Q2 2025 Finance of America Companies Inc Earnings Call

thank you for standing by and welcome to the finance of America's second, quarter, 2025 earnings call

All ends have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question-and-answer session.

If you would like to ask a question this time, simply press star followed by the number 1 on your telephone keypad.

And if you would like to recharge your question, press star 1 again. Thank you.

I would now like to turn the call over to Michael fendt senior Vice President of Finance. Please go ahead.

Thank you and good afternoon everyone and welcome to finance of America's second quarter 2025 earnings call with me today at Grand Fleming, chief executive officer, Chris and see for president and Matt Angle Chief Financial Officer.

As a reminder, this call is being recorded and you can find the earnings release on the our investor relations website at IR Finance of America. Companies.com

In addition, we will refer to certain non-gaap Financial measures on this call. You can find reconciliations of non-gaap to gaap financial measures to the extent available without unreasonable efforts, discussed on today's call and our earnings press release on the investor relations page of our website.

Also, I would like to remind everyone that comments on this conference call may be forward-looking statements within the meaning of the private Securities. Litigation Reform, Act of 1995 regarding the company's expected operating and financial performance for future periods.

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 earnings release.

Actual results for future periods, May differ materially from those expressed or implied by these 4 looking statements, due to a number of risks or other factors including those that are described in the risk factor section of finance of America's annual report on form, 10K for the year. Ended December 31st, 2024 filed with the SEC on March 14th, 2025, and amended, by amendment number 1 to our annual report on form 10ka filed with the SEC on May 20th 2025.

Such 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 today, we will be discussing interim period financials for a continuing operations which are unauthorized.

Now, I would like to turn the call over to finance of America's chief executive officer Grande, Plumbing, Graham.

Thank you, Michael. Good afternoon, everyone, and thank you for joining us today. The second quarter of 2025 marked, another period of steady progress, at Finance of America. Our performance reflects consistent execution, building momentum, and ongoing validation of our long-term strategy,

We funded 602 million in volume exceeding. The top end of our guidance range and representing a 35% increase from the second quarter of 2024. And the 7% increase from the prior quarter.

this marks, our fifth consecutive quarter of volume growth, a testament to our ability to meet the needs of our customers, regardless of market conditions,

we delivered gaap net income of 80 million or $3.16, basic earnings per share. We reported 14 million of adjusted net, income or 55 cents in adjusted earnings per share and 30 million of adjusted. Eva, we continue to deliver consistent improvement with a&i up, 8% sequentially compared to the first quarter.

For additional context. The second quarter of 2024 was the first quarter following our organizational transformation in which we've broke even on an adjusted net income.

Since then, we have seen positive and improving performance, each quarter year to date, Ani totals, 27 million, compared to a loss of 7 million in the first half of last year, reflecting the impact of our completed transformation.

This performance brings our first half adjusted EPS to a dollar 7 per share, a strong results given the evolving macro backdrop.

We also recently achieved a major milestone in the capital markets in July. We completed our first ever 1 billion plus home, safe securitization.

This transaction, not only validates, our ability to scale, but also highlights the investor demand for our assets.

Drive greater awareness and education around the power of accessing home equity through retirement, which we believe will lead to a broader adoption of our industry-leading, reverse mortgage Solutions,

2, strategic priorities are Central to that first expanding scalable digital tools to improve borrowing engagement and second enhancing the customer experience, we offer to drive long-term Channel growth.

Ultimately, we remain deeply confident in the long term opportunity for reverse mortgages as more homeowners look to housing wealth to support retirement. We Believe, Finance of America will continue to lead the market in meeting that demand and now I'll turn it over to Kristen for an update on our operations Kristen. Thank you. Graham Q2 was a focused High execution quarter. We remained disciplined in advancing our strategic initiatives, keeping the customer and our partners at the center of our efforts. As Graham mentioned, Q2, originations topped, 600 million compared to the first quarter submissions. Also roads nearly 11% overall and our home stays. Second submissions grew by almost 23%.

