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Finance of America Reports Fourth Quarter and Full Year 2022 Results

– Net loss for the year of $716 million or $3.06 basic loss per share entirely attributable to balance sheet adjustments and Mortgage Originations segment which has been discontinued –

– Adjusted net loss* of $61 million for the year, entirely attributable to businesses that have been discontinued or divested in first half of 2023 –

– Announced acquisition of AAG, further strengthening our market position in Reverse Mortgage Lending –

Finance of America Companies Inc., (“Finance of America” or the “Company”) (NYSE: FOA), a leading specialty finance and solutions platform, reported financial results for the quarter and year ended December 31, 2022.

Full Year 2022 Financial Highlights

  • For the full year 2022, the Company recognized a net loss of $716 million or $3.06 basic loss per share. The Company recognized an adjusted net loss of $61 million.
  • On an adjusted basis, the full year net loss is entirely attributable to the operational losses associated with the Mortgage Originations, Commercial Originations, and Lender Services segments. These segments are expected to be discontinued or divested by the end of Q2 2023.
  • Announced the acquisition of the assets and operations of AAG, a leading reverse mortgage lender. The transaction has received regulatory approval, is scheduled to close on March 31, 2023 and is expected to create the leading U.S. reverse mortgage originator.
  • Wind down of Mortgage Originations, announced in the fourth quarter of 2022, was completed in February 2023.
  • During the first quarter of 2023, the Company announced the execution of definitive agreements for the sale of its Title Insurance and Commercial Originations businesses.

*See the sections titled “Reconciliation to GAAP” and “Non-GAAP Financial Measures” for reconciliations to the most directly comparable GAAP measures and other important disclosures.

Graham A. Fleming, President and Interim Chief Executive Officer commented, “Thank you to all our team members for their hard work and dedication over the past 12 months. 2022 was a transformative year for FOA. We made decisions to account for uncertainty in the residential mortgage market, while continuing to invest in areas where we see solid, sustainable growth. By divesting our non-core operations and adding to our reverse lending business, we are well-positioned for future growth and will continue to invest and expand on our strategy to help Americans achieve their retirement goals.”

Fourth Quarter Financial Summary

($ amounts in millions, except margin and per share data)

 

 

 

Variance (%)

 

 

 

Variance (%)

 

 

 

 

 

Variance (%)

 

 

Q4'22

 

Q3'22

 

Q4'22 vs Q3'22

 

Q4'21

 

Q4'22 vs Q4'21

 

2022

 

2021

 

2022 vs 2021

 

 

Successor

 

Successor

 

 

 

Successor

 

 

 

Successor

 

Combined (1)

 

 

Funded volume

 

$

2,082

 

 

$

4,187

 

 

(50

) %

 

$

8,793

 

 

(76

) %

 

$

19,771

 

 

$

35,637

 

 

(45

) %

Total revenue

 

 

94

 

 

 

71

 

 

32

%

 

 

383

 

 

(75

) %

 

 

573

 

 

 

1,736

 

 

(67

) %

Total expenses and other, net

 

 

220

 

 

 

237

 

 

(7

) %

 

 

364

 

 

(40

) %

 

 

1,112

 

 

 

1,552

 

 

(28

) %

Pre-tax net loss

 

 

(181

)

 

 

(305

)

 

41

%

 

 

(1,362

)

 

87

%

 

 

(732

)

 

 

(1,197

)

 

39

%

Net loss

 

 

(182

)

 

 

(302

)

 

40

%

 

 

(1,336

)

 

86

%

 

 

(716

)

 

 

(1,177

)

 

39

%

Pre-tax income (loss) excluding impairment of goodwill, intangibles, and other assets(2)

 

 

(127

)

 

 

(167

)

 

24

%

 

 

18

 

 

(806

) %

 

 

(540

)

 

 

184

 

 

(393

) %

Adjusted net income (loss)(3)

 

 

(56

)

 

 

(20

)

 

(180

) %

 

 

70

 

 

(180

) %

 

 

(61

)

 

 

308

 

 

(120

) %

Adjusted EBITDA(3)

 

 

(67

)

 

 

(17

)

 

(294

) %

 

 

104

 

 

(164

) %

 

 

(43

)

 

 

456

 

 

(109

) %

Basic loss per share

 

$

(0.90

)

 

$

(1.35

)

 

33

%

 

$

(6.61

)

 

86

%

 

$

(3.06

)

 

 

N/A

 

 

N/A

 

Diluted loss per share(4)

 

$

(0.77

)

 

$

(1.35

)

 

43

%

 

$

(6.72

)

 

89

%

 

$

(3.12

)

 

 

N/A

 

 

N/A

 

Adjusted diluted earnings (loss) per share(4)

 

$

(0.30

)

 

$

(0.10

)

 

(200

) %

 

$

0.37

 

 

(181

) %

 

$

(0.32

)

 

$

1.61

 

 

(120

) %

(1)

 

Financial results of combined successor and predecessor of the business combination with Replay.  

