Finance of America Reports Third Quarter 2022 Results
Finance of America Companies (FOA) reported a net loss of $302 million or $1.35 per share for Q3 2022, influenced by non-cash balance sheet adjustments and the decision to discontinue its Mortgage Originations segment. Adjusted net income from Specialty Finance and Services was $7 million, while Reverse Originations generated $34 million in pre-tax income. Despite strong liquidity with $169 million in cash, total revenue dropped 84% year-over-year to $71 million, driven by a 53% decline in funded volume. The company aims to optimize resources by focusing on high-growth areas.
- Strong liquidity position with $169 million in cash.
- Reverse Originations segment generated $34 million in pre-tax income.
- Net loss of $302 million, primarily from non-cash adjustments.
- Total revenue decreased by 84% year-over-year to $71 million.
- Mortgage Originations segment incurred a pre-tax loss of $170 million.
– Net loss for the quarter of
– Adjusted net income* in SF&S for the quarter of
– Reverse Originations segment generated
Third Quarter 2022 Financial Highlights
-
For the third quarter of 2022, the Company recognized a net loss of
$302 million $1.35
-
The net loss is primarily non-cash. It includes negative changes in fair value of long-term assets and liabilities of
$116 million $138 million
-
For the third quarter of 2022, the Company recognized an adjusted net loss* of
$20 million $0.10 $7 million $0.04 $27 million $0.14
-
Strong liquidity position with
$169 million $56 million
*See the sections titled “Reconciliation to GAAP” and “Non-GAAP Financial Measures” for reconciliations to the most directly comparable GAAP measures and other important disclosures.
Third Quarter Financial Summary
($ amounts in millions, except margin and per share data) |
|
|
|
Variance (%) |
|
|
|
Variance (%) |
|
|
|
|
|
Variance (%) |
|||||||||||||
|
|
Q3'22 |
|
Q2'22 |
|
Q3'22 vs
|
|
Q3'21 |
|
Q3'22 vs
|
|
YTD 2022 |
|
YTD 2021 |
|
2022 vs
|
|||||||||||
|
|
Successor |
|
Successor |
|
|
|
Successor |
|
|
|
Successor |
|
Combined (1) |
|
|
|||||||||||
Funded volume |
|
$ |
4,187 |
|
|
$ |
6,349 |
|
|
(34 |
) % |
|
$ |
8,988 |
|
(53 |
) % |
|
$ |
17,689 |
|
|
$ |
26,844 |
|
(34 |
) % |
Total revenue |
|
|
71 |
|
|
|
141 |
|
|
(50 |
) % |
|
|
457 |
|
(84 |
) % |
|
|
480 |
|
|
|
1,353 |
|
(65 |
) % |
Total expenses and other, net |
|
|
237 |
|
|
|
310 |
|
|
(24 |
) % |
|
|
402 |
|
(41 |
) % |
|
|
892 |
|
|
|
1,187 |
|
(25 |
) % |
Pre-tax net income (loss) |
|
|
(305 |
) |
|
|
(169 |
) |
|
(80 |
) % |
|
|
55 |
|
(655 |
) % |
|
|
(551 |
) |
|
|
166 |
|
(432 |
) % |
Net income (loss) |
|
|
(302 |
) |
|
|
(168 |
) |
|
(80 |
) % |
|
|
50 |
|
(704 |
) % |
|
|
(534 |
) |
|
|
160 |
|
(434 |
) % |
Pre-tax income (loss) excluding impairment of intangibles and other assets(2) |
|
|
(167 |
) |
|
|
(169 |
) |
|
1 |
% |
|
|
55 |
|
(404 |
) % |
|
|
(413 |
) |
|
|
166 |
|
(349 |
) % |
Adjusted net income (loss)(3) |
|
|
(20 |
) |
|
|
