Finance Of America Companies Inc. Q2 FY2025 earnings call

• The second quarter of 2025 marked steady progress with $602 million funded volume, exceeding guidance. - Delivered GAAP net income of $80 million and adjusted net income of $14 million. - Achieved a major milestone with the first ever $1 billion-plus HomeSafe securitization in July. - Strategic priorities include expanding scalable digital tools to improve borrower engagement and enhancing customer experience. - In Q2, submissions rose nearly 11% overall and HomeSafe Second submissions grew by almost 23%; wholesale had nearly 55% volume growth. - Transitioned to new A Better Way with FOA campaign, digital acquisition strategy gaining traction with 10% increase in leads from digital channels. - Launched industry's first digital prequalification experience in June, leveraging AI for operational efficiency. - Planning to expand digital platform to wider audience in Q3 and introduce AI-powered virtual call agent by end of year. - Finance of America Cares, employee-funded nonprofit, celebrated 8 years of service with over $3.2 million granted to local communities.

Finance of America funded $602 million in volume in the second quarter of 2025, exceeding the top end of the guidance range. GAAP net income was $80 million or $3.16 basic earnings per share. Adjusted net income was $14 million or $0.55 in adjusted earnings per share and $30 million of adjusted EBITDA. Revenue, excluding fair value changes, totaled $84.8 million in Q2, up 6% quarter-over-quarter and 22% year-over-year. Funded volume was a 35% increase from the second quarter of 2024 and a 7% increase from the prior quarter. Adjusted net income was up 8% sequentially from the first quarter. Year-to-date adjusted net income totaled $27 million compared to a loss of $7 million in the first half of last year.

• Full year adjusted EPS guidance remains $2.60 to $3 a share. - Q3 funded volume expected in the range of $600 million to $630 million. - Payoff of higher cost working capital facility and entering into agreement with Blackstone to acquire remaining equity stake; expect annualized reduction in interest expense from working capital transaction. - Convertible debt facility in place to support next chapter of growth.

• Actual results may differ materially from forward-looking statements due to risks described in the Risk Factors section of Finance of America's annual report on Form 10-K for the year ended December 31, 2024, and subsequent filings with the SEC.

Q: I wanted to get clarity on your reiterated guidance. And does that factor in paying off the working capital line and the impact of the buyback?

A: So not specifically, but the payoff of the higher cost working capital lines: retired $85 million of working capital line at 15% rate and replaced with $40 million of exchangeable notes bearing 0% interest and a $20 million working capital line at 10%, resulting in about a $10 million annualized reduction in interest expense. The timing on the share count is between 105 and 120 days out, partially in Q4 numbers but more impactful in 2026.

Q: Can you just talk about how you're thinking about kind of the sources and uses to pay off the working capital line and then to fund the buyback later this year?

A: The convertible deal closed yesterday, working capital was paid off yesterday. There are a series of transactions between now and the end of the year to fund not just the repurchase of the equity but also the amortizing payment to bondholders due at the end of November.

Q: How are you thinking about the long term? What is the right capital structure for the business? What's the right leverage level to kind of making good progress on your transition here?

A: First order of business is to retire existing debt. A year ago, exchanged $350 million of debt for $200 million, with $50 million paid back in November. With latest support agreement, $60 million paid back by November 2026 and remaining $90 million in November 2027. The remaining $150 million convertible note will eventually convert to equity; once milestones are passed, will have thoughts on capital structure going forward