Q2 2024 Finance of America Companies Inc Earnings Call
Michael Fant: December 31st, 2023, followed by the SEC on March 15th, 2024. The risk factors may be amended and updated in our subsequent filings with the SEC. We are not undertaking any commitment to update these statements if conditioned. Please note that today we are discussing interim period financials, which are. Finally, following the recently completed reverse stock split effective July 25th, all earnings per share metrics for both current and historical periods will be calculated using the updated basic and fully diluted share counts to provide an apples-to-apples comparison across time periods. Now, I'd like to turn the call over to Finances America's Chief Executive Officer, Graham Fleming.
1023 filed with the SEC on March 15th 2024.
The risk factors may be amended and updated in our subsequent filings with the SEC.
We are not undertaking any commitment to update these statements if conditions change.
Please note that today, we are discussing interim period financials, which are unaudited.
Finally, following the recently completed reverse stock split effective July 25, all earnings per share metrics for both current and historical periods will be calculated using the updated basic and fully diluted share count to provide an apples to apples comparison across time periods.
Speaker Change: Now I'd like to turn the call over to finance of Americas, Chief Executive Officer, Greg Fleming Grant yeah. Thank.
Graham Fleming: Graham. Yeah, thank you, Michael. Good afternoon, everyone, and thank you for joining us today. To begin, I would like to review our results and discuss several key events that occurred during the quarter and how they will impact FOA. Kristen will then share some important operational updates, followed by a review of our financials from Matt. For additional information, we have posted a supplemental presentation on our Investor Relations website, which we encourage you to review in concert with today's webinar.
Speaker Change: Thank you Michael Good afternoon, everyone and thank you for joining us today.
Speaker Change: To begin I would like to review our results and discuss several key events that transpired during the quarter and how they will impact definitely Christian will then share some important operational update followed by a review of our financials for Matt.
Speaker Change: For additional information, we've posted a supplemental presentation to our Investor Relations website, which we encourage you to review in concert with today's call.
Graham Fleming: Overall, I'm pleased to share that Finance of America continues to deliver improved fundamentals across the business and, resulting in our fourth consecutive quarter of improved A&I. As a team, we've been dedicated to executing our strategic plan, strengthening our operations, and advancing our path to profit. As a result of our efforts, we see continued growth across the business; both volume and revenue grew, and expenses declined over the prior quarter. Taking a high-level look at the numbers, on a continuing operations basis, we recorded a gap net loss of $5 million, or $0.20 per basis unit. On an adjusted basis, we recognize a net loss of $1 million, or $0.05, per fully diluted share, and adjusted EBITDA of positive nine.
Graham Fleming: This marks the first quarter of positive adjusted EBITDA since 2022. Looking back, Q2'23 marked the first quarter of the combined businesses of Finance of America and AHA. Since that time, our revenues, excluding other fair value changes, have grown by 33%, and our expenses have reduced by $26 million. Year over year, we have markedly reduced our A&I from $26 million to $1 million.
Graham Fleming: Furthermore, we have made a substantial turnaround in adjusting, improving from a negative 26 million and 23 to a positive 9 million. Beyond these improved results, we see significant milestones throughout the second quarter that we believe further establish a foundation for continued operational improvement and growth. We announced a 1-for-10 reverse stock split recently completed in July, which put us back in compliance with the New York Stock Exchange's continued listing standards. As we have said in the past, we are committed to maintaining access to the public markets and trading on the NYSE.
Graham Fleming: Second, we announced an exchange offer support agreement and that holders of over 93% of our senior unsecured notes had indicated their intent to participate in the exchange offer. As of today, holders of over 99% of senior unsecured notes have indicated they are. This is a significant milestone for the company, and the transactions contemplated by the Exchange Offer Support Agreement will have later maturities, enhance our financial flexibility, and help align our cash flows with our debt obligations, thereby improving our capital structure.
Unknown Executive: As of today, holders of over 99% of senior unsecured notes have indicated their intention.
Graham Fleming: This is a significant milestone for the company, and the transactions contemplated by the exchange offer support agreement will have later maturities, enhance our financial flexibility, and help align our cash flows with our debt obligations, thereby improving our capital structure for the future. We appreciate the partnership we have with these investors and look forward to their continued support.
Graham Fleming: We appreciate the partnership we have with these investors and look forward to their continued support. Next, we close on two related warehouse facilities with two lending partners new to the reverse mortgage, to help minimize haircuts on our proprietary loan. These new loan relationships are another example of greater interest being shown to the reverse mortgage industry by an interest account. Lastly, the release of the preliminary term sheet for Jeannie Mae's HMBS 2.0 program at the end of June marked an important step in providing enhanced liquidity to the reverse mortgage industry.
