Finance Of America Companies (FOA) 6 Aug 242024 Q2 Earnings call transcript

Good day, everyone, and welcome to the Finance of America Second Quarter 2024 Earnings Call. At this time, I would like to hand the call over to Mr. Michael Fant.

Thank you, and good afternoon, everyone, and welcome to Finance of America's Second Quarter 2024 Earnings Call. With me today are Graham Fleming, Chief Executive Officer; Kristen Sieffert, President; and Matt Engel, Chief Financial Officer.

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

this certain we financial refer addition, to In measures will on call. non-GAAP

You can GAAP discussed our without today's of in Investor earnings available website. non-GAAP press to extent presentation efforts our financial Relations on the the measures call unreasonable reconciliations find of to in release and page

you may performance financial be Also, Reform find release. the on for call I the the would this of meaning on in These everyone to and Act to current operating expectations that regarding are Litigation and safe statements comments that for statements will forward-looking are based statement the like subject remind today's XXXX future company's periods. Securities the expected within harbor company's conference statements forward-looking Private of

number by America's factors, year-ended SEC Actual XX, or statements XXXX, the on due XXXX. results XX, differ described of are section those from Risk a for XX-K Form the for report risks December filed periods in future Factors on implied of forward-looking these those with materially that of Finance or annual March expressed may to the including other

amended risk the SEC. our and may The factors subsequent be in updated filings with

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

count be effective using to stock share comparison ‘XX, current share reverse following earnings and split historical for July time and periods. apples-to-apple basic an fully the the calculated completed recently across will Finally, both metrics provide all updated diluted periods per

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

updates, thank quarter then results FOA. financials afternoon, discuss today. of review several operational that events you, followed everyone, they some our joining our would the I key will and share you Thank from Kristen us Yes. transpired and will like by to how review a Matt. impact Good for Michael. important begin, during To and

presentation to additional call. review which For in encourage we information, you today's with we website, Relations Investor posted our supplemental a to have contract

to of Finance deliver the improved quarter second in I'm America quarter, our Overall, ANI. continued improved that consecutive fourth resulting fundamentals the in of pleased to business across share

we've to path our our As a team, executing our plan, operations strengthening dedicated profitability. been strategic advancing to and

quarter. continued As both the see volume a expenses of revenue and we growth grew prior result business, efforts, our and declined over across the

of a On first combined or quarter adjusted On the of and excluding fair net and continuing positive of Taking basic per a This recorded XX%. have value other share. changes the the quarter by Since per fully numbers. America AAG. $X.XX we 'XX basis, XXXX. Finance back, of high-level look an adjusted operations looking grown or QX of first and $X of basis, a marked our EBITDA adjusted reduced time, by marks XX%, the expenses since that businesses revenues, have positive our $X we share at million. million GAAP diluted $X loss recognized million of $X.XX loss EBITDA net

million million. of million have markedly from $XX ANI we substantial a Year-over-year, $X improving positive made we in $X have million negative million reduced adjusted to in a our to $XX $XX turnaround a XXXX. from EBITDA, Furthermore,

for Beyond believe continued we milestones these establish improvement quarter significant further improved results, that growth. we second the and throughout see operational foundation a

listing reverse which a completed back for recently X Stock Exchange in the put XX continued compliance split standards. with announced stock New York us we in First, July,

past, the on committed in said to the to maintaining have we we are NYSE. the public trading markets access As and

senior over in agreement to of unsecured the offer. support offer we indicated our that has Second, participate exchange their of and XX% notes announced an holders exchange intent

a unsecured the cash significant notes holders contemplated enhance will As over company today, maturities, the by later This the and of senior agreement offer is milestone exchange help flows have debt of indicated we and to support. support for investors attention. We and continued align thereby have XX% obligations, of have flexibility future. financial transactions the their with with our look structure improving our these appreciate forward partnership our for their our the capital

loan lending interest industry we relationships Next, warehouse counterparts. interest being new to minimize facilities of with the related on X on closed reverse our loan new help of haircuts example greater another space reverse by are mortgage X the to the partners to These shown proprietary production.

