Finance Of America Companies (FOA) 6 Mar 242023 Q4 Earnings call transcript

Ladies and gentlemen, thank you, for standing by. My name is Natalie, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Finance of America Fourth Quarter and Full Year 2023 Earnings Call.

[Operator Instructions] I would now like to turn the conference over to Michael Fant, Senior Vice President of Finance. Please go ahead.

afternoon, and welcome Call. Full good America's Finance and Quarter Fourth Year you, everyone, to and of Thank XXXX Earnings me Chief Fleming, President; Graham today Officer; With Sieffert, Kristen Chief and Officer. Financial Executive Engel, Matt are

As you find a on Investor the and www.financeofamerica.com. at presentation can Relations and reminder, website is release recorded, call our this being earnings

reconciliations GAAP without In call. To this measures addition, measures unreasonable you today's our financial efforts, on call we to Relations will on earnings non-GAAP refer of of can on discussed press find extent our website. financial the to available non-GAAP page certain in the Investor release

Litigation XX, described factors, Factors everyone may the regarding in Act on expected I company's like those for find within are of XXXX, operating America's of statements. company's Also, and Form number may those for year you from December of performance with the safe materially and on statements the that to on by current ended future or report statements forward-looking or results Securities XX, section filed harbor implied this risks of other subject meaning These that today's Finance expectations differ SEC expressed these are be a to Risk future periods that XXXX. are statements Reform forward-looking forward-looking statement March earnings in based the annual release. Actual the due including on of XX-K for will for conference periods. the call remind XXXX the would financial Private comments to the

filings amended and with factors may the in updated As be our such, subsequent SEC. risk

we financials update commitment any these note, change. if unaudited. interim that period undertaking discussing Please be statements not are will conditions are to We today,

to America's I of would Executive the Fleming. Graham to Finance Chief Officer, Graham? call over like turn Now

over broader everyone, I our macro would followed as well you us. like and the Thank our Good Officer, for I as results of share seeing MattEngel. strategic the will Kristen are review Yes. thank our financials Chief in joining review turn to to Michael. plan. our industry. afternoon, from to things trends a you, we To begin, by Financial then

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primarily million from assets and portfolio discuss by basic gains, continuing our in which in $X.XX the fourth driven These results share market the operations, improved recorded in operations, given we results net quarter. in to fair or $XXX our respect of shortly. income With quarter will decreases per rates of were GAAP we value recognized

quarter. margins XX%. or and in improvement as for decreased volumes Solutions, quarter expenses basis, quarter, $XX adjusted over but diluted $X.XX loss improved of the XX% a to a per an third net quarter net Beginning due of an recognized million to Retirement improvement On reduced in led in loss the in fully fourth the seasonality, we the share, adjusted expected,

portfolio In significant significant a our curve of decreases increases in value Management, brought impact In the on quarter, results. fair had about yield of quarterly fourth across assets. Portfolio market volatility the

increased Having for balance net are Over established from lies the to solid what foundation a $XX excited million. year, which course ahead. we the the by grow, of

product customer expand look We to enhance suite, to the avenues experience and at continue our drive conversion.

These ways include to identifying utilize AI.

selected these across and marketing operations, AI leverage excited tools have and analytics. data to are sales, key We partners

remain and term. strengthening the focused our expenses long we managing balance Additionally, for on sheet

Let me sales now products enhance the the turn been Kristen? Kristen operations, the channels. retail integration on update things our an of doing over to to AAG we've and platform our for work and

Good afternoon.

we We've As factor designed make that us provide believe moving last we us loan be the to for origination part originations serve, beginning home value our that to have AAG planned the late of was of achieve advancing and engine to efficiencies strategic major will equity essential platform, plan the the retirement mainstream one Graham as modern our in ensuring related an that vision a we shareholders. will to the a support also goal, is most integration the planned, to enable workflows mentioned, of was devoted including which plan retail growth. those launched the helping milestone of year platform and X-year this key strong while platform. plan. to December This . A was the this improving and to

the have the close to of America's being platform reasons of plan. retirement We will main growth at foundational few work completed, shift confidence. a for a of long-term it to we growth attention and way the for much modern this think scale, levers paves With the create in Finance

significant approximately to mortgages market, The first category addressable that which Reverse market. the believe addressable grows. is of capture the by we're positioned utilized as we total we are X% well see a

share activity. close to the As market wholesale originator, and leading industry's America retail this of Finance of has XX%