Unknown Executive: Next, we close on two related warehouse facilities with two lending partners new to the reverse space to help minimize haircuts on our proprietary loan production.
Unknown Executive: These new loan relationships are another example of greater interest being shown to the reverse mortgage industry by interested counterparts.
Unknown Executive: Lastly, the release of the preliminary term sheet for Genie Maze HMBS 2.0 program at the end of June marked an important step in providing enhanced liquidity to the reverse mortgage industry. This exciting program provides a more favorable HMBS structure that will significantly reduce the capital required for BIOS and allows for the securitization of these BIOS into pools backed by Genie Maze. This has the potential to have a positive impact on earnings, tangible net worth, and liquidity.
Graham Fleming: This exciting program provides a more favorable HMDF structure that will significantly reduce the capital required for buyouts and allows for the securitization of these buyouts into pools backed by GenieMake. This has the potential to have a positive impact on earnings, tangible net worth, and liquidity. Each of these events has left Finance of America in a better position to achieve long-term success and help homeowners unlock the joy that comes from realizing the full potential of their, Our entire team has worked diligently to improve the operations of the business while integrating and becoming a unified financing America.
Graham Fleming: Each of these events has left Finance of America in a better position to achieve long-term success and help homeowners unlock the joy that comes from realizing the full potential of their retirement. Our entire team has worked diligently to improve the operations of the business while integrating and becoming a unified finance of America.
Graham Fleming: We sincerely appreciate all the hard work, and I want to share a huge thank you to everyone that has been a part of her company's transformation over the past two years.
Graham Fleming: We sincerely appreciate all the hard work, and I want to share a huge thank you to everyone that has been a part of our company's transformation over the past. Please tell us more about the brand transition to Finance of America and further operational updates.
Graham Fleming: To tell us more about the brand transition to Finance of America and further operational updates, let me turn the call over to Kristen.
Kristen Sieffert: Thank you, Graham, and good afternoon, everyone. Beginning in late 2022 and taking place over the last 18 months, we are working to transform our operations to align with our refocus strategy centered on retirement, the 55-plus demographic, and home equity. With most of the work completed, we've turned our attention to strategic initiatives to optimize our platform and pave the way for future growth. This translates into improved operations, improved conversion, and a better customer experience overall.
Kristen Sieffert: Thank you, Graham, and good afternoon, everyone. Beginning in late 2022 and taking place over the last 18 months, we work to transform our operations to align with our refocus strategy centered on retirement, the 55-plus demographic, and home equity. With most of the work completed, we've turned our attention to strategic initiatives to optimize our platform and pave the way for future growth. This translates into improved operations, improved conversions, and a better customer experience overall.
Christian: This translates into improved operations improved conversion and a better customer experience overall lab.
Kristen Sieffert: Last month, we successfully unified all of our brands under the single name, Finance of America. This milestone included launching new brand assets, consisting of television ads featuring Tom Selleck, a streamlined corporate website, enhanced social media presence, and new multimedia advertising and collateral. In concert with the brand unification, we also developed and introduced a singular company purpose and shared values.
Kristen Sieffert: Last month, we successfully unified all of our brands under the single name Finance of America. This milestone included launching new brand assets, consisting of television ads featuring Tom Selleck, a streamlined corporate website, enhanced social media presence, and new multimedia advertising and collateral. In concert with the brand unification, we also developed and introduced the singular company Purvis and shared values. This achievement marks the significant step in our evolution, enabling full alignment across the organization to maximize our productivity as a group and realize the full value of our investment.
Speaker Change: Last month, we successfully unify all of our brands under the single name Finance of America. This milestone included launching new brand assets, consisting of TV ads, featuring Tom Selleck, a streamlined corporate website enhanced social media presence and new multimedia advertising and collateral and <unk>.
Kristen Sieffert: This achievement marks a significant step in our evolution, enabling full alignment across the organization to maximize our productivity as a group and realize the full value of our investment. Within our retail division, we modified our go-to-market strategy to focus on our most efficient channels and stepped away from strategies that have been less fruitful over time. We expect to see outsized returns from this shift, and early results are supporting this theory.
Christian: Start with the brand unification, we also developed and introduced a singular company purpose and shared values. This achievement marks a significant step in our evolution, enabling full alignment across the organization to maximize our productivity as a group and realize the full value of our investment.
Kristen Sieffert: Within our retail division, we modified our go-to-market strategy to focus on our most efficient channels and stepped away from strategies that have been less fruitful over time. We expected to see outside returns from this shift, and early results are supporting this theory. Looking at our industry-leading suite of procurement products, we continue to have strong demand from our best-in-class wholesale channel, as we introduce solutions that appeal to the vast customer base held by our wholesale partners. We are confident in our ability to grow origination and continue to explore new strategies to attract and meet the needs of more customers.
