Finance of America panies (US:FOA)2021-05-14 05:35Financial Data and Key Metrics Changes - Total funded volume grew 78% to $9.5 billion compared to $5.3 billion in the prior year quarter [14] - Total revenues of $499 million were up 165% year-over-year but down 7% versus the fourth quarter of 2020 [14] - Pre-tax net income was $125 million for the quarter compared to $153 million in the fourth quarter and a loss in the prior year quarter [14] - Adjusted EBITDA of $154 million for Q1 2021 was down 11% compared to $174 million in the fourth quarter but up more than 4 times the $35 million generated in the prior year quarter [14] Business Line Data and Key Metrics Changes - Mortgage originations generated funded volumes of $8.4 billion, double the $4.2 billion for Q1 2020, although down 5% on a linked quarter basis [15] - Reverse Originations funded volumes were up 17% quarter-over-quarter to $769 million, driving segment revenue to $69 million, up 25% compared to the prior quarter [15] - Lender services delivered total revenue of $76 million and pre-tax net income of $13 million, up considerably compared to prior quarter and year-ago levels [16] Market Data and Key Metrics Changes - The aging housing stock and the bias for newer construction or remodeled properties bode well for ongoing demand in the commercial loans segment [9] - The reverse mortgage products are increasingly appealing to baby boomers looking to tap into home equity [9] Company Strategy and Development Direction - The company launched a new vertical, Finance of America Home Improvement, via the acquisition of Renovate Americas [6] - The company is focused on capitalizing on M&A opportunities and has successfully acquired, integrated, and optimized 16 companies since its formation in 2013 [7] - The company aims to leverage its diversified model to generate sustainable returns across economic cycles [12] Management's Comments on Operating Environment and Future Outlook - Management expects macro tailwinds from growing consumer wealth to fuel expanding consumer credit and support long-term growth prospects [12] - The company estimates a reduction in adjusted EBITDA for the full year 2021 of roughly 20% year-over-year, indicating a continuation of return on pro forma equity north of 20% [12] - Management remains focused on maximizing the potential of existing platforms while strategically adding new products and distribution channels [12] Other Important Information - The company completed its business combination with Replay Acquisition Corporation and officially started trading on the NYSE on April 5 [6] - Cash and cash equivalents were up 49% on a sequential quarter basis to $348 million, providing capacity for further investments [17] Q&A Session Summary Question: Forward origination business margins - Management noted that margins have decreased from roughly 430 to 340 in the first quarter, with tighter margins across the board, particularly in correspondent and wholesale channels [19] Question: Reverse and commercial business outlook - Management indicated that reverse originations are more about segment expansion with stable margins, while the commercial business faces more margin competitiveness, particularly in the fix and flip segment [21][22] Question: Lender services growth and margin expansion - Management highlighted growth in lender services from increased adoption and new customer acquisition, with healthy margins expected to continue [24] Question: Home improvement financing products - Management discussed the new home improvement vertical and the potential for product expansion, including solar financing [28] Question: Growth of the MSR portfolio - Management confirmed plans to retain retail MSR and sell TPO MSR to the fund, with less emphasis on bulk acquisitions [29]