release for Mae's enhanced an HMBS reverse step the providing marked preliminary end industry. liquidity X.X June in to at of the Lastly, Ginnie sheet important of mortgage the program term the

structure provides program and have help capital exciting of is required tangible backed events these and tools has allows This for on Mae. a realizing the the homeowners into comes to buyouts from joy reduce earnings, the securitization that a long-term net Finance potential the their buyouts Ginnie achieve position to of Each HMBS worth significantly more potential the left these and will retirement. in of impact a by liquidity. unlock This favorable full positive success America that better of for

Finance the to has over and updates, transformation more while that transition thank call business the over years. you a tell entire I To the and the sincerely integrating a and We a of me America about Our of to let team work, everyone becoming all us worked diligently company's Kristen. share part hard past further operations turn has been to unified to of want to financing the appreciate improve the brand our X market. huge operational

refocused future completed, over and XX-plus and equity. customer demographic our and transform to improved Thank on we've the of good operations, This to our align and with operations retirement, improved the to initiatives translates the our overall. optimize turned work you, better conversion With growth. attention pave to for most last strategic the strategy a way experience and platform home months, Graham, into XX in XXXX centered our afternoon, place Beginning everyone. late worked we taking

brand unification, and presence of included launching our achievement social we the and realize name all purpose the and month, enabling new the corporate successfully we a step multimedia advertising Finance media to across full This value In This our marks our productivity consisting streamlined milestone assets our brand the new a Selleck, Tom featuring with full of developed television Last ads significant unified alignment maximize introduced and a evolution, concert website, single and of organization America. singular values. shared brands under investment. collateral. enhanced in company group as of also a

go-to-market our most over fruitful have Retail on Within modified we away been strategies our from less to division, that strategy our stepped channels and focus efficient time.

this and are returns supporting outsized expected shift series. We early to results see this from

customer held industry-leading continue from have by we we introduce wholesale Looking products, partners. appeal of the strong base as wholesale our at channel suite to that demand to our vast our best-in-class solutions

We more ability the are customers. meet our and needs originations confident grow and to continue in attract of to explore to strategies new

of In HomeSafe we and submission credit QX, we LTV a option average for in same that experienced segment the enhanced term to to Second wider and reduction a streamlined quality borrowers high In quarter-over-quarter a volume time. of XXX% appeal in period, XX% customers. a introduced underwriting increase

our state launch HomeSafe retail availability will to QX. to each in specific end plan and of Second campaigns marketing channel We expand by the quarter continue the

our continue growth opportunities total experiences of the customers. increase capitalize in to create penetration we efforts our and tailored in market, addressable for on the invest to digital Last, that technologies

With transitions building us, team's top as introduced. look attention shifting as the around out lift they're sharing updates capabilities forward and heavy behind priority brand these LOS we're their the and the of enhancements to to these

financials. discuss it our turn to to Matt over I'll Now

or and Kristen, afternoon, diluted $X the company you, for $X for the in million our or operations, good per the net Thank our the GAAP we share loss continuing million quarter everyone. per recognized $X.XX net On second adjusted quarter. $X.XX results improved recognized basic quarter loss fourth a of an consecutive fully share, of Within of basis, business.

of over just AAG. been assets year of it's a certain acquisition earlier, mentioned Graham since the As

During that operations. has completed time, its in and significant integration seen its business improvement the

million $XXX saw We originated first first up from loan the quarter. by in volumes, the quarter. We volumes origination in increased $XXX X% million from

guidance for provided quarter, came While under in we the production. we did range our positive see slightly in momentum the

XX% higher-margin our fact, in by production our grew and channels respectively, In channel. and volumes by XX%, decreased retail correspondent offset broker

and retail operating results decision higher for led and overall the improved margins financial a conscious to channels business. our that origination on Focusing was broker