Wholesale continues to be a Cornerstone of our success with nearly 55% volume growth in Q2 this year, relative to Q2 of 2024. We also increased our hmbs, issuance market share in June to over 29%. Our highest monthly share since January of 2024, our Q2 average market share of 28% reflects a 4% improvement over the average of the prior 3 quarters, these Trends reinforce confidence in our growth trajectory

turning to our retail platform. As of June 30th, we fully transitioned to our new a better way with foa campaign concluding. Our long-standing partnership with Tom Selleck early, indicators are promising in just 90 days, TV leads signal, growing appeal, among younger demographics and in markets with higher home values. At the same time, our digital acquisition strategy is gaining traction with a 10% increase in leads from digital channels.

We're also making major strides in technology in June, we launched the industry's first digital pre-qualification experience, Paving the way for scalable borrower. Friendly engagement, especially around second lean home equity loans, AI is playing a pivotal role here, accelerating development. Boosting operational efficiency and improving analytics, and document management.

Looking ahead to Q3, we're expanding this digital platform to a wide wider audience by combining seamless online access with expert loan officer support, we're enhancing both scale and service. We will also be introducing our new AI powered virtual call agent to improve off our engagement and Elevate customer experience by the end of the year.

Customers want speed and simplicity, and our digital experience, is being designed to deliver both. According to HDA, subordinate, lean loans, for senior borrowers, grew 20% year-over-year, reaching 49 billion in volume, Finance of America's meeting this demand through our home safe second product. While a significant opportunity remains ahead, as we continue to expand its reach through digital integration.

Overall, Q2 marked continued progress toward our long-term Vision, to become the most trusted brand for homeowners, entering the next chapter of life. We're building a smarter scalable and service letter, Retirement Solutions platform. And we're confident these investments will drive sustainable growth through 2025, and Beyond,

Before I wrap, I want to recognize the incredible impact of finance of America cares. Our employee funded nonprofit celebrating 8 years of service today Terrace has granted over 3.2 million dollars to our local communities and employees and crisis. Donated 12,000 hours of service and positively impacted, more than 2 million.

Million Lives. This speaks volumes about our culture and we're just getting started. Thank you to every team member who contributes with that. I'll turn it over to Matt to walk through the financials Matt.

Thank you, Kristen, and good afternoon, everyone.

Due to another strong quarter marked by continued growth and financial discipline, our funded volume held at $602 million, up 7% from $560 million in Q1 of 2025 and 35% above the $447 million in the second quarter of last year.

This marks your fifth consecutive quarter of volume growth.

Same period last year.

These results were driven by Steady production momentum and enhanced operating Leverage.

Fair value Marx, also, remained positive supported by tighter deal, spreads, declining index rates and stable home price assumptions.

Adjusted net income came in at 14.

Million 1.1 million or 8% higher than the first quarter of 12.9 million with adjusted. Eva de of 30 million for the quarter reflecting strength. In both Topline performance and margin discipline.

Our adjusted DPS for Q2 was 55 cents, bringing a first half of 2025, adjusted EPS to a dollar and 7 cents.

They sent our current trajectory, we remain on track delivered, within our full year, guidance range of 260 to 3 dollars. A share and adjusted EPS with continued operating. Leverage positioning us for higher, run rate exiting the year.

Revenue, excluding fair value changes from Market, inputs or model, assumptions settled, 84.8 million, and Q2 up 6% quarter over quarter from 79.9 million in q1 and up 22% year-over-year from 69.4 million.

This sequential and annual Improvement, reflects the commitment to our growing originations platform.

On the expense side, we remain disciplined. Our cost structure continues to align with our current scale, and we are realizing improved operating leverage as we grow.

Compared to the prior quarter total expenses were higher by approximately 2.7 million.

While variable expenses including variable compensation Loan, Production and portfolio, expense and marketing increased in line with higher volume and strategic marketing Investments. This was somewhat offset by continued reductions in our fixed cost base.

Compared to Q2 of last year, fixed expenses will lower by 4 million with significant decrease in professional fees and technology related expenses.

These 2 categories underscore recent efforts by the team, to negotiate continued Productions and vendor related. Spend

Turning to the balance sheet, we ended the quarter with 275 million in tangible, networks up from 187 million in q1 driven by our retained earnings.

Look Equity totaled 473 million at quarter end.

On the capital Markets Front, we securitize over 800 million in proprietary loans during the second quarter.

