Finance of America panies (FOA) - 2024 Q2 - Quarterly Results

Executive Summary & Company Highlights Second Quarter 2024 Overview Finance of America reported a net loss of $5 million, achieving positive adjusted EBITDA of $9 million and strategic compliance actions Q2 2024 Key Financial Highlights | Metric | Value ($ millions) | Per Share ($) | | :-------------------------------------- | :----------------- | :------------ | | Net loss from continuing operations | (5) | (0.20) | | Adjusted net loss | (1) | (0.05) | | Adjusted EBITDA | 9 | N/A | - Achieved fourth consecutive quarter of improved operating performance on an adjusted net basis[3] - Adjusted EBITDA of $9 million represents the first positive quarter since 2022[3] - Announced Exchange Offer Support Agreement with over 99% of senior unsecured note holders indicating intent to participate[3] - Completed reverse stock split in July 2024, bringing FOA back into compliance with NYSE listing standards[3] Consolidated Financial Performance Summary Financial Results The company achieved significant Q2 2024 financial improvements, with total revenues increasing and adjusted EBITDA turning positive Summary Financial Performance (Q2'24 vs. Q1'24 & Q2'23) | Metric ($ millions, except per share) | Q2'24 | Q1'24 | Q2'24 vs Q1'24 (%) | Q2'23 | Q2'24 vs Q2'23 (%) | YTD 2024 | YTD 2023 | 2024 vs 2023 (%) | | :------------------------------------ | :---- | :---- | :----------------- | :---- | :----------------- | :------- | :------- | :--------------- | | Funded volume | 447 | 424 | 5% | 447 | —% | 871 | 804 | 8% | | Total revenues | 79 | 75 | 5% | (112) | 171% | 154 | 29 | 431% | | Total expenses and other, net | 83 | 90 | (8)% | 112 | (26)% | 173 | 195 | (11)% | | Pre-tax loss from continuing operations | (4) | (16) | 75% | (224) | 98% | (20) | (166) | 88% | | Net loss from continuing operations | (5) | (16) | 69% | (221) | 98% | (21) | (165) | 87% | | Adjusted net loss | (1) | (7) | 86% | (26) | 96% | (9) | (42) | 79% | | Adjusted EBITDA | 9 | (1) | 1000% | (26) | 135% | 7 | (38) | 118% | | Basic net loss per share | (0.20)| (0.58)| 66% | (9.11)| 98% | (0.78) | (8.04) | 90% | | Adjusted loss per share | (0.05)| (0.33)| 85% | (1.16)| 96% | (0.37) | (2.00) | 82% | Balance Sheet Highlights The balance sheet as of June 30, 2024, showed minor quarter-over-quarter changes across key asset and liability categories Balance Sheet Highlights (Q2'24 vs. Q1'24) | Metric ($ millions) | June 30, 2024 | March 31, 2024 | Variance (%) Q2'24 vs Q1'24 | | :---------------------------------------- | :------------ | :------------- | :-------------------------- | | Cash and cash equivalents | 47 | 48 | (2)% | | Securitized loans held for investment | 26,614 | 26,458 | 1% | | Total assets | 27,974 | 27,684 | 1% | | Total liabilities | 27,723 | 27,428 | 1% | | Total equity | 251 | 256 | (2)% | Condensed Consolidated Statements of Financial Condition The detailed balance sheet as of June 30, 2024, shows total assets of $27.97 billion and liabilities of $27.72 billion Key Balance Sheet Figures (June 30, 2024) | Metric | June 30, 2024 ($ thousands) | | :------------------------------------------------------------------ | :-------------------------- | | Cash and cash equivalents | 46,509 | | Loans held for investment, subject to HMBS related obligations | 18,196,092 | | Loans held for investment, subject to nonrecourse debt | 8,418,195 | | Total Assets | 27,974,354 | | HMBS related obligations | 17,980,232 | | Nonrecourse debt | 8,050,708 | | Total Liabilities | 27,723,057 | | Total Equity | 251,297 | Condensed Consolidated Statements of Operations Q2 2024 consolidated operations show a significant turnaround in total revenues to $79 million and reduced net loss Key Income Statement Figures (Q2'24) | Metric ($ thousands) | Q2'24 | Q1'24 | Q2'23 | | :---------------------------------------- | :-------- | :-------- | :---------- | | Net Portfolio