We term and pie over ability increase meaningfully total will we long to so driving grows, have impact the our penetration have the fixed as well. reach the market our that as on eyes

home trillion and equity in who trillion are solution When seniors. you emerge. is retirement retirement must incorporate one the The by vehicles traditional $X.X financially held record alone, using the consider nearly of number seniors unprepared the gap to obvious $XX for savings a

our and confidence Through innovation. products advertising, to with product traditional you distribution channel, reach The our our our lenders tremendously of when and wholesale industry-leading the is connection through we our via its reason million grows their clientele consumers who of direct-to-consumer XX more for than suite mortgage second large channel. marketing the reached utilize platform our power consider and annually

in XXXX. home pioneers long creating products fill that a our in been no launched we customers, in loan recent We've was industry non-agency innovation lien that most gaps our payment for second and equity

funding fourth our quarter, XX% customers in significant non-agency QX During proprietary further the during more helping saw QX, volume, than in production we growth thrive.

to appeal products of as of a new category and While overall. provide reverse understanding set broader customers, a it recognize also customer the products and mortgage relates loan for there's solutions we significant can gap

that third now components Our reason this. to the for we confidence have is change

by market adoption exists. customers this providing and Within plan, we're our opportunity the the tailored digital they experiences. And experiences These unlocking expect. technology committed investing messaging, our to and modernized that experience in in X-year massive are customer-centric and and service breaking barrier partners essential deserve

have we and strong strategic within all, our dominant our for around plan, position our a optimism approach the given rationale In industry.

results. proven a We have vision, a a delivering team track record of clear strong and

to our quarter. business operational see growth and we'll as look sharing of We each forward vision, continuous execute you performance the within strong with long-term to indicators progress continue are we we against and confident

turn CFO, over to me Now let our Matt Engel. things

joined and Finance the Thank you, Kristen, to of afternoon, America excited good have everyone. team. I'm

the I meeting and at forward with speaking of a are story exciting business. an point to the compelling inflection tell look have you to coming many We over months. in and

basic operations, me continuing dive on into recognized we let the our income $XXX brief share. that, financial net specifics With results start with quarter. of million of Within $X.XX overview our per a before or I GAAP

to third the The quarter. per from Turning share, recognized company results. the of an improvement diluted of an for or $X.XX the $XX adjusted net operating loss million XX% quarter fully

reverse decreased to due in quarter our volumes In platform, seasonality. fourth the

Additionally, We quarter, loan our the the as the mentioned, Kristen down the third X% million originated in from million during retail system consolidation further volumes, quarter. origination began $XXX production. $XXX in impacting we loan of

full $X.X the in loan For volume. funded we year, billion originated

a While HECM the down XX% year, Finance of were prior leading market of leading and the the control of share wholesale to significant platforms, reverse portion a market. maintaining compared America allowed non-agency industry's and volumes to retail

quarter when the fourth during at looking from stark Retirement X.X%, revenue improvement quarter. XX% more This margins the quarter. nearly was Solutions' of prior margin monthly the even is an

October, their when revenue platform. margin acquisition the of revenue December, market to margin or the of since peak, year. level reached our the rates the AAG lowest During decline peaked XX.X% fell the following rates, X.X%, level By our the highest to market in

our on first moderate the to below it of have continues in to to performance in operating align during quarter continued finding highs So rates stay to infrastructure margins as see comes company October. our to When focus market experienced we revenue ways XXXX, retirement the the platform. expenses, far, strong

$X the quarter. expenses the or quarter, X% from During fourth million by reduced third

we range. continued divisions reduced our in midpoint corporate to early nearly the our corporate XXXX operating our from annualized a quarter expenses our within brings million base or see peak during to as reduction decline further addition, This by XX%. rate in In our $XX nearly run expense the of target

our $XX million Cash year, Turning the sheet. at down balance to balance in end was million September. $XX from of the

completed much our in equity FOA in sheet a quarter, cash funded balance HomeSafe of was HomeSafe securitization, that meaning loans. small invest used the newly to During as our

and business. used completed to will large our we X be securitizations, bringing significant XXXX, February up During cash in that invest grow

interest which comments value balance favorable downward $XXX end million, the the at run. rates on long-term the to from residuals quarter of December, from Our year expect the interest up on as impacts in the September. $XX have will end the in trend value over rates in confidence these be years, at prior million few value Fed, next of our our November were and of Based of validating sheet appear of assets. valued continued fair Their to the long we increase from the as the declined a

requirements. considering I on stakeholders, for the company to have success. do the bring New York time focused required long-term intend anticipate period, Lastly, our enterprise not compliance Stock compliance Finance the NYSE are received value steps standards and generating which impacting letters into with company's want within back business the touch regarding We Exchange to listing we operations. we America's from on comply listing ongoing enhanced actively the remains with all leadership ensuring recent of to

goals. strides achieve strategic While to we're not as organization great we our done, an made have

