Finance of America Companies Inc. (“Finance of America” or the “Company”) (NYSE: FOA), a modern retirement solutions platform, reported financial results for the quarter ended June 30, 2023.
Second Quarter 2023 Highlights
- Net loss from continuing operations of $221 million primarily due to non-cash, negative fair value changes on long-term assets and liabilities.
- For the quarter, the Company recognized an adjusted net loss(2) of $26 million or $0.12 per fully diluted share as it absorbed additional costs to integrate the American Advisors Group (“AAG”) platform and made investments in future growth.
- Completed the sale of a majority stake of the Lender Services platform on June 30, 2023.
- Completed the sale of the Title Insurance business on July 3, 2023.
- For the first half of 2023, our subsidiary, Finance of America Reverse maintained 39% market share in the HECM Reverse market.(1)
(1) Source: https://www.newviewadvisors.com/commentary/2023-first-half-hmbs-issuer-league-tables/; Measured by HMBS issuance
(2) See the sections titled “Reconciliation to GAAP “ and “Non-GAAP Financial Measures” for reconciliations to the most directly comparable GAAP measures and other important disclosures.
Graham A. Fleming, Chief Executive Officer commented, “Finance of America delivered on each strategic initiative we set out to accomplish as we pursue our goal to help even more Americans embrace a modern retirement and understand the value and benefits of home equity. The Company is now transformed into a leading modern retirement solutions platform. After completion of the AAG integration, we believe we will be well positioned for long-term success.”
Second Quarter Financial Summary of Continuing Operations
($ amounts in millions, except per share data) | Variance (%) | Variance (%) | Variance (%) | ||||||||||||||||||
Q2’23 | Q1’23 | Q2'23 vs Q1’23 | Q2’22 | Q2'23 vs Q2'22 | YTD 2023 | YTD 2022 | 2023 vs 2022 | ||||||||||||||
Funded volume | $ | 447 | $ | 357 | 25 % | $ | 1,647 | (73) % | $ | 804 | $ | 3,170 | (75) % | ||||||||
Total revenue | (112) | 141 | (179) % | (21) | (433) % | 29 | 25 | 16 % | |||||||||||||
Total expenses and other, net | 112 | 83 | 35 % | 99 | 13 % | 195 | 207 | (6) % | |||||||||||||
Pre-tax income (loss) from continuing operations | (224) | 58 | (486) % | (120) | (87) % | (166) | (182) | 9 % | |||||||||||||
Net income (loss) from continuing operations | (221) | 55 | (502) % | (118) | (87) % | (165) | (172) | 4 % | |||||||||||||
Adjusted net income (loss)(1) | (26) | (15) | (73) % | 6 | (533) % | (42) | 44 | (195) % | |||||||||||||
Adjusted EBITDA(1) | (26) | (12) | (117) % | 17 | (253) % | (38) | 78 | (149) % | |||||||||||||
Basic income (loss) per share | $ | (0.91) | $ | 0.29 | (414) % | $ | (0.34) | (168) % | (0.80) | (0.56) | (43) % | ||||||||||
Diluted income (loss) per share(2) | $ | (0.91) | $ | 0.22 | (514) % | $ | (0.49) | (86) % | (0.80) | (0.73) | (10) % | ||||||||||
Adjusted diluted earnings (loss) per share(2) | $ | (0.12) | $ | (0.08) | (50) % | $ | 0.03 | (500) % | (0.20) | 0.23 | (187) % | ||||||||||
(1) See Reconciliation to GAAP section for a reconciliation of Adjusted net income (loss) and Adjusted EBITDA to Net income (loss).
(2) Calculated on an if-converted basis except when anti-dilutive. See Reconciliation to GAAP section for more detail.
Balance Sheet Highlights
June 30, | March 31, | Variance (%) | ||||||
($ amounts in millions) | 2023 | 2023 | Q2 2023 vs. Q1 2023 | |||||
Cash and cash equivalents | $ | 56 | $ | 69 | (19) % | |||
Securitized loans held for investment (HMBS & nonrecourse) | 24,812 | 24,998 | (1) % | |||||
Total assets | 26,549 | 26,826 | (1) % | |||||
Total liabilities | 26,275 | 26,336 | — % | |||||
Total equity | 274 | 490 | (44) % | |||||
- Ended the first quarter with cash and cash equivalents from continuing operations of $56 million. The decrease in cash was primarily attributable to operational losses during the quarter.