(2)

  Calculated for each period as pre-tax income (loss) excluding impairment of goodwill, intangibles, and other assets.

(3)

 

See Reconciliation to GAAP section for a reconciliation of Adjusted net income (loss) and Adjusted EBITDA to Net income (loss).

(4)

 

Calculated on an if-converted basis. See Reconciliation to GAAP section for more detail.

Balance Sheet Highlights

($ amounts in millions)

 

December 31,

 

September 30,

 

Variance (%)

 

 

2022

 

2022

 

Q4 2022 vs. Q3 2022

Cash and cash equivalents

 

$

97

 

$

169

 

(43

) %

Securitized loans held for investment (HMBS & nonrecourse)

 

 

18,569

 

 

17,658

 

5

%

Mortgage servicing rights (MSRs)

 

 

95

 

 

103

 

(8

) %

Total assets

 

 

20,873

 

 

21,190

 

(1

) %

Total liabilities

 

 

20,468

 

 

20,615

 

(1

) %

Total equity

 

 

405

 

 

575

 

(30

) %

Total tangible equity(1)

 

 

30

 

 

137

 

(78

) %

(1)

 

Total tangible equity calculated as total equity less intangible assets, net. 

  • Cash and cash equivalents ended the fourth quarter at $97 million. The $72 million decrease in cash was almost entirely attributable to operational losses associated with the Mortgage Originations segment.
  • Securitized loans held for investment (HMBS & nonrecourse) increased by $911 million as a result of the completion of two securitizations of non-agency reverse mortgages during the quarter.
  • Total assets declined 1% from prior quarter due to reduced loans held for sale related to the wind down of the Mortgage Originations segment.
  • Total liabilities declined $147 million on a sequential quarter basis primarily due to reduced warehouse lines of credit related to the wind down of the Mortgage Originations segment.
  • Total tangible equity decreased $107 million to $30 million, predominantly due to operational losses associated with the Mortgage Originations, Commercial Originations, and Lender Services segments.

Segment Results

Reverse Originations

The Reverse Originations segment generates revenue and earnings in the form of net origination gains and origination fees earned on the origination of reverse mortgage loans.

($ amounts in millions)

 

 

 

Variance (%)

 

 

 

Variance (%)

 

 

 

 

 

Variance (%)

 

 

Q4'22

 

Q3'22

 

Q4'22 vs Q3'22

 

Q4'21

 

Q4'22 vs Q4'21

 

2022

 

2021

 

2022 vs 2021

 

 

Successor

 

Successor

 

 

 

Successor

 

 

 

Successor

 

Combined (1)

 

 

Funded volume

 

$

644

 

 

$

1,135

 

(43

) %

 

$

1,322

 

 

(51

) %

 

$

4,834

 

 

$

4,261

 

 

13

%

Total revenue

 

 

30

 

 

 

72

 

(58

) %

 

 

114

 

 

(74

) %

 

 

289

 

 

 

389

 

 

(26

) %

Impairment of goodwill, intangibles, and other assets

 

 

(4

)

 

 

 

N/A

 

 

 

(408

)

 

99

%

 

 

(4

)

 

 

(408

)

 

99

%

Pre-tax income (loss)

 

 

(10

)

 

 

34

 

(129

) %

 

 

(333

)

 

97

%

 

 

128

 

 

 

(165

)

 

178

%

Pre-tax income (loss) excluding impairment of goodwill, intangibles, and other assets

 

 

(6

)

 

 

34

 

(118

) %

 

 

75

 

 

(108

) %

 

 

132

 

 

 

243

 

 

(46

) %

(1)

 

Financial results of combined successor and predecessor of the business combination with Replay.

  • In 2022, Reverse Originations funded $4,834 million; an increase of 13% over 2021, which was driven by strong refinance volume in the first half of 2022 and an increase in new-to-reverse volumes.
  • 2022 revenue declined 26% from 2021 to $289 million due primarily to the impact of widening credit spreads experienced during the year, partially offset by higher volumes.
  • 2022 pre-tax income excluding impairment of goodwill, intangibles, and other assets of $132 million declined $111 million in line with the decline in revenue.

Portfolio Management

The Portfolio Management segment generates revenue and earnings in the form of gain on sale of loans, fair value gains or losses, interest income, servicing income, fees for underwriting, advisory and valuation services and other ancillary fees.

