Q1 2025 Finance of America Companies Inc Earnings Call
Celine: Thank you for standing by. My name is Celine and I will be your conference operator today. At this time, I would like to welcome everyone to the finance of America Fritz Quarter 2025
Celine: All lines I've been placed on YouTube event any background noise.
Celine: After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question, press number one again. Thank you. I would now like to turn the call over to Michael Fant. Senior Vice President of Finance, please go ahead.
Michael Fant: Thank you, and good afternoon everyone, and welcome to Finance of America's First Quarter 2025 Orange Soul.
Michael Fant: With me today are Graham Fleming, Chief Executive Officer, Kristen Sieffert, President, and Matt Engel, Chief Financial Officer.
Michael Fant: As a reminder, this call is being recorded and you can find the earnings release and additional materials on our Investor Relations website at
Michael Fant: In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliation of non-GAAP to GAAP financial measures to the extent available without unreasonable efforts discussed on today's call in our earnings press release on the Investor Relations page about our website.
Michael Fant: Also, I would like to remind everyone that comments on this conference call may be forward looking statements within the meaning of the Private Security's litigation reform act of 1995 regarding the companies expected operating and financial performance for future periods.
Michael Fant: These statements are based on the company's current expectations and are subject to the safe harbor statement for forward-looking statements that you will find in today's
Michael Fant: Actual results for future periods may differ materially from those expressed or implied by the
Michael Fant: Due to a number of risks or other factors, including those that are described in the Risk Factors section, a Finance of America's annual report on Form 10K for the year ended December 31, 2024, filed with the SEC on March 14, 2025.
Michael Fant: We are not undertaking any commitment to upbeat statements if conditions change.
Speaker Change: Please note, today we will be discussing interim period financials for our continuing operations, which are unaudited. Now, I would like to turn the call over to the Finance of America's Chief Executive Officer, Graham Fleming.
Graham Fleming: Thank you, Michael. Good afternoon everyone and thank you for joining us today.
Graham Fleming: As a result, we delivered $561 million in funded volume during the first quarter, exceeding our guidance range of $525 to $550 million. That marks a fourth consecutive quarter of volume growth and a 32% improvement over the first quarter of 2024.
Graham Fleming: During the quarter, we've benefited from a modestly lower rate environment with a 10-year treasury falling roughly 35 basis points, which is partially offset by widening spreads. On the whole, this resulted in a broadly positive fair value environment, creating a tailwind for our performance.
Graham Fleming: From a financial performance perspective, we generated 80 million in gap net income for $3.17 and cents basic earnings for SHIP on an adjusted basis.
Graham Fleming: The company earned 13 million in adjusted net income, or 52 cents per ship, an improvement of 20 million from the first quarter of 2024.
Graham Fleming: We remain on track to meet our four-year guidance of 2.4-2.7 billion in funded volumes and $2.60 cents to $3 in adjusted earnings for shifts.
Graham Fleming: With the recent launch of our new, a better way with FOA campaign, we are redefining how reverse mortgages are understood, moving the product from the margins into the mainstream as a flexible, forward-looking financial planning tool for homeowners 55 and up.
Graham Fleming: Finance of America is setting the standard for how our industry communicates the role of reverse mortgages, and Kristen will speak more about the new campaign. We believe this strategic repositioning strengthens our brand and supports long-term growth.
Graham Fleming: Finally, we continue to see the advantages of our product suite flexibility by offering a broader range of solutions and the ability to introduce new products to address emerging needs where we are able to better serve our customers.
Graham Fleming: This approach allows our customers to access the most suitable products to support their individual needs and circumstances and with that I'll turn it over to Kristen.
Kristen: Thanks, Graham and good afternoon, everyone. The first quarter marked the pivotal moment in actualizing our operational and brand strategy. As part of our commitment to elevating customer engagement, we recently launched our new messaging campaign, A Better Way with FOA.
Kristen: This campaign marks a shift away from traditional celebrity endorsements toward storytelling that reflects real-life goals and aspirations of today's homeowner.
Kristen: Our goal was to create ads that highlight relatable use cases that dismantle stereotypes and show reverse mortgages as a smart tool for responsible financial planning, whether it's funding or renovation, covering unexpected expenses, or simply enabling peace of mind.
