Finance of America panies (FOA) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Finance of America reported $1.7 billion in revenue and adjusted net income of $308 million for the full year 2021 [6][27] - The company experienced a $1.36 billion pre-tax GAAP loss in Q4 2021, primarily due to an impairment of goodwill and intangible assets [20] - Adjusted net income for Q4 was $70 million, with fully diluted adjusted earnings per share of $0.37 [21] Business Line Data and Key Metrics Changes - Specialty Finance and Services (SF&S) accounted for 51% of total revenue in Q4, contributing $196 million in revenue and $73 million in adjusted net income [9][13] - The reverse origination segment achieved a revenue increase of 107% year-over-year, reaching $114 million in Q4 [24] - The commercial originations business generated record quarterly funded volume of $580 million, with a 157% revenue increase compared to 2020 [25] Market Data and Key Metrics Changes - The mortgage origination segment saw a 20% revenue decrease compared to Q3, resulting in a pre-tax loss of $8 million [23] - The non-agency proprietary product contributed 18% of total mortgage origination during Q4 [11] Company Strategy and Development Direction - The company is focused on three strategic priorities: optimizing the mortgage business, investing in high-growth SF&S businesses, and leveraging technology to transform into a customer-centric company [9][17] - The management aims to position the mortgage business for reduced refinance volume while capitalizing on growth in the purchase and non-agency market [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the tough environment in the mortgage industry, with a significant decrease in refinancing demand due to rising rates [8] - The company expects to see continued growth in the purchase market and non-agency products, despite the challenges in the refinancing segment [8][10] Other Important Information - The company plans to maintain cash reserves for continued investment in business growth rather than stock repurchase [42] - Patty Cook announced her retirement, expressing pride in the company's achievements and commitment to a smooth transition [30] Q&A Session All Questions and Answers Question: Impact of volatility on commercial and reverse margins - Management indicated that the pressure on margins is related to market volatility rather than competitive dynamics [33] Question: Profitability expectations for the home improvement business - Management expects the home improvement business to become profitable during the year, attributing current losses to setup costs [35] Question: Drivers of strong reverse mortgage volumes - Management noted that both increased awareness among first-time borrowers and home price appreciation are driving reverse mortgage volumes [37] Question: Expense guidance and variable costs in the forward mortgage business - Management is adjusting capacity for lower volumes and has reduced headcount to optimize the mortgage business [39] Question: Stock buyback considerations - Management is focused on conserving cash for business growth rather than stock repurchase at this time [42] Question: Market perception of the company's prospects - Management believes the market may not fully recognize the growth potential of the SF&S business, which counters the cyclicality of the mortgage sector [50]