Interest Income | 65,473 | 70,175 | 65,079 | | Net Origination Gains | 40,260 | 39,657 | 32,926 | | Net Fair Value Changes on Loans and Related Obligations | 14,738 | 6,337 | (179,118) | | Net Other Income (Expense) | 13,566 | 4,507 | (176,976) | | Total Revenues | 79,039 | 74,682 | (111,897) | | Total Expenses | 85,047 | 91,315 | 110,005 | | Net Loss from Continuing Operations | (4,921) | (15,780) | (220,624) | - Total Revenues increased by 5.8% QoQ and significantly by 170.6% YoY (from negative to positive)[15] - Total Expenses decreased by 7% QoQ and 22.7% YoY[15] Earnings Per Share Q2 2024 basic net loss per share was $(0.20) and diluted net loss per share was $(0.29), reflecting substantial improvements Earnings Per Share (Q2'24 vs. Q1'24 & Q2'23) | Metric | Q2'24 | Q1'24 | Q2'23 | YTD 2024 | YTD 2023 | | :-------------------------------------------- | :------- | :------- | :------- | :------- | :------- | | Basic net loss per share from continuing operations | $(0.20)$ | $(0.58)$ | $(9.11)$ | $(0.78)$ | $(8.04)$ | | Diluted net loss per share from continuing operations | $(0.29)$ | $(0.58)$ | $(9.11)$ | $(0.88)$ | $(8.04)$ | - Basic net loss per share from continuing operations improved by 65.5% QoQ and 97.8% YoY[16] - Diluted net loss per share from continuing operations improved by 50% QoQ and 96.8% YoY[16] Segment Performance Retirement Solutions Segment Retirement Solutions achieved adjusted net income of $6 million in Q2 2024, driven by increased volumes and reduced expenses Retirement Solutions Segment Performance (Q2'24) | Metric ($ millions) | Q2'24 | Q1'24 | Q2'24 vs Q1'24 (%) | Q2'23 | Q2'24 vs Q2'23 (%) | YTD 2024 | YTD 2023 | 2024 vs 2023 (%) | | :------------------ | :---- | :---- | :----------------- | :---- | :----------------- | :------- | :------- | :--------------- | | Funded volume | 447 | 424 | 5% | 447 | —% | 871 | 804 | 8% | | Total revenue | 47 | 46 | 2% | 41 | 15% | 93 | 67 | 39% | | Pre-tax loss | (2) | (4) | 50% | (18) | 89% | (6) | (27) | 78% | | Adjusted net income (loss) | 6 | 5 | 20% | (5) | 220% | 11 | (3) | 467% | - Total expenses decreased significantly from $59 million in Q2 2023 to $49 million in Q2 2024 due to business integration and operational streamlining[8] Portfolio Management Segment Portfolio Management delivered strong Q2 2024 performance, reporting pre-tax income of $22 million and adjusted net income of $12 million Portfolio Management Segment Performance (Q2'24) | Metric ($ millions) | Q2'24 | Q1'24 | Q2'24 vs Q1'24 (%) | Q2'23 | Q2'24 vs Q2'23 (%) | YTD 2024 | YTD 2023 | 2024 vs 2023 (%) | | :------------------ | :---- | :---- | :----------------- | :---- | :----------------- | :------- | :------- | :--------------- | | Assets under management | 27,655| 27,357| 1% | 26,064| 6% | 27,655 | 26,064 | 6% | | Total revenue | 41 | 37 | 11% | (146) | 128% | 79 | (22) | 459% | | Pre-tax income (loss) | 22 | 14 | 57% | (168) | 113% | 36 | (69) | 152% | | Adjusted net income | 12 | 6 | 100% | 1 | 1100% | 17 | 6 | 183% | - Net fair value adjustments totaled $6 million in Q2 2024, as credit spread and home price appreciation adjustments more than offset changes in market interest rates[10] Non-GAAP Financial Measures & Reconciliations Reconciliation to Adjusted Net Loss and Adjusted EBITDA This section reconciles GAAP net loss to non-GAAP adjusted net loss and adjusted EBITDA, highlighting improved operational performance Reconciliation of Net Loss to Adjusted Net Loss and Adjusted EBITDA ($ millions) | Metric | Q2'24 | Q1'24 | Q2'23 | YTD 2024 | YTD 2023 | | :-------------------------------------- | :---- | :---- | :---- | :------- | :------- | | Net loss from continuing operations | (5) | (16) | (221) | (21) | (165) | | Adjustments for: | | | | | | | Changes in fair value | (8) | (9) | 171 | (18) | 77 | | Amortization or impairment of intangibles and impairment of other assets | 9 | 10 | 9 | 20 | 19 | | Equity-based compensation | — | 3 | 3 | 3 | 7 | | Certain non-recurring costs | 2 | 2 | 4 | 3 | 6 | | Adjusted net loss | (1) | (7) | (26) | (9) | (42) | | Adjusted EBITDA | 9 | (1) | (26) | 7 | (38) | Adjusted Net Income by Segment Adjusted net income by segment for Q2 2024 shows positive contributions from Retirement Solutions ($6 million) and Portfolio Management ($12 million) Adjusted Net Income (Loss) by Segment (Q2'24) | Segment | Pre-tax income (loss) ($ millions) | Adjusted net income (loss) ($ millions) | Adjusted earnings (loss) per share ($) | | :------------------- | :--------------------------------- | :-------------------------------------- | :------------------------------------- | | Retirement Solutions | (2) | 6 | 0.26 | | Portfolio Management | 22 | 12 | 0.52 | | Corporate & Other | (24) | (18) | (0.78) | | FOA (Total) | (4) | (1) | (0.05) | Adjusted Net Income (Loss) by Segment (YTD 2024) | Segment | Pre-tax income (loss) ($ millions) | Adjusted net income (loss) ($ millions) | Adjusted earnings (loss) per share ($) | | :------------------- | :--------------------------------- | :-------------------------------------- | :------------------------------------- | | Retirement Solutions | (6) | 11 | 0.48 | | Portfolio Management | 36 | 17 | 0.74 | | Corporate & Other | (50) | (37) | (1.61) | | FOA (Total) | (20) | (9) | (0.37) | Non-GAAP Financial Measures Definitions This section defines Finance of America's non-GAAP financial measures: Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Earnings (Loss) per Share - Adjusted Net Income (Loss) is defined as consolidated net income (loss) from continuing operations adjusted for changes in fair value, amortization/impairment of intangibles, equity-based compensation, certain non-recurring costs, and pro-forma income tax adjustments[33] - Adjusted EBITDA is defined as Adjusted Net Income (Loss) further adjusted for taxes, interest on non-funding debt, and depreciation[33] - Adjusted Earnings (Loss) Per Share is calculated by dividing Adjusted Net Income (Loss) by the weighted average outstanding shares on an if-converted basis[33] Additional Company Information & Disclosures Webcast and Conference Call Information Details for the Q2 2024 results webcast and conference call held on August 6, 2024, are provided, with replay available - Management hosted a webcast and conference call on August 6, 2024, at 5:00 pm Eastern Time to discuss Q2 2024 results[28] - A replay of the call is available on the Company's website until August 20, 2024[28] About Finance of America Finance of America (NYSE: FOA) is a leading provider of home equity-based financing solutions for retirement, optimizing loan distribution - Finance of America is a leading provider of home equity-based financing solutions for a modern retirement[29] - The company offers capital markets and portfolio management capabilities to optimize the distribution of originated loans to investors[29] Forward-Looking Statements This section provides cautionary disclosure on forward-looking statements, highlighting inherent uncertainties and risks that may cause actual results to differ - Forward-looking statements represent the Company's beliefs regarding future events, which are inherently uncertain and outside of the Company's control[30] - Readers are cautioned not to place undue reliance upon any forward-looking statements, as results for any specified quarter are not necessarily indicative of full-year or future period results[30] - Key risk factors include managing business transformation, responding to interest rate changes, market concentration, fair value estimates, cyber risks, regulatory compliance, and liquidity challenges[31] Contacts Contact information for Finance of America's media and investor relations departments is provided for inquiries - For media inquiries, contact pr@financeofamerica.com[34] - For investor relations inquiries, contact ir@financeofamerica.com[34]