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Operator: Good afternoon. Thank you for attending today’s Finance Of America First Quarter 2023 Earnings Call. My name is Frances, and I will be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answer at the end. I would now like to pass the conference over to our host, Michael Fant with Finance Of America.

Michael Fant: Thank you, and good afternoon, everyone. Welcome to Finance of America’s first quarter earnings call. With me today are Graham Fleming, Chief Executive Officer; and Johan Gericke, Chief Financial Officer. As a reminder, this call is being recorded and you can find the earnings release and presentation on our Investor Relations website at www.financeofamerica.com. In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures to the extent available without unreasonable effort discussed on today’s call in our earnings press release and presentation on the Investor Relations page of our website. Also, I would like to remind everyone that comments on this conference call may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the company’s expected operating and financial performance for future periods.

These statements are based on the company’s current expectations and are subject to the Safe Harbor statement for forward-looking statements that you will find in today’s earnings release. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors, including those that are described in the Risk Factor section of Finance of America’s annual report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023. As such, risk factors may be amended and updated in our subsequent filings with the SEC. We are not undertaking any commitment to update these statements if conditions change. Please note these are interim period financials and are unaudited.

Now, I would like to turn the call over to Finance of America’s Chief Executive Officer, Graham Fleming. Graham?

Graham Fleming: Thank you, Michael. Good afternoon, everyone. And thank you for joining us on our first quarter 2023 earnings call. I am excited to join the call today as Finance Of America’s CEO. I believe strongly that Finance Of America provides a truly differentiated and modern retirement solutions platform that gives older Americans more choices and new ways to consider and fund their retirement and I am honored to drive that vision forward. For today’s call I will begin with a brief discussion of our financial results for the quarter. I will then spend the remaining time focused on our go-forward business structure and strategic priorities. Johan will then offer a deeper dive into our financials. We achieved several milestones in the first quarter.

This was largely due to our efforts over the past year to streamline the organization and invest in core businesses that underpin our modern retirement platform with home equity as a centerpiece. Current demographic trends point to substantial market opportunity and we believe FOA has the significant competitive advantages needed to capitalize on this. On a continuing operations basis, we recorded GAAP net income of $55 million or $0.29 per basic share in Q1, driven primarily by favorable increases in valuations across our asset base. On an adjusted basis, we recognized a net loss of $15 million or $0.08 per fully diluted share. For the year, we expect our adjusted diluted earnings per share for continuing operations to be between $0.09 and $0.12, as we complete the integration of AAG and optimize our corporate structure.

As Johan will touch on in a moment, we recently updated our segment reporting to align with our new operating structure. We believe the new structure offers a simpler and more accurate breakdown of Finance of America today and moving forward. Both our retirement solutions and portfolio management businesses delivered profitable results on an adjusted basis in Q1. This was encouraging as we expected a substantial reduction in volume for the first quarter of the year. Overall, profitability in our continuing operations was down quarter-over-quarter on an adjusted basis, as lower profitability in our operating segments wasn’t fully offset by a reduction in corporate expenses. We remain focused on our efforts to right-size our corporate structure to better align with our current footprint and expect to materially complete this work by the third quarter of 2023.

Since the first quarter of 2022, we have seen a 32% reduction in corporate salaries and benefits, and we expect to see further reductions in the coming quarters. Finally, in line with our commitment to strengthen our balance sheet, a series of actions, including the recently closed AAG acquisition, as well as the concurrent $30 million equity raised from existing shareholders, increased our tangible book value for continuing operations from $108 million at the end of last year to over $200 million this quarter, a significant improvement and further validation that our efforts are beginning to deliver real results. Further into our balance sheet and operating improvement efforts, in Q2, we signed an agreement to sell a majority share of the remainder of the lender services businesses.

This transaction is expected to close in Q2. The previously announced sale of our title insurance business to Essent is also on track to close early in Q3, subject to regulatory approvals and customary closing conditions. Once both of those transactions have closed, we will have completed the full scale transformation of Finance of America into a modern retirement solutions platform. Our new structure and suite of innovative solutions are designed to help retire as age in place and thrive later in life. Looking beyond, we expect that the acquisition of the assets of AAG will materially enhance Finance of America’s growth prospects and position the company as a leader in the retirement solutions field. This acquisition marks a new chapter in our strategic plan to expand awareness of our offerings and accelerate growth in the market.

We are quite optimistic about what this new combination means in our business in terms of; one, increased market share as we are now the largest originator of reverse mortgages by volume; two, greater reach and awareness among consumers, as a result of our increased presence and brand awareness; and three, our ability to grow the customer base through a combination of direct-to-consumer outreach via the AAG brand and strategic educational partnerships and initiatives via Finance of America Reverse. Importantly, AAG’s expanded reach and retail presence will complement the innovative proprietary product suite at Finance of America Reverse. The AAG brand’s direct-to-consumer retail channel alone reaches more than 10 million consumers annually via targeted marketing and advertising.