(22 |
) |
|
9 |
% |
|
|
75 |
|
(127 |
) % |
|
|
(4 |
) |
|
|
239 |
|
(102 |
) % |
Adjusted EBITDA(3) |
|
|
(17 |
) |
|
|
(19 |
) |
|
11 |
% |
|
|
111 |
|
(115 |
) % |
|
|
24 |
|
|
|
352 |
|
(93 |
) % |
Basic earnings (loss) per share |
|
$ |
(1.35 |
) |
|
$ |
(0.65 |
) |
|
(108 |
) % |
|
$ |
0.36 |
|
(475 |
) % |
|
$ |
(2.16 |
) |
|
|
N/A |
|
N/A |
|
Diluted earnings (loss) per share(4) |
|
$ |
(1.35 |
) |
|
$ |
(0.70 |
) |
|
(93 |
) % |
|
$ |
0.22 |
|
(714 |
) % |
|
$ |
(2.34 |
) |
|
|
N/A |
|
N/A |
|
Adjusted diluted earnings (loss) per share(4) |
|
$ |
(0.10 |
) |
|
$ |
(0.12 |
) |
|
17 |
% |
|
$ |
0.39 |
|
(126 |
) % |
|
$ |
(0.02 |
) |
|
$ |
1.25 |
|
(102 |
) % |
(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 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) |
|
|
|
|
|
Variance (%) |
|||
|
|
|
2022 |
|
|
2022 |
|
Q3 2022 vs. Q2 2022 |
|
Cash and cash equivalents |
|
$ |
169 |
|
$ |
219 |
|
(23 |
) % |
Securitized loans held for investment (HMBS & nonrecourse) |
|
|
17,658 |
|
|
17,483 |
|
1 |
% |
Mortgage servicing rights (MSRs) |
|
|
103 |
|
|
359 |
|
(71 |
) % |
Total assets |
|
|
21,190 |
|
|
21,736 |
|
(3 |
) % |
Total liabilities |
|
|
20,615 |
|
|
20,873 |
|
(1 |
) % |
Total equity |
|
|
575 |
|
|
863 |
|
(33 |
) % |
Total tangible equity(1) |
|
|
137 |
|
|
288 |
|
(52 |
) % |
(1) |
Total tangible equity calculated as total equity less intangible assets, net. |
-
Cash and cash equivalents ended the second quarter at
$169 million $50 million
-
MSR balances declined
71% quarter over quarter following strategic asset sales in the period.
-
Total assets declined
3% from prior quarter due to reduced loans held for sale, at fair value, lower MSR balances, and impairments of intangible and other assets.
-
Total liabilities declined
$258 million
-
Total tangible equity decreased
$151 million $137 million
-
Residual value of assets subject to nonrecourse debt within the securitization trusts as of
September 30, 2022 was$61 million $390 million December 31, 2021 .
Segment Results
Mortgage Originations
The Mortgage Originations segment generates revenue through fee income from loan originations and gain on sale of mortgage loans into the secondary market.
($ amounts in millions) |
|
|
|
Variance (%) |
|
|
|
Variance (%) |
|
|
|
|
|
Variance (%) |
|||||||||||||||
|
|
Q3'22 |
|
Q2'22 |
|
Q3'22 vs
|
|
Q3'21 |
|
Q3'22 vs
|
|
YTD 2022 |
|
YTD 2021 |
|
2022 vs
|
|||||||||||||
|
|
Successor |
|
Successor |
|
|
|
Successor |
|
|
|
Successor |
|
Combined (1) |
|
|
|||||||||||||
Funded volume (Total) |
|
$ |
2,697 |
|
|
$ |
4,229 |
|
|
(36 |
) % |
|
$ |
7,383 |
|
|
(63 |
) % |
|
$ |
12,032 |
|
|
$ |
22,716 |
|
|
(47 |
) % |
Funded volume (Purchase) |
|
|
2,278 |
|
|
|
3,336 |
|
|
(32 |
) % |
|
|
3,759 |
|
|
(39 |
) % |
|
|
8,380 |
|
|
|
9,918 |
|
|
(16 |
) % |
Funded volume (non-agency) |
|
|
504 |
|
|
|
945 |
|
|
(47 |
) % |
|
|
994 |
|
|
(49 |
) % |
|
|
2,568 |
|
|
|
2,826 |
|
|
(9 |
) % |
Net rate lock volume |
|
|
2,474 |
|
|
|
3,800 |
|
|