Kristen: We're embedding this message across every customer and marketing touchpoint, and we expect the full transition will be complete by the end of June . To give you a closer look at the campaign and action, we've posted a few examples of our creative materials on our investor relations website.
Kristen: We believe this new platform will enable us to attract and convert a new, broader audience, one that is experienced and comfortable with leveraging home equity to responsibly achieve their financial goals and that has a higher intent to transact.
Kristen: A modest 5% improvement in our leads to opportunity metric would support the growth and retail production that we've modeled for the year with additional upside as we continue to focus on optimizing the customer journey.
Kristen: While the campaign has only been in market at a small scale for less than one month, we're already seeing this play out in our early direct mail results, which has shown a 16% improvement in our upper funnel inquiry to lead conversion.
Kristen: As we gain insight into the new types of customers engaging with our brand, we will utilize this data to inform our growth strategy and drive product innovation.
Kristen: Given the various economic uncertainties impacting our customers, including stock market volatility, risk of recession and further inflation, we're confident that our current solutions can assist many Americans in achieving this stability they seek.
Kristen: Furthermore, we're well-positioned to introduce new solutions to address additional needs.
Kristen: In addition to launching the New Black Brands platform, we've continued to focus on the fundamentals across the business and is seeing notable improvements across key operational metrics in Q1.
Kristen: Quarter over quarter, we doubled the percentage of retail loans funded within the first 30 days from admission. We increased the initial 30 days sales conversion rate by 40 percent, and we reduced our costs for opportunity by 12 percent over the same period.
Kristen: Our continued focus on operational excellence is strengthening the business and laying the groundwork for future growth investment.
Speaker Change: Before I hand it over to Matt, I'd like to congratulate John Skarpatti on his recent promotion to Chief Production Officer of our operating subsidiary, Finance of America Reverse.
Speaker Change: John has been the head of our industry leading wholesale division for over a decade. In this new role, John will oversee our sales and production strategy, heading both the wholesale and retail channels. We believe this leadership will be key to helping us unlock the massive growth potential we know is available within our category.
Speaker Change: With momentum on the brand and operations front, I'll turn it over to Matt to discuss our financial performance. Matt?
Matt: Thank you, Kristen. Good afternoon, everyone. The first quarter of 2025 was strong across several key metrics.
Matt: We delivered 561 million in funded volume, up 5% from the fourth quarter of 24, and 32% from the first quarter of 2024 As Graham mentioned, this was the fourth consecutive quarter of volume growth for the company [inaudible]
Matt: We also saw a meaningful improvement in our GAF results. For the first quarter, the company recorded GAF net income of $80 million or $3.17 per basic share compared to a GAF net loss of $16 million or $0.58 per basic share in the first quarter of 2024.
Matt: These results were aided by positive fair value adjustments during the quarter. While spreads widened slightly, overall valuations remained positive, giving declining base rates and stable home price appreciation assumptions.
Matt: Adjusted that income for the first quarter came in at 13 million or 52 cents per share.
Matt: This result was in line with our stated expectations, performing similar to the third quarter of 2024.
Matt: Compared to the first quarter of 2024, when we reported it and adjusted that loss of $7 million, the company saw a $20 million improvement year over year. This turned around reflects three key elements of strong operational performance, higher volumes, a fully integrated business, and disciplined expense management.
Matt: Quarter over quarter, adjusted net income improved by $8 million, increasing from $5 million in the fourth quarter of 24.
Matt: This performance reflects our ability to grow volume efficiently while maintaining margin discipline, even in a dynamic rate environment.
Adjusted EBITDA total $29,000,000 [inaudible]
Matt: This represents an $11 million improvement in the 18 million and the fourth quarter of 24 and a 29 million increase from break even in the first quarter of 2024.
Matt: Building on that, product level margins improved quarter over quarter as expected. However, total retirement solutions revenue margin was flat, eventually, driven by a shift in channel
Matt: Our wholesale channel exceeded volume expectations, helping us beat our overall guidance. However, since wholesale carries lower margins, channel mix offset the product level improvement and our overall revenue margin was flat.
Matt: Turning to our cost structure, we saw further improvements both sequentially and year over year as a result of our disciplined approach to vendor spend.