This combination creates a remarkable opportunity for finance of America to become a lifelong resource for an enormous number of customers. We strongly believe there is a growing need for a modern retirement solutions platform like ours. In the U.S., the retirement savings GAAP is approaching $4 trillion, yet homeowners age 62 and older have amassed more than $11.5 trillion in home equity value. This is the market opportunity, helping older homeowners use their homes in superpower to achieve their financial goals, whether by tapping a home equity via AAG or FAR, securing the Finance of American Home Improvement Loan or generating additional income by home sharing with Silvernest. Together, AAG and FAR will enable the overall finance of America company to better serve the growing needs of retirees across the nation.

We are excited by the long-term potential of Finance of America and our modern retirement solutions platform. Given the transformative changes and investments we have made to position Finance of America for the future, we are confident our strategy will result in continued growth and success. And with that, I will pass the call to Johan to discuss the financials.

Johan Gericke: Thank you, Graham, and good afternoon, everyone. As Graham mentioned, we have made significant changes to our financial reporting in the first quarter. Following the successful wind down of our mortgage operations, along with the recently announced divestitures of our commercial title insurance and lender services businesses, we have designated each of these business lines as discontinued operations. For the quarter, our continuing operations reported net income of $55 million or $0.29 per basic share, primarily driven by the market rate changes that increased the value of our reverse assets. Excluding these fair value changes and other non-recurring items, the company reported an adjusted net loss of $15 million or $0.08 per fully diluted share as earnings in our operating segments were more than offset by corporate expenses.

From a balance sheet perspective, the acquisition of the assets of AAG occurred on March 31st, adding $5.6 billion in assets and $62 million in equity to the company. Most significantly, we added $5.4 billion in loans held for investment subject to HMBS obligations. Additionally, the $30 million capital raised from existing shareholders and profitable results for the quarter led to a significant improvement in tangible equity. As of March 31st, the company reported $203 million in tangible equity, an increase of 88% from December 31st. Additionally, we have worked diligently to delever our balance sheet. As of September 30 of last year, the company had $2.3 billion in other financing lines of credit. As of March 31, that number had decreased by 52% to $1.1 billion.

Over the same time frame, loans held for investment and loans held for sale, declined from $2.2 billion to $0.8 billion or a reduction of 62%. As we streamline our organization, we have also updated our segments to more closely align with our go-forward business strategy that Graham laid out a moment ago. Beginning this quarter, we will present our operating results through three reporting segments; Retirement Solutions, Portfolio Management and Corporate and Other. Our Retirement Solutions segment perform Finance of America’s goal to help older homeowners achieve their financial goals and retirement, and includes all origination activity for the company including reverse mortgage and home improvement lending. For the quarter, we funded $357 million, down from the prior quarter as volumes softened due to seasonality and competitive pressures.

Even with this decline, the segment recognized $2 million in adjusted net income for the quarter, as revenue margins for the segment improved to 7.3% from 4.6% in the fourth quarter. Please note that the results for the operations acquired from AAG are not yet included in our P&L, but will be included in Retirement Solutions beginning in the second quarter. We expect the acquisition to drive profitable growth, as we realize both revenue and expense synergies over the coming quarters. Our Portfolio Management segment did not see any reporting changes due to the realignment. For the quarter, Portfolio Management recognized $99 million in pretax income as market rate adjustments led to increased values of our reverse assets. On an adjusted basis, the segment recognized $4 million of adjusted net income in Q1.

Combined, these two segments earned $6 million in adjusted net income for the quarter. As mentioned earlier, the company reported a total adjusted net loss of $15 million. The delta represents the unallocated cost of our current Corporate infrastructure. As we work to streamline our organization and complete the remaining transactions, we will further reduce Corporate overhead to align with the size and simplicity of our organization. As Graham mentioned, and I want to reiterate, we have already seen a significant reduction in Corporate expenses. Since the first quarter of 2022, we have reduced Corporate salaries and benefits by 32% and we will continue to optimize this. In conclusion, Finance of America has worked hard to position itself for success moving forward.

So far, we have executed on every step we set out to take and plan to continue to make the right decisions to improve profitability, strengthen liquidity and derisk our balance sheet. With that, let me now hand it back to Graham for closing remarks.

Graham Fleming: Thank you, Johan. Overall, we are pleased with our start to the year. The continuing operations of our business was profitable and we hope to deliver further value by focusing on our core businesses and rightsizing our corporate infrastructure. Moving forward, we are confident we will drive continued strength in Retirement Solutions and Portfolio Management, as we work through these efforts and we believe in the long-term earnings power of our organization. With that, Operator, we will open it up for questions.

