Finance of America panies (FOA) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Highlights Key Highlights Finance of America reported a $16 million net loss from continuing operations for Q1 2024, showing improved adjusted operating performance Q1 2024 Key Financial Metrics | Metric | Value (in millions) | | :--- | :--- | | Net loss from continuing operations | $(16) | | Adjusted net loss | $(7) | | Adjusted EBITDA | $(1) | - This marks the third consecutive quarter of improved operating performance on an adjusted net basis, with the adjusted net loss narrowing significantly[1][4] - The Retirement Solutions segment saw a 69% improvement on a pre-tax basis compared to the prior quarter, driven by higher revenue margin and reduced expenses[4] - The CEO expressed confidence that the company is well-positioned to benefit from home price appreciation and a growing senior homeowner population, and is on track to return to sustained profitability[3] Consolidated Financial Results Financial Performance Summary Total revenues for Q1 2024 were $75 million, a decrease from prior periods, though adjusted net loss improved by 65% to -$7 million Q1 2024 Financial Summary vs. Prior Periods (Continuing Operations) | ($ amounts in millions) | Q1'24 | Q4'23 | Q1'23 | | :--- | :--- | :--- | :--- | | Funded volume | $424 | $446 | $357 | | Total revenues | $75 | $276 | $141 | | Pre-tax loss from continuing operations | $(16) | $172 | $58 | | Net loss from continuing operations | $(16) | $171 | $55 | | Adjusted net loss | $(7) | $(20) | $(15) | | Adjusted EBITDA | $(1) | $(18) | $(12) | Balance Sheet Highlights Total assets increased 2% to $27.7 billion, driven by securitized loans, while total liabilities also grew 2%, leading to a 6% decrease in total equity Balance Sheet Summary (as of March 31, 2024) | ($ amounts in millions) | March 31, 2024 | December 31, 2023 | Variance (%) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $48 | $46 | 4% | | Securitized loans held for investment | $26,458 | $25,821 | 2% | | Total assets | $27,684 | $27,108 | 2% | | Total liabilities | $27,428 | $26,835 | 2% | | Total equity | $256 | $272 | (6)% | - The increase in total assets and liabilities was primarily driven by growth in securitized loans and corresponding HMBS obligations, following two proprietary securitizations during the quarter[8] Segment Performance Retirement Solutions The Retirement Solutions segment reported a pre-tax loss of $4 million, a 69% improvement, driven by a 12% revenue increase and improved margins Retirement Solutions Q1 2024 Performance | ($ amounts in millions) | Q1'24 | Q4'23 | Q1'23 | | :--- | :--- | :--- | :--- | | Funded volume | $424 | $446 | $357 | | Total revenue | $46 | $41 | $26 | | Pre-tax loss | $(4) | $(13) | $(9) | | Adjusted net income (loss) | $5 | $(2) | $2 | - Revenue margin improved to 10.8% in Q1 2024 from 9.2% in Q4 2023 as a result of spread tightening[13] - Funded volume in the Reverse business decreased 3% from the prior quarter, attributed to seasonality and the consolidation to a single loan origination system[13] Portfolio Management The Portfolio Management segment generated a pre-tax income of $14 million and adjusted net income of $6 million, primarily due to higher yields Portfolio Management Q1 2024 Performance | ($ amounts in millions) | Q1'24 | Q4'23 | Q1'23 | | :--- | :--- | :--- | :--- | | Assets under management | $27,357 | $26,773 | $26,327 | | Total revenue | $37 | $240 | $124 | | Pre-tax income | $14 | $217 | $99 | | Adjusted net income | $6 | $— | $4 | - The segment's adjusted net income of $6 million was an improvement over the prior quarter's break-even result, primarily due to increased yield on the Company's retained interests in securitized loans[14] - Net fair value adjustments during the quarter totaled $7 million, as changes in market interest rates were more than offset by credit spread and home price appreciation adjustments[14] Detailed Financial Statements Condensed Consolidated Statements of Financial Condition The detailed balance sheet shows total assets of $27.68 billion and total liabilities