($ amounts in millions)

 

 

 

Variance (%)

 

 

 

Variance (%)

 

 

 

 

 

Variance (%)

 

 

Q4'22

 

Q3'22

 

Q4'22 vs Q3'22

 

Q4'21

 

Q4'22 vs Q4'21

 

2022

 

2021

 

2022 vs 2021

 

 

Successor

 

Successor

 

 

 

Successor

 

 

 

Successor

 

Combined (1)

 

 

Assets under management

 

$

20,186

 

$

19,871

 

 

2

%

 

$

18,974

 

 

6

%

 

$

20,186

 

 

$

18,974

 

 

6

%

Assets excluding HMBS and non-recourse obligations

 

 

1,617

 

 

2,560

 

 

(37

) %

 

 

2,431

 

 

(33

) %

 

 

1,617

 

 

 

2,431

 

 

(33

) %

Mortgage servicing rights (MSRs)

 

 

95

 

 

103

 

 

(8

) %

 

 

428

 

 

(78

) %

 

 

95

 

 

 

428

 

 

(78

) %

Total revenue

 

 

30

 

 

(104

)

 

129

%

 

 

(29

)

 

203

%

 

 

(220

)

 

 

17

 

 

(1394

) %

Impairment of goodwill, intangibles, and other assets

 

 

 

 

(4

)

 

100

%

 

 

(12

)

 

100

%

 

 

(4

)

 

 

(12

)

 

67

%

Pre-tax income (loss)

 

 

3

 

 

(135

)

 

102

%

 

 

(69

)

 

104

%

 

 

(347

)

 

 

(109

)

 

(218

) %

Pre-tax income (loss) excluding impairment of goodwill, intangibles, and other assets

 

 

3

 

 

(131

)

 

102

%

 

 

(57

)

 

105

%

 

 

(343

)

 

 

(97

)

 

(254

) %

(1)

Financial results of combined successor and predecessor of the business combination with Replay.

  • 2022 assets under management grew 6% to $20,186 million compared to 2021. This growth is directly attributable to the eight securitizations completed during the year.
  • 2022 revenue was materially impacted by negative fair value adjustments on assets held for investment and related liabilities as we updated model assumptions to account for higher credit spreads and increased interest rates experienced during the year. The residual value of assets subject to nonrecourse debt within the securitization trusts as of December 31, 2022 was $110 million, down from $390 million as of December 31, 2021.

Lender Services

The Lender Services business generates revenue and earnings in the form of lender service support fees.

($ amounts in millions)

 

 

 

Variance (%)

 

 

 

Variance (%)

 

 

 

 

 

Variance (%)

 

 

Q4'22

 

Q3'22

 

Q4'22 vs Q3'22

 

Q4'21

 

Q4'22 vs Q4'21

 

2022

 

2021

 

2022 vs 2021

 

 

Successor

 

Successor

 

 

 

Successor

 

 

 

Successor

 

Combined (1)

 

 

Total revenue

 

$

37

 

 

$

44

 

 

(16

) %

 

$

83

 

 

(55

) %

 

$

215

 

 

$

328

 

 

(34

) %

% of revenue from third-party clients

 

 

80

%

 

 

80

%

 

%

 

 

82

%

 

(2

) %

 

 

80

%

 

 

81

%

 

(1

) %

Impairment of goodwill, intangibles, and other assets

 

$

(48

)

 

$

 

 

N/A

 

 

$

(110

)

 

56

%

 

$

(48

)

 

$

(110

)

 

56

%

Pre-tax loss

 

 

(65

)

 

 

(11

)

 

(491

) %

 

 

(101

)

 

36

%

 

 

(73

)

 

 

(71

)

 

(3

) %

Pre-tax income (loss) excluding impairment of goodwill, intangibles, and other assets

 

 

(17

)

 

 

(11

)

 

55

%

 

 

9

 

 

(289

) %

 

 

(25

)

 

 

39

 

 

(164

) %

(1)

 

Financial results of combined successor and predecessor of the business combination with Replay.

  • On February 1, the Company entered into an agreement to sell its Title Insurance Businesses. The transaction is expected to close in the second quarter of 2023. For additional detail, please refer to the Company’s Current Report on Form 8-K filed with the SEC on February 2, 2023.

Commercial Originations

During the period, the Commercial Originations segment provided business purpose lending solutions for residential real estate investors. The Commercial Originations segment generated revenue and earnings in the form of net origination gains and origination fees earned on the origination of mortgage loans.