(35 |
) % |
|
|
7,679 |
|
|
(68 |
) % |
|
|
11,591 |
|
|
|
22,753 |
|
|
(49 |
) % |
Mortgage originations margin |
|
|
1.87 |
% |
|
|
2.14 |
% |
|
(13 |
) % |
|
|
2.61 |
% |
|
(28 |
) % |
|
|
2.07 |
% |
|
|
2.95 |
% |
|
(30 |
) % |
Total revenue |
|
|
61 |
|
|
|
103 |
|
|
(41 |
) % |
|
|
235 |
|
|
(74 |
) % |
|
|
300 |
|
|
|
773 |
|
|
(61 |
) % |
Impairment of intangibles and other assets |
|
|
(129 |
) |
|
|
— |
|
|
N/A |
|
|
|
— |
|
|
N/A |
|
|
|
(129 |
) |
|
|
— |
|
|
N/A |
|
Pre-tax income (loss) |
|
|
(170 |
) |
|
|
(35 |
) |
|
(386 |
) % |
|
|
15 |
|
|
(1233 |
) % |
|
|
(226 |
) |
|
|
104 |
|
|
(317 |
) % |
Pre-tax income (loss) excluding impairment of intangibles and other assets(2) |
|
$ |
(41 |
) |
|
$ |
(35 |
) |
|
(17 |
) % |
|
$ |
15 |
|
|
(373 |
) % |
|
$ |
(97 |
) |
|
$ |
104 |
|
|
(193 |
) % |
(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 intangibles and other assets. |
-
Net rate lock volume totaled
$2,474 million $3,800 million
-
Total revenue of
$61 million $103 million
-
Pre-tax loss was
$170 million $35 million $129 million
-
As previously disclosed on Form 8-K filed
October 21, 2022 , the Company will discontinue substantially all of its Mortgage Originations operations as a part of its Resource Optimization Plan.
Reverse Originations
The Reverse Originations segment generates revenue and earnings in the form of net origination gains and origination fees earned on the origination of reverse mortgage loans.
($ amounts in millions) |
|
|
|
Variance (%) |
|
|
|
Variance (%) |
|
|
|
|
|
Variance (%) |
||||||||||
|
|
Q3'22 |
|
Q2'22 |
|
Q3'22 vs
|
|
Q3'21 |
|
Q3'22 vs
|
|
YTD 2022 |
|
YTD 2021 |
|
2022 vs
|
||||||||
|
|
Successor |
|
Successor |
|
|
|
Successor |
|
|
|
Successor |
|
Combined (1) |
|
|
||||||||
Funded volume |
|
$ |
1,135 |
|
$ |
1,580 |
|
(28 |
) % |
|
$ |
1,157 |
|
(2 |
) % |
|
$ |
4,190 |
|
$ |
2,939 |
|
43 |
% |
Total revenue |
|
|
72 |
|
|
80 |
|
(10 |
) % |
|
|
111 |
|
(35 |
) % |
|
|
260 |
|
|
275 |
|
(5 |
) % |
Pre-tax income |
|
|
34 |
|
|
36 |
|
(6 |
) % |
|
|
69 |
|
(51 |
) % |
|
|
138 |
|
|
168 |
|
(18 |
) % |
(1) |
Financial results of combined successor and predecessor of the business combination with Replay. |
-
Third quarter 2022 funded reverse volume was
$1,135 million
-
Third quarter 2022 revenue of
$72 million 10% from the second quarter 2022 due primarily to the impact of lower volumes during the quarter, partially offset by improved margins.
-
Pre-tax income of
$34 million 6% as$6 million
-
Year-to-date 2022 volume of
$4,190 million 43% increase compared to the same period in 2021, which was driven by strong growth in both refinance and new-to-reverse volumes period over period.
Commercial Originations
The Commercial Originations segment provides business purpose lending solutions for residential real estate investors. The Commercial Originations segment generates revenue and earnings in the form of net origination gains and origination fees earned on the origination of mortgage loans.