and a ability about scaled earnings margins. business of excited the goal lies current $XXX and an $X.XX to that month mortgage company. basis We're long-term in in optimistic ahead on our about opportunity achieve power on based of million XXXX, in the and believe originating $X.XX are to EPS we reverse We the adjusted our annual our

it now remarks. With hand to that, let back for closing me Graham

improved both our via and strengthened year an was uncertain Matt. transformation a to face moving environment, a business the believe significant Yes. of of forward. XXXX their Thank you, streamline for establish we operations macro and our foundation success business. acquisition we In for

the More growing. don't for the enough continue overarching us when all-time in as our of demographics proportion home importantly, high $XX make equity. The and homeowners, U.S. in save long-term business. whole, of value have retirees have to a trillion in and is the time older more at an nearly retirement, a At most confident than

favorable We more rate open utilizing a help believe them home equity are we customer to base growing and retirement. well in their positioned thrive environment a benefit to from to interest

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

of Raymond the [Operator from Stephen question comes line James. first Laws with Instructions] Your

comments want a couple actually on based of start I to with you you made. Matt

are Were securitizations, did to does cash. which securitizations I that do deals liquidity Can or was cash -- think you cash? for incremental much freed how I those about free up those think demand in you you X up? talk and some said what your on refinance. then one able you And that with a February,

They're market. of We the the some ongoing it. think well that just HomeSafe the use overall So I cash, securitization. With cash continue the to kind cash of until the you pretty remainder and strong. business, the the was That's those fully bonds production, next months do main stack. in invest were deals grow we're They that demand in causes all -- sold received for in subscribed. in of

of The rest corporate -- cleanup behind is this XXXX, of kind Graham mentioned. in as the us

So cash that a burn behind is lot the of past us. of

you how deal? a Do call you call And opportunity deals then that you calls. Or the going up lever back may any what's securitization in more the outlook for think do new additional about forward. and have

Yes.

call deals of this the that years. liquidity value outstanding. of the answer more kind we'll there's economics. So at And to look and them value we first something at call but the we -- this economic needs obviously, deals, coming Stephen, look not of at the in look at over maximize residuals date. the date at auction of way, a all, specific XX do make between have So the We at right? look, obviously, the and liquidity the -- time we range at our crossover look operating plan and the We that

a the But as fit, residuals, call these call QX date results, you as lot or inherent we call or But deals. definitely can -- of see the the of and the in calling value there's or mandatory depending is these upon reissuing mandatory from or the the reissue see and now generate date and by there opportunity auction past some to liquidity we'll date.

the you about to half as along expect build see guess to lines, those as move this How maintained through do of do we'll you think cash year? balance I QX? you cash expect first where end we

start the origination really in bit as the a gets of kind a platform to cash back of It's going up. we'll think half don't year. build the retail volume the of first delay I

production, So the the HomeSafe towards some end the third second into get we of additional deals the do quarter. quarter maybe

I of year. the think see large build expect a would cash to first certainly I the in half not

Matt, notes then, sure And just down. I got Great. to my make

level to outlook I continuing you does A&I annually. and $XXX said volume a longer-term month said? you of what target $X.XX support that Is million kind some that of think still

right. exactly That's

change Great. the realize And pretty be Certainly, that in think me But I of then attractively priced I how days. the factor think things lastly -- the trending? do year-to-date almost for fair was value we're XX the welcome you in about, is how Can relief into about could now, year. the how but value your summer headwind QX. changes? are But year-to-date or you one may talk quarter, QX competitors changes for a fair a next being in last deal

of the one finish back of we're kind we've here. at there's components, is about little seen basis number seen -- up Stephen. look, sure a come points X quarter, and right, major rates, the So exactly obviously, And which not that end will bit rates where move it we've XX down

proprietary beginning seen agency The definitely second on our we've component in spreads, at also here our product, the not product. just HECM tightening of year, spreads is but the on

say, a And which end days impact seen of tight the rates HPA, in if last hopefully supports down piece the little some remained what it are we've quarter. further and spreads and come It's robust. positive We're Shiller, be waiting here from before is March, rates are, overall to right? that's should the let's but on come an value. positive for fair out