($ amounts in millions)

 

 

 

Variance (%)

 

 

 

Variance (%)

 

 

 

 

 

Variance (%)

 

 

Q4'22

 

Q3'22

 

Q4'22 vs Q3'22

 

Q4'21

 

Q4'22 vs Q4'21

 

2022

 

2021

 

2022 vs 2021

 

 

Successor

 

Successor

 

 

 

Successor

 

 

 

Successor

 

Combined (1)

 

 

Funded volume

 

$

300

 

 

$

355

 

 

(15

) %

 

$

580

 

 

(48

) %

 

$

1,768

 

 

$

1,769

 

 

%

Total revenue

 

 

13

 

 

 

12

 

 

8

%

 

 

30

 

 

(57

) %

 

 

59

 

 

 

95

 

 

(38

) %

Impairment of goodwill, intangibles, and other assets

 

 

 

 

 

(6

)

 

100

%

 

 

(76

)

 

100

%

 

 

(6

)

 

 

(76

)

 

92

%

Pre-tax loss

 

 

(5

)

 

 

(12

)

 

58

%

 

 

(68

)

 

93

%

 

 

(31

)

 

 

(58

)

 

47

%

Pre-tax income (loss) excluding impairment of goodwill, intangibles, and other assets

 

 

(5

)

 

 

(6

)

 

17

%

 

 

8

 

 

(163

) %

 

 

(25

)

 

 

18

 

 

(239

) %

(1)  

Financial results of combined successor and predecessor of the business combination with Replay.

  • On February 19, the Company entered into an agreement to sell certain operational assets of our Commercial Originations segment. The transaction is expected to close mid-March. For additional detail, please refer to the Company’s Current Report on Form 8-K filed with the SEC on February 21, 2023.

Mortgage Originations

During the period, the Mortgage Originations segment generated revenue through fee income from loan originations and gain on sale of mortgage loans into the secondary market.

($ amounts in millions)

 

 

 

Variance (%)

 

 

 

Variance (%)

 

 

 

 

 

Variance (%)

 

 

Q4'22

 

Q3'22

 

Q4'22 vs Q3'22

 

Q4'21

 

Q4'22 vs Q4'21

 

2022

 

2021

 

2022 vs 2021

 

 

Successor

 

Successor

 

 

 

Successor

 

 

 

Successor

 

Combined (1)

 

 

Funded volume (Total)

 

$

1,137

 

 

$

2,697

 

 

(58

) %

 

$

6,891

 

 

(84

) %

 

$

13,169

 

 

$

29,607

 

 

(56

) %

Funded volume (Purchase)

 

 

951

 

 

 

2,278

 

 

(58

) %

 

 

3,405

 

 

(72

) %

 

 

9,331

 

 

 

13,323

 

 

(30

) %

Funded volume (non-agency)

 

 

192

 

 

 

504

 

 

(62

) %

 

 

1,242

 

 

(85

) %

 

 

2,760

 

 

 

4,068

 

 

(32

) %

Net rate lock volume

 

 

345

 

 

 

2,474

 

 

(86

) %

 

 

6,198

 

 

(94

) %

 

 

11,936

 

 

 

28,952

 

 

(59

) %

Mortgage originations margin

 

 

(2.16

) %

 

 

1.87

%

 

(215

)%

 

 

2.52

%

 

(185

)%

 

 

1.94

%

 

 

2.86

%

 

(32

) %

Total revenue

 

$

(1

)

 

$

61

 

 

(102

) %

 

 

187

 

 

(101

) %

 

 

299

 

 

 

959

 

 

(69

) %

Impairment of goodwill, intangibles, and other assets

 

 

 

 

 

(129

)

 

100

%

 

 

(775

)

 

100

%

 

 

(129

)

 

 

(775

)

 

83

%

Pre-tax loss

 

 

(68

)

 

 

(170

)

 

60

%

 

 

(783

)

 

91

%

 

 

(294

)

 

 

(679

)

 

57

%

Pre-tax income (loss) excluding impairment of goodwill, intangibles, and other assets

 

 

(68

)

 

 

(41

)

 

(66

) %

 

 

(8

)

 

(750

) %

 

 

(165

)

 

 

96

 

 

(272

) %

(1)  

Financial results of combined successor and predecessor of the business combination with Replay.

  • On October 20, 2022, the Company announced its decision to wind down the operations of the Mortgage Originations segment, other than the Home Improvement channel. This commenced in the fourth quarter and was completed on February 28, 2023. Please refer to the Company’s Current Report on Form 8-K filed with the SEC on March 6, 2023 for additional information.