($ amounts in millions) |
|
|
|
Variance (%) |
|
|
|
Variance (%) |
|
|
|
|
|
Variance (%) |
|||||||||||||
|
|
Q3'22 |
|
Q2'22 |
|
Q3'22 vs
|
|
Q3'21 |
|
Q3'22 vs
|
|
YTD 2022 |
|
YTD 2021 |
|
2022 vs
|
|||||||||||
|
|
Successor |
|
Successor |
|
|
|
Successor |
|
|
|
Successor |
|
Combined (1) |
|
|
|||||||||||
Funded volume |
|
$ |
355 |
|
|
$ |
540 |
|
|
(34 |
) % |
|
$ |
448 |
|
(21 |
) % |
|
$ |
1,468 |
|
|
$ |
1,189 |
|
23 |
% |
Total revenue |
|
|
12 |
|
|
|
13 |
|
|
(8 |
) % |
|
|
28 |
|
(57 |
) % |
|
|
46 |
|
|
|
65 |
|
(29 |
) % |
Impairment of intangibles and other assets |
|
|
(6 |
) |
|
|
— |
|
|
N/A |
|
|
|
— |
|
N/A |
|
|
|
(6 |
) |
|
|
— |
|
N/A |
|
Pre-tax income (loss) |
|
|
(12 |
) |
|
|
(12 |
) |
|
— |
% |
|
|
6 |
|
(300 |
) % |
|
|
(27 |
) |
|
|
10 |
|
(370 |
) % |
Pre-tax income (loss) excluding impairment of intangibles and other assets(2) |
|
$ |
(6 |
) |
|
$ |
(12 |
) |
|
50 |
% |
|
$ |
6 |
|
(200 |
) % |
|
$ |
(21 |
) |
|
$ |
10 |
|
(310 |
) % |
(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 intangibles and other assets. |
-
Third quarter 2022 funded volume of
$355 million 34% decline quarter over quarter and a21% decrease compared to the prior year quarter. Year to date volumes of$1,468 million 23% increase over prior year.
-
Pre-tax income excluding impairment of goodwill and intangibles improved by
50% relative to Q2 2022 due to a$7 million
Lender Services
The Lender Services business generates revenue and earnings in the form of lender service support fees. Lender Services supports over 2,800 third party clients across the lending industry.
($ amounts in millions) |
|
|
|
Variance (%) |
|
|
|
Variance (%) |
|
|
|
|
|
Variance (%) |
|||||||||||||||
|
|
Q3'22 |
|
Q2'22 |
|
Q3'22 vs
|
|
Q3'21 |
|
Q3'22 vs
|
|
YTD 2022 |
|
YTD 2021 |
|
2022 vs
|
|||||||||||||
|
|
Successor |
|
Successor |
|
|
|
Successor |
|
|
|
Successor |
|
Combined (1) |
|
|
|||||||||||||
Total revenue |
|
$ |
44 |
|
|
$ |
58 |
|
|
(24 |
) % |
|
$ |
88 |
|
|
(50 |
) % |
|
$ |
178 |
|
|
$ |
245 |
|
|
(27 |
) % |
% of revenue from third-party clients |
|
|
80 |
% |
|
|
81 |
% |
|
(1 |
) % |
|
|
81 |
% |
|
(1 |
) % |
|
|
81 |
% |
|
|
79 |
% |
|
3 |
% |
Pre-tax income (loss) |
|
$ |
(11 |
) |
|
$ |
(5 |
) |
|
(120 |
) % |
|
$ |
9 |
|
|
(222 |
) % |
|
$ |
(9 |
) |
|
$ |
30 |
|
|
(130 |
) % |
(1) |
Financial results of combined successor and predecessor of the business combination with Replay. |
-
Third quarter 2022 revenue was
$44 million 24% compared to the prior quarter as the segment faced continued pressure from rising interest rates and declining refinance volumes.
-
Third quarter 2022 pre-tax loss was
$11 million $14 million $8 million
-
Revenue from third-party clients was
80% in the third quarter of 2022, down1% from the prior quarter.
Portfolio Management
The Portfolio Management segment generates revenue and earnings in the form of gain on sale of loans, fair value gains or losses, interest income, servicing income, fees for underwriting, advisory and valuation services and other ancillary fees.