HECM which have business. seen we Additionally, more which have recent enhanced the balances, and XX%. fourth of the clearly income in statement the of our both products, increase resulted we decrease part have section drivers key of presentation, lays the an from has the proprietary quarter retail 'XX, Note for around out channel across average the in that rates. our average loan HECM Since our size of increased loan revenue interest in

of X supplement website. Slide our on You to can see Relations this earnings posted the Investor

resulting flat, portfolio yield see, As while a from million runoff has $XX is you net decreased can portfolio. million, higher on $XX in our year-over-year accretive income interest to

addition, have from million. origination $XX In to net $XX gains million increased

we loan origination up As origination statement. future, will this income the and fee the of income in lines volumes gains in new show net grow the

million from Excluding This ‘XX in or to in the is model of assumptions, year. quarter a million operations second in across market revenue continuing our fair of for increase last second $XX operations $XX inputs value changes compared the revenue XXXX. in our total was the XX% quarter

expenses. an While continue to revenues overall have see increased year-over-year, we in decrease

to XXXX from million declined cost quarter $XXX continuing the XXXX $XX taken of million to the as first in For initiatives continued have the year of XXXX in in expenses the to we have $XX over quarter of past materialize. operations, quarter second the second million total reduction

balance the Turning sheet. to

$XX the sheet the our at financing as of the Graham earlier, to Our reduced new as million unrestricted balance was quarter, cash the of in March invested the quarter. cash the comparable balance of mentioned end end second

operating was excitement to Finance second quarter accomplish want I of America surrounding reiterate during beyond to our results. able initiatives our the the Finally,

be these been have are of discussing pleased efforts. able results share and quarters, to several the very our we to We actions for

June are by The to continued support in listing America's capital we New transactions contemplated announced by support improve of split the July to ‘XX, and look Exchange forward stock note agreement exchange America standards. reverse and Stock back The of holders. at offer structure, compliance continued with refinance York the into expected our effective

The the required program expected to be industry Finance at FAC Mae a recently term proposed allows limits Ginnie manage program securitization during for securitizations mortgage of capital is claims the buyouts to of X.X reverse large. the these and benefit sheet significant buyouts the and America the the of in the Additionally, HMBS process. as to held

and million $XXX positive and an Looking our operational excited forward, given in early sustained we strong And continue $XXX third and be quarter. on expect ANI profitability third the improvement standpoint, return path hold, our July the market to our quarter. to about were across it of to closing would margins, Graham to From declines to the expect expense profitability. back should base in result the our we bottom to continued assets. volumes recent quarter million. during that, top volumes reduced in interest to me we they between rates for fair the adjustments With we are let hand in remarks. third higher results lines, value With expect and

Matt. Thank Yes. you,

the operations move the in the market rates in our key recap how policy, worthwhile be rate a and third quarter for material In potential interest a environment, impact events benefit Given X rate these in our it ways. Fed business. in may so shift to will declining far

are expected increase values the tangible as to for have in an potential we net First, asset increase. worth

cost to originations loan. ratios would structure Secondly, borrowers lower higher our fixed expect expense with more funded to on changes initial we minimal as result qualify. volumes would per loans, reduce loan-to-value Increased also allowing to new near-term increase origination funded in our rates

be submission we second strong excited the Finance addressable the and pipeline indeed delivering see the massive and retirement, heavily our retirement customer quarter, poised seniors as record are the equity-based focused home holding positioned products. experience are needs and continuous while of the which When growth, financially a innovation. about unprepared grows. total a well we America Throughout to market for our home a equity, meet record market to with of who their of over and amount course stayed simultaneously capture you we'll number on We're term, consider long volumes,

more we're to and that share, customers transform by their will helping home. their the we and our lives our largest base customer continue make most market top holds ever out of FOA in than confident asset grow Today,

As to in continue can what quarters, control. on previous execute we we

that platform strong for an to the and a built growth have while with We that, for questions. customers. us delivering our experience well any enhanced we'll positions And call profitability, open up