Reconciliation to GAAP

($ amounts in millions)

Q4'22

 

Q3'22

 

Q4'21

 

2022

 

2021

 

Successor

 

Combined (1)

 

 

 

 

 

 

 

 

 

Reconciliation of net loss to adjusted net income loss and adjusted EBITDA

$

(182

)

 

$

(302

)

 

$

(1,336

)

 

$

(716

)

 

$

(1,177

)

Add back: Benefit (provision) for income taxes

 

(1

)

 

 

3

 

 

 

(26

)

 

 

16

 

 

 

20

 

Net loss before taxes

 

(181

)

 

 

(305

)

 

 

(1,362

)

 

 

(732

)

 

 

(1,197

)

Adjustments for:

 

 

 

 

 

 

 

 

 

Changes in fair value(2)

 

12

 

 

 

116

 

 

 

52

 

 

 

335

 

 

 

108

 

Amortization and impairment of goodwill, intangibles, and other assets(3)

 

66

 

 

 

152

 

 

 

1,395

 

 

 

246

 

 

 

1,422

 

Share-based compensation(4)

 

6

 

 

 

7

 

 

 

11

 

 

 

28

 

 

 

32

 

Certain non-recurring costs(5)

 

21

 

 

 

3

 

 

 

 

 

 

42

 

 

 

53

 

Adjusted net income (loss) before taxes

 

(76

)

 

 

(27

)

 

 

96

 

 

 

(81

)

 

 

418

 

(Provision) benefit for income taxes(6)

 

20

 

 

 

7

 

 

 

(26

)

 

 

20

 

 

 

(110

)

Adjusted net income (loss)

 

(56

)

 

 

(20

)

 

 

70

 

 

 

(61

)

 

 

308

 

Provision (benefit) for income taxes(6)

 

(20

)

 

 

(7

)

 

 

26

 

 

 

(20

)

 

 

110

 

Depreciation

 

2

 

 

 

3

 

 

 

1

 

 

 

10

 

 

 

10

 

Interest expense on non-funding debt

 

7

 

 

 

7

 

 

 

7

 

 

 

28

 

 

 

28

 

Adjusted EBITDA

$

(67

)

 

$

(17

)

 

$

104

 

 

$

(43

)

 

$

456

 

OTHER KEY METRICS

 

 

 

 

 

 

 

 

 

Cash paid for income taxes

$

 

 

$

 

 

$

 

 

$

 

 

$

2

 

 

 

 

 

 

 

 

 

 

 

($ amounts in millions except shares and $ per share)

Q4'22

 

Q3'22

 

Q4'21

 

 

2022

 

 

 

2021

 

 

Successor

 

Combined (1)

GAAP PER SHARE MEASURES

 

 

 

 

 

 

 

 

 

Net loss attributable to controlling interest

$

(57

)

 

$

(85

)

 

$

(395

)

 

$

(191

)

 

 

(252

)

Weighted average outstanding share count

 

63,204,118

 

 

 

62,804,809

 

 

 

59,806,378

 

 

 

62,298,532

 

 

 

N/A

 

Basic loss per share

$

(0.90

)

 

$

(1.35

)

 

$

(6.61

)

 

$

(3.06

)

 

 

N/A

 

If-converted method net earnings (loss)

 

(145

)

 

 

(85

)

 

 

(1,273

)

 

 

(587

)

 

 

N/A

 

Weighted average diluted share count

 

187,822,266

 

 

 

62,804,809

 

 

 

189,436,869

 

 

 

188,236,513

 

 

 

N/A

 

Diluted earnings (loss) per share

$

(0.77

)

 

$

(1.35

)

 

$

(6.72

)

 

$

(3.12

)

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

NON-GAAP PER SHARE MEASURES

 

 

 

 

 

 

  

 

 

Adjusted net income (loss)

$

(56

)

 

 

(20

)

 

$

70

 

 

$

(61

)

 

$

308

 

Weighted average diluted share count

 

187,822,266

 

 

 

187,877,936

 

 

 

189,436,869

 

 

 

188,236,513

 

 

 

190,745,873

 

Adjusted diluted earnings (loss) per share

$

(0.30

)

 

 

(0.10

)

 

$

0.37

 

 

$

(0.32

)

 

$

1.61

 

(1)

 

Financial results of combined successor and predecessor of the business combination with Replay.

(2)

 

Changes in fair value include changes in fair value of loans and securities held for investment and related obligations, deferred purchase price obligations, warrant liability, and minority investments.

(3)

 

Successor period amortization includes amortization of intangibles recognized from the business combination with Replay and impairment charges to goodwill, intangibles, and certain other long lived assets recognized during the periods presented.

(4)

 

Funded 85% by the non-controlling shareholders.