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Operator: Thank you. Our first question comes from the line of Stephen Laws with Raymond James. Please go ahead.

Stephen Laws: Hi. Good afternoon. Looks like a really solid quarter, you guys came in a little ahead of me and I always love to see that, kind of wanted to get your thoughts, maybe, first, Graham, from a higher level, can you talk about the turmoil of banks kind of what if any direct impacts are there from that? And maybe how much do you compete with banks for some of your loan products or maybe in home improvement or asked another way, credit availability is contracting elsewhere in the system. How much — are you seeing anybody turn yet to your products, do you think that’s the coming opportunity, how do you think about the bigger picture in the banking market?

Graham Fleming: Yeah. So, Stephen, thanks for the question. So let’s look at it through two lines, right? On the reverse side, right, we haven’t necessarily seen banks in that space for a number of years, right, non-bank lenders? Although, we would be thrilled if the bank has been into the space that would increase the visibility of the product with our customer base. But on the home improvement, right? We have seen or we have read right around Goldman and Marcus and them selling their portfolio and potentially exiting that business. So we do see that as an opportunity. We haven’t seen — we have been focused on the integration of AAG and getting those LOs licensed and getting the marketing up the curve. So we have been focused on getting the AAG guys back to where they were pre-acquisition.

Haven’t seen any earlier indications yet on the tightening of credit. We have seen some widening of spreads here in Q2, as we work through some deals, but nothing that indicates it’s going to be longer term, right? But we have seen some widening, but we haven’t seen much in the way of credit tightening at this point.

Stephen Laws: Yeah. I appreciate those comments and kind of lead to a follow-up on outlook for origination volume. I think in your prepared remarks, maybe you said seasonality and maybe a little bit more competition, but can you talk about volumes maybe in April and it seems like margins really improved sequentially and how you are seeing margins hold up quarter-to-date?

Johan Gericke: Yeah. Stephen, thank you. Yeah. So we expect volumes to pick up in Q2, obviously, on the back of the AAG acquisition, right? And so, as I look at where we stand today, probably, closer to Q4, once we get the AAG integration fully up to speed. Just from a practical perspective, the first few weeks in April, we had to go through typical integrate some things when you do an asset acquisition, so there were some licensing. We are just getting everybody fully integrated into the platform and that’s working perfectly. So if all, obviously, we won’t have the full benefit of the origination power of AAG. But once we roll into the second part of Q2, I expect that to be operating smoothly and as it had prior to the acquisition.

As Graham said, our spreads widened a little bit starting here in April, probably on the back of the banking dislocation, so to speak. So margins may be a little bit softer in Q2, but it’s so early, it’s hard to say where we end up, to be honest.

Stephen Laws: Yeah. No. Fair enough. I appreciate the comments this afternoon. Thank you.

Operator: Thank you for your questions.

Stephen Laws: Yeah.

Operator: The next question comes from Leon Cooperman with Omega Advisors. Please go ahead.

Leon Cooperman: Yeah. Thank you. There have been a number of changes in the company as you transition to a modern retirement structure. What do you think your normalized earnings are as you restructure the company looking at 12 months, 18 months from today, no voice?

Johan Gericke: 12 months, 18 months from today? It’s going to be, obviously, volume dependent. But I think if we look at where we saw Q4, right, and we say, okay, with the AAG acquisition, we can get something better than that, right? And then you say what is a decent bottomline for that business and I still believe that it’s somewhere in the 4% to 5% range of funded volume, right? And then you look at the Portfolio Management segment, which should run relatively stable and once we layer in the AAG acquisition, that number should maybe be twice as high as what it is today. And then we do some further rationalization in Q1, we said we expect our Corporate expenses to come down to what half of it what it was at the peak. So we are about two-thirds of the way there, I’d say. So when you layer all of that in, it should give you a good indication of kind of where the profitability is.

Leon Cooperman: Is that in excess of $0.50 a share?

Graham Fleming: No. I mean…

Johan Gericke: Yeah. At the right volume could be, yeah.

Leon Cooperman: Okay. Thank you.

Operator: Thank you for your question. At this time, there are no further questions waiting. So I will pass the conference back over to Graham for any additional remarks.

Graham Fleming: Yeah. Thank you, Frances. I want to thank everybody for joining the call. I appreciate the questions and we look forward to our next earnings call in August to provide an update on our progress. So thank you everybody for joining.

Operator: That concludes the Finance of America first quarter 2023 earnings call. Thank you for your participation. You may now disconnect your lines.