Christian: Within our retail division, we modified our go to market strategy to focus on our most efficient channels and stepped away from strategies that have been less fruitful over time, we expected to see outsized returns from this shift and early results are supporting this theory.
Christian: Looking at our industry, leading suite of proprietary products.
Kristen Sieffert: Looking at our industry-leading suite of proprietary products, we continue to have strong demand from our best-in-class wholesale channel as we introduce solutions that appeal to the vast customer base held by our wholesale partners. We are confident in our ability to grow originations and continue to explore new strategies to attract and meet the needs of more customers. In Q2, we enhanced the LTV of Homestay Second to appeal to a wider segment of borrowers and introduced a streamlined underwriting option for high credit-quality customers. In that same period, we experienced a 168% increase in submission volume quarter over quarter and a 30% reduction in average term time.
Christian: Products, we continue to have strong demand from our best in class wholesale channel as we introduce solutions that appeal to the vast customer base held by our wholesale partners. We are confident in our ability to grow originations and continue to explore new strategies to attract and meet the needs of more customers.
Kristen Sieffert: In Q2, we enhance the LTV, at home safe second, to appeal to a wider segment of borrowers and introduced a streamlined underwriting option for high credit quality customers. In that same period, we experience a 168% increase in submission volume, quarter over quarter, and a 30% reduction in average term time. We will continue to expand the state availability each quarter and plan to launch Home Safe second specific marketing campaigns in our retail channel by the end of Q3. Last, in our efforts to increase the penetration of the total addressable market, we continue to invest in digital technologies that capitalize on growth opportunities and create tailored experiences for our customers.
Christian: In Q2, we enhanced the LTV of Homestay second to appeal to a wider segment of borrowers and introduced a streamlined underwriting option for high credit quality customers.
Kristen Sieffert: We will continue to expand the state availability each quarter and plan to launch Homestay's second specific marketing campaign in our retail channel by the end of Q3. Finally, in our efforts to increase the penetration of the total addressable market, we continue to invest in digital technologies that capitalize on growth opportunities and create tailored experiences for our customers. With the heavy lift of the LOS and brand transitions behind us, we're shifting the team's attention to building out these capabilities as their top priority, and look forward to sharing updates around these enhancements as they're introduced. Now, I'll turn it over to Matt to discuss our finance.
Kristen Sieffert: With the heavy lift of the LOS and brand transitions behind us, we're shifting the team's attention to building out these capabilities as their top priority and look forward to sharing updates around these enhancements as they're introduced.
Kristen Sieffert: Now, I'll turn it over to Matt to discuss our financials.
Matthew Engel: Thank you, Kristen.
Matthew Engel: Thank you, Kristen, and good afternoon, everyone. Within our continuing operations, we recognize a gas net loss of $5 million, or $0.20 per basic share, for the second quarter. On an adjusted basis, the company recognized a net loss of $1 million for the quarter, or $0.05 per fully diluted share, the fourth consecutive quarter of improved results in our business. As Graham mentioned earlier, it's been just over a year since the acquisition of certain assets of AHA.
Matthew Engel: A good afternoon, everyone. Within our continuing operations, we recognize gaffed net lots of $5 million or 20 cents per basic share for the second quarter. On an adjusted basis, the company recognized a net loss of $1 million for the quarter, or five cents per fully diluted share, the fourth consecutive quarter of improved results in our business. As Graham mentioned earlier, it's been just over a year since the acquisition of certain assets of AAG. During that time, the business has completed its immigration and seen significant improvement in its operations. We saw origination volumes increased by 5% from the first quarter.
Matthew Engel: During that time, the business has completed its integration and seen significant improvement in its operations. We saw origination volumes increase by 5% from the first quarter. We originated $447 million in loan volumes, up from $424 million in the first quarter. While we came in slightly under the provided guidance range for the quarter, we did see positive momentum in our production. In fact, our higher-margin retail and broker channels grew volumes by 18% and 12%, respectively, offset by decreased production in our correspondence.
Matthew Engel: We originated $447 million in loan volumes, up from $424 million in the first quarter. While we came in slightly under the provided guidance range for the quarter, we did see positive momentum in our production. In fact, our higher margin retail and broker channels grew volumes by 18% and 12%, respectively, offset by decreased production in our corresponding channel. Focusing on our retail and broker origination channels was a conscious financial decision that led to improve operating results and higher overall margins for the business. Additionally, we have seen an increase in average loan balances both for proprietary and Heckham products, which have resulted in part in the recent decrease in interest rates.
Matthew Engel: Focusing on our retail and broker origination channels was a conscious financial decision that led to improved operating results and higher overall margins for the business. Additionally, we have seen an increase in average loan balances, both for proprietary and HECM products, which resulted in part in the recent decrease in interest rates. Since the fourth quarter of 2013, the average size of a HECM loan across our retail channel has increased around 10%.