(5) Certain non-recurring costs relate to various one-time expenses and adjustments that management believes should be excluded as these do not relate to a recurring part of the core business operations. These items include certain one-time charges including amounts recognized for settlement of legal and regulatory matters, acquisition related expenses and other one-time charges.
(6)

We applied an effective combined corporate tax rate to adjusted consolidated pre-tax income (loss) for the respective period to determine the tax effect of adjusted consolidated net income (loss).

Finance of America Companies Inc. and Subsidiaries

Selected Financial Information

Consolidated Statements of Financial Condition  

(In thousands, except share data)

(Unaudited)

 

December 31, 2022

 

September 30, 2022

 

 

 

 

ASSETS

 

 

 

Cash and cash equivalents

$

97,361

 

 

$

169,072

 

Restricted cash

 

180,075

 

 

 

210,147

 

Loans held for investment, subject to HMBS related obligations, at fair value

 

11,114,100

 

 

 

10,916,551

 

Loans held for investment, subject to nonrecourse debt, at fair value

 

7,454,638

 

 

 

6,741,391

 

Loans held for investment, at fair value

 

907,998

 

 

 

1,307,413

 

Loans held for sale, at fair value

 

315,978

 

 

 

859,650

 

MSR, at fair value, $60,562 and $59,800 subject to nonrecourse MSR financing liability, respectively

 

95,096

 

 

 

103,069

 

Derivative assets

 

2,354

 

 

 

89,899

 

Fixed assets and leasehold improvements, net

 

19,015

 

 

 

19,828

 

Intangible assets, net

 

374,555

 

 

 

438,300

 

Other assets, net

 

311,485

 

 

 

334,577

 

TOTAL ASSETS

$

20,872,655

 

 

$

21,189,897

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

HMBS related obligations, at fair value

$

10,996,755

 

 

$

10,784,841

 

Nonrecourse debt, at fair value (includes amounts due to related parties of $0 and $142,435, respectively)

 

7,343,177

 

 

 

6,745,526

 

Other financing lines of credit

 

1,455,369

 

 

 

2,305,999

 

Payables and other liabilities

 

273,111

 

 

 

395,635

 

Notes payable, net (includes amounts due to related parties of $46,790 and $0, respectively)

 

399,402

 

 

 

382,810

 

TOTAL LIABILITIES

 

20,467,814

 

 

 

20,614,811

 

 

 

 

 

EQUITY

 

 

 

Class A Common Stock, $0.0001 par value; 6,000,000,000 shares authorized; 63,423,356 shares issued and outstanding at December 31, 2022

 

6

 

 

 

6

 

Class B Common Stock, $0.0001 par value; 1,000,000 shares authorized; 14 shares issued and outstanding at December 31, 2022

 

 

 

 

 

Additional paid-in capital

 

888,488

 

 

 

876,140

 

Accumulated deficit

 

(634,295

)

 

 

(577,272

)

Accumulated other comprehensive loss

 

(273

)

 

 

(367

)

Noncontrolling interest

 

150,915

 

 

 

276,579

 

TOTAL EQUITY

 

404,841

 

 

 

575,086

 

TOTAL LIABILITIES AND EQUITY

$

20,872,655

 

 

$

21,189,897

 

Finance of America Companies Inc. and Subsidiaries

Selected Financial Information

Consolidated Statements of Operations

(In thousands, except share data)

 

Q4'22

 

Q3'22

 

Q4'21

 

2022

 

 

2021

 

Successor

 

 

Combined(1)

 

(Unaudited)

 

 

(Unaudited)

REVENUES

 

 

 

 

 

 

 

 

 

 

Gain (loss) on sale and other income from loans held for sale, net

$

(15,318

)

 

$

36,179

 

 

$

166,853

 

 

$

211,018

 

 

 

$

855,859

 

Net fair value gains (losses) on mortgage loans and related obligations

 

98,522

 

 

 

(6,376

)

 

 

88,090

 

 

 

104,194

 

 

 

 

418,413

 

Fee income

 

45,332

 

 

 

70,512

 

 

 

149,476

 

 

 

362,130

 

 

 

 

547,436

 

Net interest expense:

 

 

 

 

 

 

 

 

 

 

Interest income

 

5,888

 

 

 

12,022

 

 

 

14,912

 

 

 

47,636

 

 

 

 

56,586

 

Interest expense

 

(40,837

)

 

 

(41,236

)

 

 

(36,377

)

 

 

(151,737

)

 

 

 

(142,060

)

Net interest expense

 

(34,949

)

 

 

(29,214

)

 

 

(21,465

)

 

 

(104,101

)

 

 

 

(85,474

)

TOTAL REVENUES

 

93,587

 

 

 

71,101

 

 

 

382,954

 