Harter Douglas [Operator from question UBS. Instructions]. We'll first take of our

I was today. flow could you in on the just program? This your might hoping for on more I expand benefits a HMBS potential X.X touch heard actually really Will on this Masa Douglas you is bit you remarks. new receive program prepared the that from And cash

net to a it's early little So define cash exactly the proceeds.

industry file the think gave months. whole feedback to in the that to turn we come coming the [indiscernible] came I out expect just the recently, out a as proposal and to

However, on be our was that that into the dropout advance significant above put with to see buyouts the warehouse based the portion eligible we line. be of presented, today new where we are a at would rates clearly program

more So quarter be as finalized. over closely we'll coming little that those quantifying numbers the a gets

you seeing margin origination would far? that the a rates, And revenue commented move moving if trend you just one expect forward outlook. on could pipeline so given comment you're then rates. in going third you to on then just of quarter And And recent follow-up. how the I level know the given

Yes.

pipeline the strong. has So remained

we're activity, funding leads think any that and the into in rates refinance up guidance the in, down, that to we we're gave with borrowers coming starting today volumes see origination we pick see increase QX. QX. for already qualifying the in week, probably this in built if that's we'll But I on new the see that coming are that

And margins, expansion a might little you not for on but that part the I spread And we'll generally, I the margin significant. watch second think of see on bit products, question loan land our maybe securitize think now. these are a market coming but in for. weeks. settle moving we a think the margin Spreads This is right around in terms here volatile bit, of little that will little in can we of the loans

next from Ching. The line question the come Stephen Raymond will of Laws,

the I have the next you X positive. know hitting over very EBITDA X to ANI the quarters. past to guys of achieve hard worked positive know I that's on reiterating Congrats quarter, something

to made progress I the so things. So see nice far. smaller base to of you've some kind wanted touch around

July guys said prepared the remarks July can First where that kind verify you are? Or was volumes volume of XX% to kind of outlook, in quantify the up? you

target the think So and hit $XXX million third the to that is up end our July really the of production that gave for pace I the for target. between million, the was at guidance high quarter $XXX we quarter,

back balance interest having a loan you think expense sequentially. needs, the about flow year? trend guess to that of are As cash the I you funding how will can increased And capital cash and in talk non-funding slightly you the about the working

loan So curious increase drove what a else? or was that, if rate something it on that working capital

burn. from are hold our terms to phone. kind So Graham on in one couple the of cash first that his and the a that have production. funding haircuts the production part partnered go the have we do of that thing new decreased really of to of new pre-loan remarks, is a in to necessary in fund greatly our The lenders those loans question, on help a mentioned of helpful minimum That's kind

a second the driven notes. part, non-funding rate the On on that maybe was

And this forward? expense from of rate lot the expense think initiatives. outlook synergies accomplishments expense on here? a good Do kind more curious now the is your side. from of one there's then of Is that moving what reduction for you kind of reductions A occur can now. or Kind last

pencil. think I think kind reductions, at the see we don't sharpen this got heavy I of lifting there's this but We point. maybe to opportunities that significant have largely always the

we continue that off. current not off think more right to added that enter we are when we more sized low [indiscernible] roll larger contracts much contracts, some and and I more will legacy a organization can what company into we some were into that still have when

kind continued changes expect but pressure wouldn't So I there at line, this downward of expense I the on be in plan. think will

see our level Although that because we're I'd higher than can expense lower doing we production add base support for today. expect to cost funded much loans of a

to the So quarters. in that we expect see coming

the congrats Appreciate on Again, comments afternoon. a quarter. nice second this

I'll hand remarks. or are there for further no closing Graham call this to at additional back any time, everyone, questions. And Fleming the

everybody progress to our Again, our we on and call call, November, will QX. you for joining in we'll look and having update thank in QX our forward

much, very you thank and So you. Thank we'll to soon. talk everybody everybody,

We thank does today's would that to participation. all conference. again, And for you like conclude your