Matthew Engel: Since the fourth quarter of 23, the average size of the Heckham loan across our retail channel has increased around 10%. Note that we have enhanced the revenue section of our income statement presentation, which more clearly lays out the key drivers of our business. You can see this on slide eight of the earnings supplement posted to our Investor Relations website. As you can see, year-over-year net portfolio interest income is flat. While runoff has decreased from $55 million to $48 million, resulting in a higher accrued yield on our portfolio. In addition, net origination gains have increased from $33 million to $40 million.
Matthew Engel: Note that we have enhanced the revenue section of our income statement presentation, which more clearly lays out the key drivers of our business. You can see this on slide eight of the earnings supplement posted to our investor relations website. As you can see, year over year, net portfolio interest income is flat, while runoff has decreased from $55 million to $48 million, resulting in a higher accreted yield on our portfolio. In addition, net origination gains have increased from $33 million to $40 million. As we grow new loan origination volumes in the future, this will show up in the net origination gains and fee income lines of the income tax.
Matthew Engel: As we grow new loan origination volumes in the future, this will show up in the net origination gains and the income lines of the income statement. Excluding fair value changes from market inputs or model assumptions, total revenue for our continuing operations was $68 million in the second quarter of 2024, compared to $51 million in the second quarter of 2023. This is a 33% increase in revenue across our operations in the last year. While revenues have increased year over year, we continue to see an overall decrease in expenses. For continuing operations, total expenses declined from $110 million in the second quarter of 2023 to $91 million in the first quarter of 2024 to $85 million in the second quarter of 2024.
Matthew Engel: Excluding fair value changes from market inputs or model assumptions, total revenue for our continuing operations was $68 million in the second quarter of 2024 compared to $51 million in the second quarter of 2023. This is a 33% increase in revenue across our operations over the last year. While revenues have increased year-over-year, we continue to see an overall decrease in expenses. For continuing operations, total expenses declined from $110 million in the second quarter of 2023 to $91 million in the first quarter of 2024 to $85 million in the second quarter of 2024, as the cost reduction initiatives we have taken over the past year have continued to materialize.
Matthew Engel: As the cost reduction initiatives we have taken over the past year have continued to materialize. Turning to the balance sheet, our unrestricted cash balance was $47 million at the end of the second quarter, comparable to March, as the new financing grant mentioned earlier reduced the cash invested in our balance sheet as of the end of the quarter.
Matthew Engel: Turning to the balance sheet, our unrestricted cash balance was $47 million at the end of the second quarter, comparable to March as the new financing Graham mentioned earlier reduced the cash invested in our balance sheet as of the end of the quarter.
Matthew Engel: Finally, I want to reiterate our excitement surrounding the initiatives Finance of America was able to accomplish during the second quarter beyond our operating resume. We have been discussing these actions for several quarters, and we are very pleased to be able to share the results of our efforts. The reverse stock split announced in June and effective July 22 put Finance of America back into compliance with New York Stock Exchange continued listing standards.
Matthew Engel: Finally, I want to reiterate our excitement surrounding the initiatives by Inter-America was able to accomplish during the second quarter beyond our operating results. We have been discussing these actions for several quarters, and we are very pleased to be able to share the results of our efforts. The reverse box split announced in June and effective July 20th at the Finance of America back into compliance with New York Stock Exchange continued listing standards. The transactions contemplated by the exchange offer support agreement are expected to improve finance of America's capitalist structure, and we look forward to the continued support of our noteholders.
Matthew Engel: Transactions contemplated by the exchange offer support agreement are expected to improve Finance of America's capital structure, and we look forward to the continued support of our note holders. Additionally, the recently published proposed term sheet for the HMBS 2.0 program is expected to be of significant benefit to Finance of America and the reverse mortgage industry at large. The program allows for the securitization of buyouts into Ginnie Mae-backed securitizations and limits the capital required to manage these buyouts during the claims process.
Matthew Engel: Additionally, the recently published proposed term sheet for the HMBS 2.0 program is expected to be a significant benefit to finance America and the reverse mortgage industry at large. The program allows for the securitization of buyouts into genuine made back securitizations and limits the capital required to manage these buyouts during the claims process.
Matthew Engel: Looking forward, we are excited about the early results in our third quarter. July volumes were strong, and recent declines in market interest rates, should they hold, would result in positive adjustments to the fair value of our assets. From an operational standpoint, we expect volumes in the third quarter to be between $475,500,000, and given our reduced expense space and higher margins, we expect to return to ANI profitability during the third quarter. With continued improvement across our top and bottom lines, we expect to continue on the path to sustain profitability.