 

 

573,241

 

 

 

 

1,736,234

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

Salaries, benefits, and related expenses

 

113,570

 

 

 

146,385

 

 

 

231,374

 

 

 

663,325

 

 

 

 

1,006,635

 

Occupancy, equipment rentals, and other office related expenses

 

6,286

 

 

 

7,003

 

 

 

8,386

 

 

 

28,389

 

 

 

 

30,986

 

General and administrative expenses

 

95,288

 

 

 

105,533

 

 

 

131,335

 

 

 

456,901

 

 

 

 

519,449

 

TOTAL EXPENSES

 

215,144

 

 

 

258,921

 

 

 

371,095

 

 

 

1,148,615

 

 

 

 

1,557,070

 

IMPAIRMENT OF GOODWILL, INTANGIBLES, AND OTHER ASSETS

 

(54,325

)

 

 

(138,184

)

 

 

(1,380,630

)

 

 

(192,509

)

 

 

 

(1,380,630

)

OTHER, NET

 

(5,403

)

 

 

21,330

 

 

 

6,287

 

 

 

35,831

 

 

 

 

5,250

 

NET LOSS BEFORE INCOME TAXES

 

(181,285

)

 

 

(304,674

)

 

 

(1,362,484

)

 

 

(732,052

)

 

 

 

(1,196,216

)

Provision (benefit) for income taxes

 

725

 

 

 

(2,974

)

 

 

(26,197

)

 

 

(16,524

)

 

 

 

(19,534

)

NET LOSS

 

(182,010

)

 

 

(301,700

)

 

 

(1,336,287

)

 

 

(715,528

)

 

 

 

(1,176,682

)

CRNCI

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,260

 

Noncontrolling interest

 

(124,987

)

 

 

(217,214

)

 

 

(940,839

)

 

 

(524,846

)

 

 

 

(929,001

)

NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST

$

(57,023

)

 

$

(84,486

)

 

$

(395,448

)

 

$

(190,682

)

 

 

$

(251,941

)

 

 

 

 

 

 

 

 

 

 

 

LOSS PER SHARE

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

63,204,118

 

 

 

63,204,118

 

 

 

59,806,378

 

 

 

62,298,532

 

 

 

 

N/A

 

Basic net loss per share

$

(0.90

)

 

$

(1.35

)

 

$

(6.61

)

 

$

(3.06

)

 

 

 

N/A

 

Diluted weighted average shares outstanding

 

187,822,266

 

 

 

62,804,809

 

 

 

189,436,869

 

 

 

188,236,513

 

 

 

 

N/A

 

Diluted loss per share

$

(0.77

)

 

$

(1.35

)

 

$

(6.72

)

 

$

(3.12

)

 

 

 

N/A

(1)

 

Financial results of combined successor and predecessor of the business combination with Replay.

Webcast and Conference Call

Management will host a webcast and conference call on Monday, March 13th at 5:00 pm Eastern Time to discuss the Company’s results for the fourth quarter and full year ended December 31, 2022. A copy of the press release and investor presentation will be posted prior to the call under the “Investors” section on Finance of America’s website at https://www.financeofamerica.com/investors.

To listen to the audio webcast of the conference call, please visit the “Investors” section of the Company's website at https://www.financeofamerica.com/investors. The conference call can also be accessed by dialing the following:

  1. 1-844-200-6205 (Domestic)
  2. 1-929-526-1599 (International)
  3. Conference ID: 095724

Replay

A replay of the call will also be available on the Company's website approximately two hours after the conclusion of the conference call through March 28, 2023. To access the replay, dial 1-866-813-9403 (United States) or +44 204 525 0658 (International). The replay pin number is 148194. The replay can also be accessed on the “Investors” section of the Company's website at https://www.financeofamerica.com/investors.

