Finance of America panies (US:FOA)2022-08-07 16:03Financial Data and Key Metrics Changes - The company recorded a net loss of $168 million or $0.70 per fully diluted share for Q2 2022, primarily due to operating losses and balance sheet write-downs [8][10] - On an adjusted basis, the company generated an adjusted net loss of $22 million, largely attributed to the Mortgage Originations segment due to a significant drop in refinance volumes [10][32] - Tangible equity decreased by $155 million, mainly due to non-cash fair value marks from wider spreads [33] Business Line Data and Key Metrics Changes - Mortgage Originations revenue decreased by 24% compared to Q1 2022, with a 29% decline in net rate lock volume, resulting in a $21 million adjusted net loss [34] - Reverse Origination segment achieved a record funded volume of $1.58 billion in Q2, a 7% increase quarter-over-quarter, but revenue decreased by 26% due to margin compression [21][36] - Commercial Originations originated $540 million in funded volume, a slight decline from Q1, with expectations of lower volumes in Q3 due to rising rates [23][38] - Lender Services revenue fell by 24% quarter-over-quarter, impacted by lower refinance volumes, but advisory income saw strong growth [39] Market Data and Key Metrics Changes - The tenure increased by 115 basis points to 3.49% and then decreased by 51 basis points to close the quarter at 2.98%, resulting in a 64 basis point increase for the quarter [29] - Spreads on both agency and non-agency mortgages reached new highs, significantly impacting the Origination businesses and balance sheet [30] Company Strategy and Development Direction - The company is focused on three strategic priorities: optimizing the mortgage business, investing in Specialty Financing Services, and leveraging technology to transform into a customer-centric organization [15][26] - The company aims to capitalize on the growing purchase market, with purchase originations currently comprising approximately 85% of total volume [18] - The Home Improvement business is expected to become an effective customer acquisition channel, with plans to cross-sell additional products [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating current market challenges and emphasized the long-term fundamentals of the business remain sound [14][27] - The company anticipates continued volatility in the market but expects margins to improve as conditions stabilize [42] - Management is not providing specific financial guidance due to market uncertainty but remains optimistic about long-term growth opportunities [42] Other Important Information - The company has reduced overall headcount and expenses by approximately 20% since the beginning of the year to align with current market demand [11][12] - The company is actively managing costs and has implemented expense initiatives to right-size the business [11] Q&A Session Summary Question: Customer Growth Prospects - Management is optimistic about growing customers in the Reverse channel through education and strategic partnerships, and in the Mortgage business by filling geographic gaps [46][47] Question: Reverse Volume Projections - Management refrained from providing specific numbers for Reverse volumes but expressed optimism about long-term growth due to significant market opportunities [49][50] Question: Stock Repurchase Strategy - Management indicated no current intention to buy back stock, citing the need for equity to fund growth in the Reverse business and the importance of maintaining liquidity amid market volatility [55][56]