- Securitized loans held for investment (HMBS & nonrecourse) remained relatively flat as new production was offset by the change in fair value related to market rates and spreads.
- Total assets decreased 1% in line with the change in securitized loans held for investment.
- Total liabilities also remained flat to prior quarter, in line with the change in assets.
Segment Results
Retirement Solutions
The Retirement Solutions segment generates revenue and earnings in the form of net origination gains and origination fees earned on the origination of reverse mortgage and home improvement loans.
Var (%) | Var (%) | Var (%) | |||||||||||||||||||
($ amounts in millions) | Q2’23 | Q1’23 | Q2’23 vs Q1’23 | Q2’22 | Q2’23 vs Q2’22 | YTD 2023 | YTD 2022 | 2023 vs 2022 | |||||||||||||
Funded volume | $ | 447 | $ | 357 | 25 % | $ | 1,647 | (73) % | $ | 804 | $ | 3,170 | (75) % | ||||||||
Total revenue | 41 | 26 | 58 % | 83 | (51) % | 67 | 192 | (65) % | |||||||||||||
Pre-tax income (loss) | (18) | (9) | (100) % | 32 | (156) % | (27) | 98 | (128) % | |||||||||||||
Adjusted net income (loss) | (5) | 2 | (350) % | 31 | (116) % | (3) | 87 | (103) % | |||||||||||||
- Funded volume increased 25% quarter over quarter as the Company began the operational integration of the retail platform of AAG.
- Second quarter revenue increased 58% from first quarter to $41 million due to higher volumes and a higher margin associated with the increase in volume through the AAG retail platform.
Portfolio Management
The Portfolio Management segment generates revenue and earnings in the form of gain on sale of loans, fair value gains or losses, interest income, servicing income, fees for underwriting, advisory and valuation services and other ancillary fees.
Var (%) | Var (%) | Var (%) | |||||||||||||||||||
($ amounts in millions) | Q2’23 | Q1’23 | Q2’23 vs Q1’23 | Q2’22 | Q2’23 vs Q2’22 | YTD 2023 | YTD 2022 | 2023 vs 2022 | |||||||||||||
Assets under management | $ | 26,064 | $ | 26,327 | (1) % | $ | 19,881 | 31 % | $ | 26,064 | $ | 19,881 | 31 % | ||||||||
Assets excluding HMBS and non-recourse obligations | 1,605 | 1,887 | (15) % | 2,360 | (32) % | 1,605 | 2,360 | (32) % | |||||||||||||
Total revenue | (146) | 124 | (218) % | (95) | (54) % | (22) | (148) | 85 % | |||||||||||||
Pre-tax income (loss) | (168) | 99 | (270) % | (129) | (30) % | (69) | (217) | 68 % | |||||||||||||
Adjusted net income (loss) | 1 | 4 | (75) % | (2) | 150 % | 6 | 5 | 20 % | |||||||||||||
- Second quarter revenue was materially impacted by negative non-cash fair value adjustments on assets held for investment and related liabilities, as we updated model assumptions to account for changes in market interest rates, home price appreciation and credit spreads during the quarter.
Reconciliation to GAAP
($ amounts in millions)(1) | Q2’23 | Q1’23 | Q2’22 | YTD 2023 | YTD 2022 | |||||||||
Reconciliation of net income (loss) from continuing operations to adjusted net income (loss) and adjusted EBITDA | ||||||||||||||
Net income (loss) from continuing operations | $ | (221) | $ | 55 | $ | (118) | $ | (165) | $ | (172) | ||||
Add back: Benefit (provision) for income taxes | 3 | (3) | 2 | 1 | 10 | |||||||||
Net income (loss) from continuing operations before taxes | (224) | 58 | (120) | (166) | (182) | |||||||||
Adjustments for: | ||||||||||||||
Changes in fair value(2) | 171 | (94) | 111 | 77 | 207 | |||||||||
Amortization of intangible assets(3) | 9 | 9 | 9 | 19 | ||||||||||
