquire personal finance app Truebill for $1.275 billion in cash. Truebill was founded in 2015, and currently has 2.5 million members that use the platform to manage subscriptions and other bills. Joining us now for a first on Yahoo Finance interview is Rocket Companies CEO, Jay Farner.

Jay, good to see you. You weren't kidding a couple of weeks ago when you told us that you were on the hunt for acquisitions. Congrats on this one. What's the play here?

JAY FARNER: Yeah. Thanks so much. We're super excited. You know, if you look at Truebill, you mentioned it, 2.5 million members, this is really what we consider a next-generation personal finance app for our client base, we talk to millions of people a year, we've got $350 billion of mortgage originations that we'll be doing this year. And a small percent of the people we talk to can be helped with a mortgage, they can be helped with a personal loan, they can be helped with a car. But the vast majority of people that we talk to aren't ready to transact yet. So how do we assist them, how do we stay engaged with those clients? Well, Truebill answers that question, right?

Our clients want to save money, Truebill helps people save money. They've got credit improvement. They've got subscription cancellation services. They've got bill-saving services, so budgeting. All of the things that we need to do to take that billion-dollar marketing budget and keep those clients engaged in our funnel, we accomplish with Truebill. So a really exciting day for us and should really help Rocket Companies continue this platform vision that we've got and grow.

BRIAN SOZZI: Jay, I would say you've been on a little bit of a crusade late in this year to get a higher stock multiple for Rocket Companies. You've said you have wanted a fintech multiple. And is that part of the reason why you made this deal?

JAY FARNER: Yeah. When I look at Dave, when I look at Acorns, when I think about these other next-generation finance apps, I think Truebill is right there, does an amazing job. The clients that are participating, the members love it. And it gives us reoccurring revenue. So we've got about $1.3 billion of cash coming in on a yearly basis from servicing, so every month people are making those payments to us. But adding this, $100 million of additional reoccurring revenue, and now growing with the base that we've got. We've got our origination revenue but now we've got this reoccurring revenue as well. And I think that will help our multiple.

More importantly, it accomplishes our mission. It grows the platform. It engages consumers. It allows us to leverage the marketing spend. And so we know stock's going to go up and down and we'll continue to buy it back if we see it's a great price to do so like we've been doing but we're focused on the future and this Truebill acquisition allows us to accomplish those goals.

JULIE HYMAN: Hey, Jay, it's Julie here. Is Truebill also a more interest rate increase resistant business?

JAY FARNER: So if you think about the lifetime value of our clients, at some point in time, we're going to help them with a purchase. In fact, about 25%, 26% of Truebill's clients own a home, which is great news, and we'll help them save money on their home. But the other 70 plus percent don't own a home. These are millennials, Gen Z, 65%, 66% of millennials say they're worried about their finances, 80 plus percent say they want to purchase a home.

So if we have this app, this engagement funnel that allows us to plug in their bank account, 2.5 million of Truebill's clients have already engaged their bank account to Truebill. So every day the data is coming in about deposits they're receiving, about withdrawals they're making. All of that data will allow us to know when it's right to help those clients with a mortgage, help them buy a home, help them with a personal loan.

So it really becomes about servicing the client and it takes away the volatility of interest rates. So we grow our business and we get that reoccurring revenue, we get that membership or Rocket Prime is how we're thinking about it. I mean, all of these things continue to change our company into that fintech platform that we've been discussing.

BRIAN SOZZI: And Jay, some of my contacts on the Street were expecting Rocket to come out with a special dividend soon. Does this deal push that off the table?

JAY FARNER: No. We're very fortunate, we've been in business for 36 plus years, always profitable. And as we've talked about before, we continue to make money, we continue to have cash. And so we've been buying our stock back. We'll continue to do that when it's the right thing to do. We continue to invest in things like Truebill to grow our platform, to grow our client base, to grow the lifetime value of our clients, but also making a special dividend remains on the table as well. We've got billions of dollars of cash, and we're always thinking about the right move to make to reward our shareholders but also grow our company for the long run.

BRIAN SOZZI: A couple weeks ago, Jay, you presented at a Goldman Sachs conference and something caught my eye, you said you had pretty big days for your core mortgage business on Black Friday and Cyber Monday. That's not something I'm used to hearing from a lot of players in your industry. What's the demand look like right now?

JAY FARNER: Well, I think the 10-year Treasury here is now back down below 1.4 and so interest rates are incredibly low. We feel great about where we're going to be in 2022. The desire to purchase homes will remain strong, but the ability to save money is incredibly strong as well.

I think people are worried that rates have ticked up a little bit. But when you're in the 3's, there's plenty of opportunity to rate and term refinance somebody. There's also plenty of opportunity for people to take cash out of their home. We've got $25 trillion, $26 trillion of equity in the market right now. And so as people think about saving, we just saw that reports came out that savings is actually dropping a little bit. So as consumers think about ways to pay off debt, ways to improve their home, as we've got Truebill as another way to engage with them, to help them budget and see that they need to do these things. You know, 2022 is looking up to be a great year for our business, at least for Rocket. We feel very strong about where we're headed.

BRIAN SOZZI: Well, congrats on the deal. Look forward to catching up with you in the new year. Rocket Companies CEO, Jay Farner. We'll talk to you soon.