($ amounts in millions) |
|
|
|
Variance (%) |
|
|
|
Variance (%) |
|
|
|
|
|
Variance (%) |
|||||||||||||||
|
|
Q3'22 |
|
Q2'22 |
|
Q3'22 vs
|
|
Q3'21 |
|
Q3'22 vs
|
|
YTD 2022 |
|
YTD 2021 |
|
2022 vs
|
|||||||||||||
|
|
Successor |
|
Successor |
|
|
|
Successor |
|
|
|
Successor |
|
Combined (1) |
|
|
|||||||||||||
Assets under management |
|
$ |
19,871 |
|
|
$ |
19,881 |
|
|
— |
% |
|
$ |
18,403 |
|
|
8 |
% |
|
$ |
19,871 |
|
|
$ |
18,403 |
|
|
8 |
% |
Assets excluding HMBS and non-recourse obligations |
|
|
2,560 |
|
|
|
2,687 |
|
|
(5 |
) % |
|
|
2,452 |
|
|
4 |
% |
|
|
2,560 |
|
|
|
2,452 |
|
|
4 |
% |
Mortgage servicing rights (MSRs) |
|
|
103 |
|
|
|
359 |
|
|
(71 |
) % |
|
|
341 |
|
|
(70 |
) % |
|
|
103 |
|
|
|
341 |
|
|
(70 |
) % |
Total revenue |
|
|
(104 |
) |
|
|
(95 |
) |
|
(9 |
) % |
|
|
10 |
|
|
(1140 |
) % |
|
|
(250 |
) |
|
|
46 |
|
|
(643 |
) % |
Impairment of intangibles and other assets |
|
|
(4 |
) |
|
|
— |
|
|
N/A |
|
|
|
— |
|
|
N/A |
|
|
|
(4 |
) |
|
|
— |
|
|
N/A |
|
Pre-tax loss |
|
|
(135 |
) |
|
|
(129 |
) |
|
(5 |
) % |
|
|
(20 |
) |
|
(575 |
) % |
|
|
(350 |
) |
|
|
(41 |
) |
|
(754 |
) % |
Pre-tax loss excluding impairment of intangibles and other assets(2) |
|
$ |
(131 |
) |
|
$ |
(129 |
) |
|
(2 |
) % |
|
$ |
(20 |
) |
|
(555 |
) % |
|
$ |
(346 |
) |
|
$ |
(41 |
) |
|
(744 |
) % |
(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 intangibles and other assets. |
-
Third quarter 2022 mortgage servicing rights were down
71% to$103 million
-
Revenue in the third quarter 2022 was negative due to fair value adjustments on long-term assets and liabilities as we updated model assumptions to account for higher credit spreads and increased interest rates. The residual value of assets subject to nonrecourse debt within the securitization trusts as of
September 30, 2022 was$61 million $390 million December 31, 2021 .
Reconciliation to GAAP
($ amounts in millions) |
Q3'22 |
|
Q2'22 |
|
Q3'21 |
|
YTD 2022 |
|
YTD 2021 |
||||||||||
|
Successor |
|
Combined (1) |
||||||||||||||||
Reconciliation of net income (loss) to adjusted net income (loss) and adjusted EBITDA |
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) |
$ |
(302 |
) |
|
$ |
(168 |
) |
|
$ |
50 |
|
|
$ |
(534 |
) |
|
$ |
160 |
|
Add back: Benefit (provision) for income taxes |
|
3 |
|
|
|
1 |
|
|
|
(4 |
) |
|
|
17 |
|
|
|
(7 |
) |
Net income (loss) before taxes |
|
(305 |
) |
|
|
(169 |
) |
|
|
54 |
|
|
|
(551 |
) |
|
|
167 |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
||||||||||
Changes in fair value(2) |
|
116 |
|
|
|
111 |
|
|
|
20 |
|
|
|
323 |
|
|
|
55 |
|
Amortization and impairment of intangibles and other assets(3) |
|
152 |
|
|
|
14 |
|
|
|
13 |
|
|
|
180 |
|
|
|
28 |
|
Share-based compensation(4) |
|
7 |
|
|
|
7 |
|
|
|
11 |
|
|
|
23 |
|
|
|
21 |
|
Certain non-recurring costs(5) |
|
3 |
|
|
|
9 |
|
|
|
3 |
|
|
|
21 |
|
|
|
53 |
|
Adjusted net income (loss) before taxes |
|
(27 |
) |