Graham Fleming: Looking forward, we are excited about the early results in our third quarter. July volumes were strong, and recent declines in market interest rates, should they hold, would result in positive adjustments to the fair value of our assets. From an operational standpoint, we expect volumes in the third quarter to be between $475 million and $500 million. And given our reduced expense base and higher margins, we expect to return to ANI profitability during the third quarter. With continued improvement across our top and bottom lines, we expect to continue on the path to sustained profit. With that, I will hand it back to Graham for closing remarks. Thank you, Matt.
Matthew Engel: With that, let me head back to Graham for closing remarks.
Graham Fleming: Thank you, Matt.
Graham Fleming: Given the material movement in market interest rates so far in the third quarter and the potential for a shift in Fed policy, it may be worthwhile to recap how these events impact our business. In a declining rate environment, our operations will benefit in two key ways. First, we have the potential for an increase in tangible net worth as asset values are expected to increase. Secondly, we would expect originations to increase as lower rates result in higher initial loan-to-value ratios on new loans. Allowing more borrowers to qualify
Graham Fleming: Given the material move and market rate interest rates so far in the third quarter and the potential for a shift in Fed policy, it may be worthwhile to recap how these events impact our business. In a declining rate environment, our operations will benefit in two key ways. First, we have the potential for an increase in tangible net worth as asset values are expected to increase. Secondly, we would expect originations to increase as lower rates result in higher initial loan-to-value ratios on new loans, allowing more borrowers to qualify. Increased funded volumes with minimal near-term changes to our fixed expense structure would also reduce our origination cost the Lone.
Graham Fleming: Throughout the second quarter, Finance of America stayed the course and continued to focus heavily on growth, delivering a strong customer experience and continuous innovation. We're excited about our pipeline and submission volumes, and we see a massive total addressable market over the long term, which we are well positioned to capture as the market grows. When you consider the record number of seniors who are financially unprepared for retirement, while simultaneously holding your record amount of home equity, we'll be poised to meet their needs with our home equity base for retirement products. Today, FOA holds top market share, and we're more confident than ever that we will continue to grow our customer base and transform lives by helping our customers make the most out of their largest asset, their home.
Graham Fleming: Increased funded volumes with minimal near-term changes to our fixed expense structure would also reduce our origination cost per. Throughout the second quarter, Finance of America stayed the course and continued to focus heavily on growth, delivering strong customer experiences and continuous innovation. We're excited about our pipeline and submission volumes. And we see a massive total addressable market over the long term, which we are well positioned to capture as the market grows. When you consider the record number of seniors who are financially unprepared for retirement while simultaneously holding a record amount of home equity, we'll be poised to meet their needs with our home equity-based retirement program.
Christian: Capture as the market grows.
Speaker Change: When you consider the record number of seniors who are financially unprepared for retirement, while simultaneously holding a record amount of home equity will be poised to meet their needs with our home equity based retirement products.
Graham Fleming: Today, FOA holds top market share, and we're more confident than ever that we will continue to grow our customer base and transform lives by helping our customers make the most out of their largest asset, their home. As in previous quarters, we continue to execute on what we can control. We have built a strong platform that positions us well for growth and profitability while delivering an enhanced experience to our customers. And with that, we'll open the call up for any questions.
Speaker Change: Today, <unk> top market share and we're more confident than ever that we will continue to grow our customer base and transform lives by helping our customers make the most out of their largest asset their home.
Graham Fleming: As in previous quarters, we continue to execute on what we can control. We have built a strong platform that positions as well for growth and profitability while delivering an enhanced experience to our customers.
Speaker Change: As in previous quarters, we continue to execute on what we can control we have built a strong platform that positions us well for growth and profitability, while delivering an enhanced experience to our customers and with that we'll open the call up for any questions.
Graham Fleming: And with that, we'll open the call up for any questions. Thank you, sir.
Speaker Change: Thank you, Sir and everyone. If you would like to ask a question today. Please press star one on your telephone keypad.
Operator: Thank you, sir. And everyone, if you would like to ask a question today, please press star one on your telephone keypad. We'll take our first question from Doug Carter of UBS.
Unknown Executive: And everyone, if you would like to ask a question today, please press star one on your telephone keypad.
Unknown Executive: We'll take our first question from Doug Carter, UBS. Yes. Thanks.
Speaker Change: We'll take our first question from Doug Harter with UBS.
Will Naso: Thanks, Hi, this is actually will NASA on for Doug today.
Will Nasta: Thanks. Hi, this is actually Will Nasta on for Doug today. I heard you touch on the new HMBS 2.0 program and your prepared remarks. I was really just hoping you could expand a bit more on the potential cash flow benefits that you might receive from this program.