In July, we built on that momentum by closing a $1.2 billion transaction, our largest to date and the first in company history to exceed the $1 billion mark.

This Milestone not only reinforces the strength of investor demand for reverse assets but also positions us. Well, execute on our broader Capital plan.

we reaffirm our full year, guidance of

2.4 to 2.7 billion in originations and 260 to 3 dollars in adjusted eps.

For the third quarter, we expect funded volume in the range of 600 to 630 million.

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

Thank you, Matt.

Before we open the call for questions as announced yesterday, we have paid off our higher cost working capital facility and entered into an agreement with Blackstone to acquire the remaining Equity stake in finance of America.

This marks a natural evolution in our journey and I want to take the moments and thank our longtime Partners at Blackstone for their support, over the last 10 years, their belief in our team and our vision, play a meaningful role in shaping the company we are today looking forward. We are excited for the further support of longtime investors and bond holders through a new convertible debt. Facility we are, well, positioned to aggressively pursue our next chapter of growth.

As we mark this turning point in our ownership, it's an appropriate moment to step back and reflect on how far we've come just 1 year ago. We were exiting a period of transformation since then, we've delivered 5 consecutive quarters of volume growth regained, profitability launch launched a national brand campaign and stabilized our balance sheet. More importantly, we're helping more people understand that there is a better way.

a better way to age a better way, to manage, Financial uncertainty and a better way to tap into the value, they build through home ownership there is a better way with foa

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

We will now begin the question and answer session. If you would like to ask a question simply press star, followed by the number 1 on your telephone keypad.

And your first question comes from the line of dog. Carter with UBS dog, please go ahead.

Uh, thanks. Good afternoon.

1 to get clarity on on your reiterated guidance, because that factor in paying off the working capital line, and the, and the impact of the buyback.

Help us obviously meet that Target as well. Alright, so the first impact on the the path of the higher, um, cost working capital lines, you know, and gross numbers we've, you know, retired 85 million. I work in capital line, at 15% rate of interest.

And we replace it with 40 million of of exchangeable notes that bear to 0% interest and a 20 million dollar working capital line at 10%. So we're going to see about a 10 million annualized reduction in our interest expense just from that transaction.

Then the timing on the share count. Um, you know, we've got a window between 105, 120 days out which puts that somewhere around the end of November, right? So you'd expect to see that reduced to your account partially, in our Q4 numbers, but more important as we, uh, project into 2026.

Great, appreciate that. Matt.

um,

And then, can you just talk about how you're thinking about, you know, kind of the sources and uses, uh, to pay off the working capital line? And then the fund, the, um, you know, the funds, the, the buyback, you know, later later this year,

Um, yeah, absolutely. So the so the convertible deal, uh, closed yesterday in the work Capital was paid off, uh, yesterday. Um, so that's, that's done. Uh, we have a series of transactions, uh, between now and the end of the year that will fund. Uh, not just the, uh, not just the, the repurchase of the equity, but also the, uh, uh, the advertising payment, uh, to the bond holder. So let's do it. The, uh, the

Do at the end of November.

Great appreciate that. If I could just get 1 more, like how are you thinking about the long term? What is the right capital structure for the business? What's the right leverage level?

To, you know, kind of uh making good progress in your transition here.

I mean, it's a very fair question. Doug. I think, you know, first things first, for us, is to think about how to retire the, the, the debt we have on hand, right? So, remember a year ago, we exchanged that 350 million of debt for 200 million, um, which 50 be paid back. This November with this latest support agreement and Amendment. We'll, we'll pay back 60 of that by November of 26, and the remaining 90 million in November of 27. So, that's, that's kind of our first order of business. And the, in the capital structure, uh, thinking there may be 150 convertible note, I think eventually, we'll we'll convert Equity. Um, so I think once we get a, you know, a line of sight to just getting past those Milestones, we'll have some additional thoughts as to the capital structure, um, going forward.

Great. Thank you guys.

Thank you, everybody.

Personal further, quit.

There's no further question at this time. I will now turn the call over to Grant Fleming for closing remarks.

Uh, thank you everybody for joining, the call another great quarter for finance of America and uh, we look forward to updating you on a Q3 numbers uh, later this year. So, thank you very much.

that includes today's call, you may now disconnect