Finance of America panies (FOA) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company recorded a net loss of $182 million or $0.90 per fully diluted share in Q4 2022, with an adjusted net loss of $56 million for the quarter and $61 million for the full year [7][37] - Cash decreased to $97 million in Q4, primarily due to operational losses in the mortgage origination segment, with a book value of $405 million and tangible net worth of $30 million as of December 31 [21][22] - On a pro forma basis, excluding the wind-down and divested businesses, the company recognized adjusted net income of $53 million for the year [20][43] Business Line Data and Key Metrics Changes - The reverse mortgage business originated $4.8 billion in funded volume in 2022, generating $128 million in pre-tax income despite declining revenue margins [32][42] - The mortgage origination segment recorded a $98 million adjusted net loss, while the commercial segment had a pre-tax loss of $26 million and lender services recorded a pre-tax loss of $25 million [41][42] - The company expects modest losses in the mortgage business in Q1 2023, with losses anticipated to be eliminated as the wind-down is completed [38] Market Data and Key Metrics Changes - The company is focusing on the reverse mortgage market, which is benefiting from strong demographic and economic tailwinds, with senior home equity reaching a record $11.8 trillion [18][30] - The acquisition of AAG is expected to enhance the company's market presence and expand its ability to educate consumers about leveraging home equity for retirement [10][11] Company Strategy and Development Direction - The company has decided to discontinue its forward mortgage origination segment due to uncertainty in the residential mortgage market, focusing instead on high-growth businesses like reverse mortgages [8][9] - The strategic direction is centered on helping Americans achieve their retirement goals through innovative home equity solutions [30][31] - The company anticipates significant cost and revenue synergies from the AAG acquisition, which will strengthen its capital and liquidity [39][40] Management's Comments on Operating Environment and Future Outlook - Management remains bullish on the earnings power of the organization but expects some volatility in near-term performance due to the recent business transformation [45] - The company believes that the actions taken will lead to improved performance in 2023, with a focus on completing announced transactions and integrating the AAG platform [24][40] Other Important Information - The company has taken steps to streamline operations and optimize infrastructure, expecting annual savings of $80 million to $100 million compared to peak costs in 2022 [34] - The company has completed four securitizations for over $1.4 billion in proprietary reverse volume during a challenging market [33] Q&A Session Summary Question: What is the current state of the Reverse business and expected volumes? - Management noted that volumes in the Reverse space have decreased, but they expect the AAG acquisition to add approximately $100 million in proprietary product volume post-acquisition [47][48] Question: What are the expectations for adjusted net income in Q1? - Management indicated that Q1 is likely to be the trough for the year, with improvements expected in Q2 as synergies from the AAG transaction materialize [49][50] Question: Are there any additional business lines that need to be wound down? - Management expressed confidence that the process of divesting non-core operations is largely complete, with no immediate plans for further monetization of remaining business lines [51]