Unknown Executive: Hi, this is actually Will Masta on for Doug today. I heard you touched on the new HNBS 2.0 program in your prepared remarks. I was really hoping you could expand a bit more on the potential cashflow benefits that you might receive from this program. So, it's a little early to define exactly the net cash proceeds. I think the industry as a whole gave feedback to the draft to make folks who came out this recently. I expect the final turn to come out in the coming months. However, based on the draft proposal that was presented, we see a significant portion of our buyouts that would be eligible to put into the new program with advanced rates, you know, clearly above where we are today at our warehouse line.
will NASA: I heard you touched on the new <unk> two <unk> program in your prepared remarks, I was really just hoping you could expand a bit more on the potential cash flow benefits that you might receive from this program.
will NASA: So.
Unknown Executive: So it's a little early to define exactly the net cash proceeds. But I think the industry as a whole gave feedback to the JAFT GMA proposal that came out just recently. And we expect the final deterrent to come out in the coming months. However, based on the draft proposal that was presented, we see a significant portion of our buyouts that would be eligible to be put into the new program with advanced rates, you know, clearly above where we are today at the warehouse line. So we'll be quantifying those numbers a little more closely over the coming quarter as that gets finalized.
Too early to define exactly the net cash proceeds I think the industry as a whole gave feedback to the draft G&A proposal that came out just recently.
will NASA: The final the churn to come out in the coming months.
will NASA: However, based on the on the draft proposal that was presented.
will NASA: You'd see a significant portion of our buyout that would be eligible to be put into the new program.
will NASA: With advance rates clearly above where we are at the data warehouse lines. So we'll be we'll be quantifying those numbers are more closely over the coming quarter as that gets finalized.
Unknown Executive: And so we'll be; we'll be qualifying those numbers a little more closely over the coming quarter.
Unknown Executive: Is that the finalists? Okay. Great. Thanks.
Speaker Change: Okay, great. Thanks.
Unknown Executive: Okay, great. Thanks. Um, and then just one follow-up on a comment on the third quarter origination outlook. And given the recent moving rates, if you just comment on the pipeline you're seeing so far, and then how would you expect level revenue margin to trend going forward, given those moving rates?
Unknown Executive: And then there's one follow up. I commented on the third quarter origination outlook. And given the recent moving rates, if you could just comment on the pipeline you're seeing so far. And then how would you expect level revenue margin to trend going forward given that moving rates?
Speaker Change: And then just one follow up I know you commented on the third quarter origination outlook given.
Speaker Change: Given the recent move in rates if you could just comment on the pipeline you are seeing so far and then how would you expect a level of revenue margin to trend going forward given that move in rates.
Unknown Executive: I'll take the green on that. On the pipeline. Yeah, so the pipeline has remained strong. I think we're with the refinance activity. If we see any which rates coming down, we'll probably see that funding in Q4. But the increase in borrowers that are qualifying today on new leads coming in, we're already starting to see that pick up this week, and that's built into the guidance that we gave for the origination volumes in Q3. I think the second part of the question on margins, I think generally you might see a little bit of margin expansion on our loan products, but maybe not significant.
Speaker Change: Thank you very much.
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On the pipeline side of the pipeline.
Unknown Executive: Yeah, so the pipeline has remained strong. I think we're with the refinance activity. If we see any with rates coming down, we'll probably see that funding in Q4. But the increase in borrowers that are qualifying today on new leads coming in, we're already starting to see that pick up this week. And that's built into the guidance that we gave for origination volumes in Q3. I think the second part of the question on
Speaker Change: Yeah. So the pipeline has remained strong I think we're with that refinance activity. If we see any with rates coming down, we'll probably see that funding in Q4.
Speaker Change: But the increase in borrowings that are qualifying today on new lease coming in or are you starting to see that pick up this week and are built into the guidance that we gave for the origination volumes in Q3.
Unknown Executive: I think the second part of the question on margins. I think, generally, you might see a little bit of margin expansion on our loan products, but maybe not significant. We'll watch where spreads land in terms of the margin we can securitize these loans for. The market's a little volatile right now. Spreads are moving around a little bit, but we think that'll settle in here in the coming weeks.
Speaker Change: And I think the second part of the question on margins I think generally it's let's say a little bit of margin expansion on our loan products, but they're not significant.
Unknown Executive: Then we'll watch, we're spread land in terms of the margin we can secure ties these loans for the market full of volatile right now. Spreads are moving around a little bit, but we think that'll settle in here to come a week. Okay.
Speaker Change: And then we'll watch.
Fred: Fred's land in terms of the.
Fred: The margin we can securitize. These loans for the markets were volatile right now spreads have moved around a little bit, but we think that will settle in.
Speaker Change: Here in the coming weeks.
Speaker Change: Okay. Thank you.