Our next comes Harter line UBS. the question from Doug with of

Cory talk sheet could is wanted any way balance reduce the mark-to-market there balance through, Harter. I sheet the to just and/or Doug for the Johnson limit you of volatility perhaps is on me intensity business? see, of This the to

all mandated -- right, GAAP right, these are with GAAP. Unfortunately, GAAP these are and in these issues, are accordance

to on won't $XX allow X, to close to than is It there's everything based marking do. So some my ideas obviously a almost at -- which balance. us top of billion right UPB other the head, no GAAP

it speaking, is Matt, anything to relatively add? But So points. basis

sometimes if question always think think around the and I should put There's you. in and when is downsides go look I standpoint you hedges from the of liquidity get whether that against -- a at rates you place. hedging big we upsides

moving in some consider now, the rate right some it's back the our at are with look volatility of We've the we in pay doing of future. in But cycle, this from favor. past. we time time. kind we'll some hedged something in to So We'll and given

be further going reductions -- expense Or or through the place? I operating take that And is revenue? increased there Great. see, is want is to could to it path profitability to

that expense improved. much they more don't to going be have a Yes, expect tackle We QX, revenue in right, there's on little the side, primarily higher we're in December. were margins to than them

we're return path origination summer, now the end through to this towards the also kind have profitability QX over volume as the do So right? profitability. over loan to currently to So see volume, of path of a increased expect has anticipating we A&I we We're A&I increased which consolidation profitability to

little just the And to about for in you me. the last reverse current Can for Great. maybe bit a outlook volumes environment? rate me talk origination question

Yes. platform quarters. rate last so the less about it's probably say We operating is to I what foundation, and drive now, integration do kind we've and to from pull which about stable the getting We've current would a to over completed. just focused just X mainly right that of been environment need the the growth. technology levers the on got the

this through plan with in into model the it come the we volume so where rates the easier. production obviously, down, that incrementally today, and growing are growth begin when And of course still the makes is have. the rates year well we believe future. it And to But

Next Lee Family from Omega of Office. line question comes the Cooperman with

I to. have operating to responded you the the you your recurring already that down operating question Somebody mentioned the mentioned, the road? $X.XX recurring X earnings That's for one. questions, $X.XX was and or maybe volatility the What one call, are year on earnings? expectations objectives this that

So be to around month Lee, the $XXX million. a $X.XX averaging We're will somewhere originations. million million currently $XXX of $XXX on based

going need grow that for would this of be towards a to to the So don't $X.XX. that. to on end we're into to I year. path achieve expect think We we're $X.XX going to

for have earnings willing what you share? this you operating So is your year? one? Are to expectation Do

the over are would of submissions growing. say pipelines that year. We optimistic course haven't and We're our the provided that grow volume I the that specific our guidance. will

specific... out given haven't We

It's Do an to rather statement? you a open platform. not? it's make you'd open want an mic, Or

Lee. point, I'd rather not at this

adequacy capital it. conduct Do conduct your want way you you conduct to to capital? . have that rate the you to adequate you do how business want Second, a

capital. adequate We do have

addressing warehouse securitization we with are fit timing needs and so credit our kind see lines, of We lines as forth. constantly of our

in So believe for capitalized our we we're properly XXXX. growth

one I enormous diluted share There diluted? to X the actual from million? is what press was Is $XX with increase an of look don't basically, I'm is. fully in you at release. I share the Page million follow the currently, that about share to $XXX count count fully million closely your $XXX.X If the it

count, the diluted yes, fully share That's Lee.

for $XXX and million about is $XXX $XXX million account to the I'd million shares. increased say, What

think There I there increase... $XXX million don't -- a was wasn't share a

your the release, Page it million. and shares dilution it year $ of $XXX.X $XX.X shares are diluted says X -- And average weighted a Well, here the basic outstanding the million million. on XX.X was was ago,

pretty big... it's So

Yes, Lee. method No, EPS with run we by the calc. or fully so the do that actually has to diluted if which converted

dilutive, requires so Or And just view us GAAP the is on right? count just instead. share use in fully-diluted you for the shares add basic because that not anti-dilutive it all when to

why It's year, is compared dilutive the same So can share is you in QX basic and the periods. each of just basic. EPS of to that's diluted see per diluted those the number this where

rates. You long go probably but the short mentioned or not rate? your that effective to could drop view What's of view be about and important XX-year rates the down up. rates will happen I rate to XX-day the the to go going are bill interest more

in wouldn't GDP, XX-year be be The X% to to I will say say bond assuming growth the Great nominal that reason is X%. undervalue... XX-year what yield Financial inflation, Crisis, prior I The the X% real line and with used

to as the is XX-year, to important the X- as us X-year out We're in What's not range. far Lee. quite probably

X-year, down, than is to to whatever. less rate goes that But XX-year short-term you rates? the X- the significant rate

kind curve. -- X-year are And probably our focused the where up that's on a assets then of Yes, so we're duration.

further turn time. There I'll you. over Fleming, back this the questions call are no at Mr. to

Yes.

we forward the to call, our which look like in thank the of May. joining for updates I'd to at end we and everybody expect So QX,

thank So everybody, night. good and you,

concludes This conference call. today's

You may now disconnect.