Matt: Compared to the first quarter of 24, general and administrative expenses declined by 4.3 million, for up to 28 to 25% year-over-year reduction.
Matt: A key contributor to this is a 35% decrease in communication and data prophecy and expenses, which reflects our ongoing efforts to right size our vendor relationships and optimize our technology and infrastructure.
Matt: These savings highlight the efficiency gains we continue to unlock through proactive cost management.
Matt: Speaking of efficiency across the platform, operational productivity continues to trend favorably.
Matt: We originated higher volumes with the more streamlined team leading to an increase in loans per employee of 33% across our original nation platform compared to the first quarter of 2024.
Matt: We expect to continue to see this trend upward through the scalability of our model and the benefit of our ongoing digital transformation.
Matt: The liquidity remains adequate and we remain healthy, maintain healthy financing capacity to support our continued growth projections.
Matt: We are reaffirming our full-year guidance for both volume and earnings.
Matt: 2.4 to 2.7 billion in origination volume and $2.60 to $3.00 in adjusted EPS. In addition, for the second quarter, we expect to see funded volume in the range of $575 to $600.00
Graham Fleming: With that, let me hand it back to Graham for closing remarks.
Thank you, Matt.
Graham Fleming: We are happy with a progress in Q1 and confident in our ability to continue to execute going forward. Our message is resonating, our platform is delivering and our strategy is taking hold. Older homeowners are increasingly aware of the values sitting around them.
They're home equity.
Graham Fleming: When investment portfolios are under pressure, the wealth of stability of housing creates compelling case for tapping its home equity.
Graham Fleming: As the largest originator of a verse mortgages in the country, we believe we are well positioned to meet the moment There is a better way with FOA and with that we'll open the call for questions
Graham Fleming: Thank you, we will now begin the question and answer session.
Graham Fleming: If you have dialed in, do like to ask a question. Please press star 1 on your telephone keypad.
Graham Fleming: To raise your hand, enjoy the key. If you would like to withdraw your question, simply press star one again. If you are called up and to ask your question and are listening by a lot, speaking on your device, please pick up your hands and ensure that your phone is not unwittingly asking your question.
Speaker Change: Your first question comes from the line of Doug Harter with GPS. Please go ahead.
Speaker Change: Thanks. This is actually Will Nasta on for Doug today. I know you gave guidance for two few volumes, but I was just hoping you could talk for a minute about how the rate of volatility particularly in April impacted volumes and kind of what you've been seeing in the market so far this quarter.
Speaker Change: You know, I'll take the second part of that question. April , April was actually our best submission and funded volume month and the last two years. A very strong volume in April . I don't know
Matt: I think certainly Ray's continued to bounce around a little bit, so we're kind of taking a bit of day by day, but we haven't seen any significant movement yet, either way in in terms of the rate impacting our volume at this point.
Matt: Okay. All right. That makes sense. Thanks. And then there's one more. Could you just talk about what your outlook for expenses are? Obviously, they've come down to this amount over the last year or plus. I'm just curious how you're thinking about your expense base going forward.
Matt: So I'll kind of reiterate what we said in prior quarters, that
You know, our fixed cost base is relatively fixed.
Matt: As production increases, we expect there will be some variable expenses increase along with that
Matt: But the six faces relatively six. That said, on the six side.
Matt: We continue to see, we were much bigger business a couple years ago, we continue to see opportunities where we call sharp in the pencil.
Matt: As contracts renew and we can renew for a lower peak count, lower number of licenses, we see some down with pressure on some of those expenses. But relatively speaking, our fixed corporate infrastructure is going to be fixed and we'll have the variable expenses on the increased production.
Matt: Would you feel like our platform can handle significantly more production without putting a lot of pressure on that fixed cost space?
Okay. Thank you.
Matt: That concludes our question and answer session. I will now turn the conference back over to Graham Fleming for closing remarks.
Graham Fleming: Thank you everybody. I want to thank everybody for joining our Q1 call and we look forward to updating you on our progress in Q2 in in August . So thank you very much everybody.
Graham Fleming: Ladies and gentlemen, but concludes today's call. Thank you all for joining. You may now disconnect.