Stephen Laws: The next question will come from the line of Stephen Laws, Raymond James. I get Afternoon. Congrats on, you know, the EBITDA positive. You know, that was a reiterating of hitting A and I positive next quarter. I know that's something you guys have worked very hard to achieve in the past: get a score to six quarters. So nice to see the progress you've made so far.
Speaker Change: The next question will come from the line of Stephen Laws Raymond James.
Stephen Laws: The next question will come from the line of Stephen Laws, Raymond James.
Stephen Laws: Hi, good afternoon.
Unknown Executive: Congratulations on, you know, the EBITDA positive and reiterating hitting A&I positive next quarter. I know that's something you guys have worked very hard to achieve over the past four to six quarters. So, nice to see the progress you've made so far, you know. Wanted to touch base kind of around, you know, some smaller things, such as first to verify the volume outlook, you guys say in the prepared remark that July was kind of 10% up, or kind of help quantify where July volumes are.
Speaker Change: Okay.
Speaker Change: Congrats on.
Speaker Change: The EBITDA positive, but you know I know.
Speaker Change: Sure.
Speaker Change: Reiterating hitting Eni positive next quarter I know, that's something you guys have worked very hard to achieve over the past.
Speaker Change: Four to six quarters, so nice to see the progress you've made so far.
Stephen Laws: You know, wanted to touch base kind of around, you know, some smaller thing. This first to verify, you know, the volume outlook, you got to say in the from here to mark that July was kind of 10% up or kind of can you give help quantify what July volumes are. So I think that's the guidance we gave for the third quarter is between 475 to 500 million, and our July production without a pace really hit that target for the quarter. High-end target. Fantastic.
Speaker Change: Wanted to touch base kind of around.
Speaker Change: Some smaller things is first to verify the volume outlook you guys say in the prepared remarks that the July was kind of 10% up or kind of can you get help quantify where Joe July volumes are.
Speaker Change: So I think that's.
Unknown Executive: So I think that the guidance we gave for the third quarter was between 475 million and 500 million, and our July production was on a pace to really hit that target for the quarter.
Speaker Change: The guidance, we gave for the third quarter is between $475 million to $500 million and our July production was on a pace to really hit that target for the quarter. The high end of the target.
Unknown Executive: Really hit that target from the water, the high end of the target. Fantastic. As you think about, you know, funding that and cash flow needs, can you talk about how the cash balance will trend toward the end of the year? And, you know, are you tapping the working capital loan? And I guess the non funding interest expense increased slightly sequentially. So curious what drove that, if it was a late increase on that working capital loan or something else?
Speaker Change: Fantastic.
Stephen Laws: As you think about, you know, funding that and cash flow need, we talked about how the cash balance will turn to the back of the year and, you know, happy working capital loan. And I guess the non-funding interest expense, the increased slightly sequentially, uh, secure what drove that if it was the way to increase on that working capital loan or something else. So on the first part of the question, in terms of funding the new production, um, so one thing that you've grand mentioned, his remarks, we do have a new, uh, couple of liners that have kind of partnered together to help fund our primary loan production and it's greatly decreased our haircuts, uh, necessarily to hold those good loans and our current amount of money, but that's really helpful.
Speaker Change: As you think about.
Speaker Change: Funding that and cash flow needs can you talk about how the cash balance will trend through the back of the year.
Speaker Change: Are you happy with working capital loan I.
Speaker Change: I guess the non funding interest expense increased slightly sequentially. So curious what drove that if it was the rate increase on that working cap loan or something else.
Speaker Change: Okay.
Unknown Executive: So, on the first part of the question, in terms of funding the new production, so one thing that Graham mentioned in his remarks, we do have Nor ? um couple of lenders that have kind of partnered together to help fund our avocado crocodile production and it's greatly decreased our haircuts necessary to hold those those loans on our warehouse, that that's really helpful from kind of minimizing the the cash burn and second part that's do you was raced with out of the on the non funding that
Speaker Change: So on the first part of the question in terms of funding the new production.
Speaker Change: So one thing that Dan mentioned his remarks, we do have.
Speaker Change: I knew a.
Speaker Change: A couple of lenders that are kind of partner together to help fund our proprietary loan production and as Greg will decrease our haircuts necessary to hold those loans on a mouthful, but that's really helpful and minimizing the cash burn.
Stephen Laws: So I'm kind of minimizing the cash growing. On the second part, um, that maybe was, uh, a breakthrough on the, uh, on the non funding this.
Speaker Change: Alright.
Speaker Change: Richard.
Richard: On the non funded notes.
Unknown Executive: Great. And then the last one for now, you know, a lot of accomplishments from the expense reduction initiatives. Is this kind of a good rate now moving forward? Do you think there's more synergies or expense reductions that can occur from here? Kind of curious what your outlook is on the expense side.