of $27.43 billion, with total equity at $255.7 million Detailed Balance Sheet (in thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $48,229 | $46,482 | | Loans held for investment, subject to HMBS related obligations | $18,050,772 | $17,548,763 | | Loans held for investment, subject to nonrecourse debt | $8,407,602 | $8,272,393 | | TOTAL ASSETS | $27,683,568 | $27,107,590 | | LIABILITIES & EQUITY | | | | HMBS related obligations | $17,827,060 | $17,353,720 | | Nonrecourse debt | $7,897,896 | $7,904,200 | | TOTAL LIABILITIES | $27,427,845 | $26,835,183 | | TOTAL EQUITY | $255,723 | $272,407 | Condensed Consolidated Statements of Operations For Q1 2024, total revenues were $74.7 million and total expenses $91.3 million, resulting in a pre-tax loss of $15.8 million from continuing operations Detailed Income Statement (in thousands) | | Q1'24 | Q4'23 | Q1'23 | | :--- | :--- | :--- | :--- | | TOTAL REVENUES | $74,682 | $275,732 | $140,855 | | TOTAL EXPENSES | $91,315 | $92,799 | $83,777 | | NET INCOME (LOSS) FROM CONTINUING OPERATIONS | $(15,780) | $171,361 | $55,482 | | NET LOSS FROM DISCONTINUED OPERATIONS | $(4,524) | $(6,698) | $(40,890) | | NET INCOME (LOSS) | $(20,304) | $164,663 | $14,592 | | NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST | $(7,538) | $61,361 | $3,054 | Reconciliation of GAAP to Non-GAAP Measures Consolidated Reconciliation The company reconciles its GAAP net loss of $16 million to a non-GAAP adjusted net loss of $7 million, further reconciling to an adjusted EBITDA loss of $1 million Reconciliation to Adjusted Net Loss and Adjusted EBITDA (Q1 2024, in millions) | | Amount | | :--- | :--- | | Net loss from continuing operations (GAAP) | $(16) | | Adjustments for: | | | Changes in fair value | $(9) | | Amortization and impairment of intangibles | $10 | | Share-based compensation | $3 | | Certain non-recurring costs | $2 | | Benefit for income taxes | $2 | | Adjusted net loss (Non-GAAP) | $(7) | | Adjustments for: | | | Benefit for income taxes | $(2) | | Depreciation | $— | | Interest expense on non-funding debt | $8 | | Adjusted EBITDA (Non-GAAP) | $(1) | Per Share Reconciliation (Q1 2024) | | Per Share Amount | | :--- | :--- | | Basic net loss per share from continuing operations (GAAP) | $(0.06) | | Adjusted loss per share (Non-GAAP) | $(0.03) | Adjusted Net Income by Segment For Q1 2024, the total adjusted net loss of $7 million is broken down by segment, with Retirement Solutions and Portfolio Management contributing positive adjusted net income Q1 2024 Adjusted Net Income (Loss) by Segment (in millions) | Segment | Pre-tax income (loss) | Adjustments | Adjusted net income (loss) | | :--- | :--- | :--- | :--- | | Retirement Solutions | $(4) | $12 | $5 | | Portfolio Management | $14 | $(6) | $6 | | Corporate & Other | $(26) | $8 | $(18) | | Total FOA | $(16) | $14 | $(7) | Supplementary Information Forward-Looking Statements and Risk Factors The report contains forward-looking statements subject to inherent uncertainties and numerous risk factors, including business transformation and regulatory compliance - The company is managing unique challenges presented by its business transformation from a diversified lending platform to a modern retirement solutions platform[29] - Key risks include the ability to operate profitably, respond to interest rate changes, manage cyber risks, obtain sufficient capital and liquidity, and comply with extensive regulations[29][30] Non-GAAP Financial Measures Definition The company uses non-GAAP measures like Adjusted Net Loss and Adjusted EBITDA to provide an additional view of performance, adjusting GAAP figures - Adjusted Net Loss is defined as net income from continuing operations adjusted for items like changes in fair value, amortization, share-based compensation, and certain non-recurring costs[32] - Adjusted EBITDA is defined as Adjusted Net Loss further adjusted for taxes, interest on non-funding debt, and depreciation[33] - A reconciliation of forward-looking non-GAAP guidance to GAAP measures is not provided due to the inherent difficulty in forecasting the adjusting items[37]