Finance of America panies (FOA) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income of $55 million or $0.29 per basic share for continuing operations, primarily driven by market rate changes that increased the value of reverse assets [44][62] - On an adjusted basis, the company recognized a net loss of $15 million or $0.08 per fully diluted share, as earnings in operating segments were offset by corporate expenses [44][62] - Tangible book value for continuing operations increased from $108 million at the end of last year to over $200 million this quarter, reflecting a significant improvement [5][68] Business Line Data and Key Metrics Changes - The Retirement Solutions segment includes all origination activity, such as reverse mortgage and home improvement lending, and is expected to drive profitable growth post-AAG acquisition [10][69] - The Portfolio Management segment recognized $99 million in pretax income due to market rate adjustments, with an adjusted net income of $4 million for the quarter [70] Market Data and Key Metrics Changes - The retirement savings gap in the U.S. is approaching $4 trillion, while homeowners aged 62 and older have amassed over $11.5 trillion in home equity value, indicating a substantial market opportunity [66] - The company expects volumes to pick up in Q2, particularly due to the AAG acquisition, although margins may be softer in the short term due to banking dislocation [19][20] Company Strategy and Development Direction - The acquisition of AAG is expected to enhance growth prospects and position the company as a leader in retirement solutions, marking a new chapter in its strategic plan [6][65] - The company aims to streamline its organization and reduce corporate overhead, having already achieved a 32% reduction in corporate salaries and benefits since Q1 2022 [12][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term earnings power of the organization, emphasizing the importance of the AAG acquisition for future growth [49][65] - The company has not yet seen significant credit tightening but noted some widening of spreads in Q2, indicating a cautious outlook on margins [52][74] Other Important Information - The company has designated certain business lines as discontinued operations following the wind down of mortgage operations and divestitures of commercial title insurance and lender services businesses [67] - A $30 million capital raise from existing shareholders contributed to the significant improvement in tangible equity, which increased by 88% from December 31 [68] Q&A Session Summary Question: Impact of banking turmoil on the company - Management noted that they have not seen significant impacts from banking turmoil but acknowledged some widening of spreads in Q2 [50][52] Question: Outlook for origination volume - Management expects origination volumes to improve in Q2, particularly as the integration of AAG progresses [19][54] Question: Normalized earnings outlook post-restructuring - Management indicated that corporate expenses are expected to be reduced significantly, which should positively impact profitability moving forward [81][82]