Stephen Laws: Great. And then, uh, last one for now, you know, a lot of accomplishments from the expense reduction initiatives. Is this kind of a, a, a good rate now moving forward? Do you think there's more, uh, kind of synergies or expense reductions that can occur from here? Kind of curious what your outlook is on the expense side. I mean, I think that we largely have got the heavy lifting behind this at this point. I would obviously, you know, maybe significant reductions, but I think there's always opportunities to kind of sharpen the pencil. I think, you know, some extent, we still have some legacy contracts and whatnot that we're into when we're in much larger company. Then, as we roll off, we're going to, uh, board right sides contracts for current organization, which we can continue with less to those contracts falling off.
Richard: Great and then.
Speaker Change: Last one for now.
Speaker Change: A lot of accomplishments from the expense reduction initiatives.
Speaker Change: Is this kind of a.
Speaker Change: A good right now moving forward do you think theres more.
Speaker Change: Synergies are expense reductions that can occur from here kind of curious what your outlook is on the expense side.
Speaker Change: I mean, I think that we've largely got.
Unknown Executive: I mean, I think that we largely have the heavy lifting behind us at this point. We don't see, you know, maybe significant reductions, but I think there are always opportunities to kind of sharpen the pencil. I think, you know, to some extent, we still have some legacy contracts and whatnot that were entered into when we were a much larger company, and as those roll off, and we enter into more right-side contracts in our current organization, which we can continue to do because those contracts won't roll off. So I think there'll be continued kind of downward pressure on the expense line, but I wouldn't expect massive changes at this point.
Speaker Change: Heavy lifting behind us at this point.
Speaker Change: Don't see maybe significant reductions, but I think theres always opportunities to kind of sharpen the pencil.
Speaker Change: Some extent, we still have some.
Speaker Change: Legacy contracts and whatnot that we entered into when we were a much larger company than algo rollout.
Speaker Change: More right sized contracts more current organization that can continue request with the Wisconsin.
Speaker Change: First of all a lot. So I think there'll be continued kind of downward pressure on.
Stephen Laws: So if it could be, it could use kind of downward pressure on the expense line, but I wouldn't expect, you know, back-to-changes, uh, this point. Although I'd add that we expect to see lower costs per fund as long because our fixed expense base can support a much higher level of production than we're doing today. Um, so we expect to see that in the coming quarters.
Speaker Change: On the expense line, but I wouldn't expect faster changes at this point, although I would add that we expect to see lower cost per funded.
Unknown Executive: I'd add that we expect to see lower costs per funded loan because our fixed expense base can support a much higher level of production than we're doing today. So we expect to see that in the coming quarters.
Speaker Change: Our fixed expense base can support a much higher level of production of them are getting today.
Speaker Change: Hum.
Speaker Change: We expect to see that.
Speaker Change: In the coming quarters.
Stephen Laws: Great. Appreciate the comments this afternoon. Again, congratulations on a nice second quarter.
Stephen Laws: Great. Appreciate the comments. Uh, this afternoon, again, congrats on a nice second quarter.
Speaker Change: Great I appreciate the comments.
Speaker Change: Afternoon, and again, congrats on a nice second quarter.
Operator: Thanks, Stephen. Thank you.
Graham Fleming: Thank you. And everyone at this time, there are no further questions.
Speaker Change: Thank you. Thank you.
Graham Fleming: And everyone, at this time, there are no further questions. I'll hand the call back to Graham Fleming for any additional or closing remarks.
ground Fleming: And everyone. At this time there are no further questions I'll hand, the call back to ground Fleming for any additional or closing remarks.
Graham Fleming: I'll hand the call back to Graham Fleming for any additional or closing remarks. Again, thank you for joining our Q2 call, and we will look forward to having our call in November, and we'll update everybody on our progress in Q3. So thank you very much, everybody, and we'll talk to everybody. Thank you.
Graham Fleming: Again, thank you for joining our Q2 call, and we will look forward to having our call in November, and we'll update everybody on our progress in Q3. So thank you very much, everybody, and we'll talk to everybody soon. And again, that does conclude today's conference. We would like to thank you all for your participation.
ground Fleming: Again, thank you for joining.
ground Fleming: Our Q2 call and we will look forward to having our call in November and we'll update everybody on our progress in Q3. So thank you very much everybody and.
Speaker Change: We will talk to everybody soon thank you.
Speaker Change: And again that does conclude today's conference we would like to thank you all for your participation you may now disconnect.
Unknown Executive: And again, that does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.
Operator: And again, that does conclude today's conference. We would like to thank you all for your participation. You may now disconnect. Thanks for watching!
Speaker Change: Okay.
Speaker Change: [music].