About Finance of America

Finance of America (NYSE: FOA) is a specialty finance consumer lending platform that provides customers with access to an innovative range of flexible solutions including reverse mortgages and home improvement loans. In addition, FOA offers complementary lending services to enhance the customer experience, as well as capital markets and portfolio management capabilities to optimize distribution to investors. FOA is headquartered in Plano, Texas. For more information, please visit www.financeofamerica.com.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts or statements of current conditions, but instead represent only management’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that our actual results, financial condition and liquidity may differ, possibly materially, from the anticipated results, financial condition and liquidity in these forward-looking statements. The Company’s actual results may differ from its expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions (or the negative versions of such words or expressions) are intended to identify such forward-looking statements. The Company cautions readers not to place undue reliance upon any forward-looking statements, which are current only as of the date of this release. Results for any specified quarter are not necessarily indicative of the results that maybe expected for the full year or any future period. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law. All subsequent written and oral forward-looking statements concerning the Company or other matters and attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. A number of important factors exist that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: the transformation of our business the transformation of our business from a vertically-integrated, diversified lending platform to a focused, reverse mortgage lending business; our ability to obtain sufficient capital and liquidity to meet the financing and operational requirements of our business, and our ability to comply with our debt agreements and pay down our substantial debt; our proposed acquisition of American Advisors Group, as well as the proposed sale of our Incenter subsidiaries and their respective expected benefits and increased liquidity, anticipated cost savings, financial and accounting impact, and timing; our ability to successfully and timely integrate the business of American Advisors Group into the legacy business of the Company; the possibility that the Company may be adversely affected by other economic, business and/or competitive factors in our business markets worldwide financial markets, including a sustained period of higher interest rates; our ability to respond to significant changes in prevailing interest rates, and to develop a profitable business; our ability to manage disruptions in the secondary home loan market, including the mortgage-backed securities market; our ability to finance and recover costs of our reverse servicing operations; our ability to manage changes in our licensing status, business relationships, or servicing guidelines with Ginnie Mae, HUD or other governmental entities; our geographic market concentration if the economic conditions in our current markets should decline or as a result of natural disasters; our use of estimates in measuring or determining the fair value of the majority of our assets and liabilities, which may require us to write down the value of these assets or write up the value of these liabilities if they prove to be incorrect; our ability to manage various legal proceedings and compliance matters, federal or state governmental examinations and enforcement investigations we are subject to from time to time, including consumer protection laws applicable to reverse mortgage lenders, which may be highly complex and slow to develop, and results are difficult to predict or estimate; our ability to prevent cyber intrusions and mitigate cyber risks; our ability to compete with national banks, which are not subject to state licensing and operational requirements; our holding company status and dependency on distributions from Finance of America Equity Capital LLC; our “controlled company” status under New York Stock Exchange rules, which exempts us from certain corporate governance requirements and affords stockholders fewer protections; our substantial number of shares of Class A common stock issuable upon conversion of Finance of America Equity Capital LLC Units, which may dilute your investment, and the sale of which could cause significant downward pricing pressure on our stock; and our common stock trading history has been characterized by low trading volume, which may result in an inability to sell your shares at a desired price, if at all.

All of these factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for our management to predict all such factors or to assess the effect of each such new factor on our business. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and any of these statements included herein may prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements, or our objectives and plans will be achieved. Please refer to Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2021, originally filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2022, for further information on these and other risk factors affecting us, as such factors may be amended and updated from time to time in the Company’s subsequent periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov.

Non-GAAP Financial Measures

The Company’s management evaluates performance of the Company through the use certain non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Adjusted Diluted Earnings per Share.

We define Adjusted Net Income as net income adjusted for change in fair value of loans and securities held for investment due to assumption changes, change in fair value of deferred purchase price obligations (including earnouts and TRA obligations), warrant liability, and minority investments, amortization and other impairments, equity based compensation, and certain non-recurring costs.

We define Adjusted EBITDA as Adjusted Net Income (defined above) adjusted for taxes, interest on non-funding debt and depreciation.

We define Adjusted Diluted Earnings Per Share as Adjusted Net Income (defined above) divided by our weighted average diluted share count, which includes our issued and outstanding Class A Common Stock shares plus Finance of America Equity Capital LLC’s Class A LLC units owned by our noncontrolling interests on an if-converted basis.

The presentation of non-GAAP measures is used to enhance investors’ understanding of certain aspects of our financial performance. This discussion is not meant to be considered in isolation, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Management believes these key financial measures provide an additional view of our performance over the long-term and provide useful information that we use in order to maintain and grow our business.

These non-GAAP financial measures should not be considered as an alternate to (i) net income (loss) or any other performance measures determined in accordance with GAAP or (ii) operating cash flows determine in accordance with GAAP. Adjusted Net Income, Adjusted EBITDA, and Adjusted Diluted Earnings per Share have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations of these metrics are: (i) cash expenditures for future contractual commitments; (ii) cash requirements for working capital needs; (iii) cash requirements for certain tax payments; and (iv) all non-cash income/expense items.

Because of these limitations, Adjusted Net Income, Adjusted EBITDA, and Adjusted Diluted Earnings per Share should not be considered as measures of discretionary cash available to us to invest in the growth of our business or distribute to stockholders. We compensate for these limitations by relying primarily on our GAAP results and using our non-GAAP financial measures only as a supplement. Users of our interim unaudited consolidated financial statements are cautioned not to place undue reliance on our non-GAAP financial measures.

 

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