|
|
(28 |
) |
|
|
101 |
|
|
|
(4 |
) |
|
|
324 |
|
(Provision) benefit for income taxes(6) |
|
7 |
|
|
|
6 |
|
|
|
(26 |
) |
|
|
— |
|
|
|
(85 |
) |
Adjusted net income (loss) |
|
(20 |
) |
|
|
(22 |
) |
|
|
75 |
|
|
|
(4 |
) |
|
|
239 |
|
Provision (benefit) for income taxes(6) |
|
(7 |
) |
|
|
(6 |
) |
|
|
26 |
|
|
|
— |
|
|
|
85 |
|
Depreciation |
|
3 |
|
|
|
2 |
|
|
|
3 |
|
|
|
8 |
|
|
|
7 |
|
Interest expense on non-funding debt |
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
20 |
|
|
|
21 |
|
Adjusted EBITDA |
$ |
(17 |
) |
|
$ |
(19 |
) |
|
$ |
111 |
|
|
$ |
24 |
|
|
$ |
352 |
|
OTHER KEY METRICS |
|
|
|
|
|
|
|
|
|
||||||||||
Cash paid for income taxes |
$ |
— |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
2 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
($ amounts in millions except shares and $ per share) |
Q3'22 |
|
Q2'22 |
|
Q3'21 |
|
YTD 2022 |
|
YTD 2021 |
||||||||||
|
Successor |
|
Combined (1) |
||||||||||||||||
GAAP PER SHARE MEASURES |
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) attributable to controlling interest |
$ |
(85 |
) |
|
$ |
(41 |
) |
|
$ |
21 |
|
|
$ |
(134 |
) |
|
|
N/A |
|
Weighted average outstanding share count |
|
62,804,809 |
|
|
|
62,379,041 |
|
|
|
59,861,171 |
|
|
|
61,993,353 |
|
|
|
N/A |
|
Basic earnings (loss) per share |
$ |
(1.35 |
) |
|
$ |
(0.65 |
) |
|
$ |
0.36 |
|
|
$ |
(2.16 |
) |
|
|
N/A |
|
If-converted method net earnings (loss) |
|
(85 |
) |
|
|
(131 |
) |
|
|
43 |
|
|
|
(441 |
) |
|
|
N/A |
|
Weighted average diluted share count |
|
62,804,809 |
|
|
|
187,818,255 |
|
|
|
191,161,431 |
|
|
|
188,375,945 |
|
|
|
N/A |
|
Diluted earnings (loss) per share |
$ |
(1.35 |
) |
|
$ |
(0.70 |
) |
|
$ |
0.22 |
|
|
$ |
(2.34 |
) |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
NON-GAAP PER SHARE MEASURES |
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted net income (loss) |
$ |
(20 |
) |
|
$ |
(22 |
) |
|
$ |
75 |
|
|
$ |
(4 |
) |
|
$ |
239 |
|
Weighted average diluted share count |
|
187,877,936 |
|
|
|
187,818,225 |
|
|
|
191,161,431 |
|
|
|
188,375,945 |
|
|
|
191,180,610 |
|
Adjusted diluted earnings (loss) per share |
$ |
(0.10 |
) |
|
$ |
(0.12 |
) |
|
$ |
0.39 |
|
|
$ |
(0.02 |
) |
|
$ |
1.25 |
|
($ amounts in millions) |
SF&S |
|
Mortgage |
|
|
Total |
||||||
Reconciliation of net loss before taxes to adjusted net income (loss) for the three months ended |
|
|
|
|
|
|
||||||
Net loss before taxes |
$ |
(135 |
) |
|
$ |
(170 |
) |
|
|
$ |
(305 |
) |
Adjustments for: |
|
|
|
|
|
|
||||||
Changes in fair value(2) |
|
116 |
|
|
|
— |
|
|
|
|
116 |
|
Amortization and impairment of intangibles and other assets(3) |
|
21 |
|
|
|
131 |
|
|
|
|
152 |
|
Share-based compensation(4) |
|
6 |
|
|
|
1 |
|
|
|
|
7 |
|
Certain non-recurring costs(5) |
|
2 |
|
|
|
1 |
|
|
|
|
3 |
|
Adjusted net income (loss) before taxes |
|
10 |
|
|
|
(37 |
) |
|
|
|
(27 |
) |
(Provision) benefit for income taxes(6) |
|
(3 |
) |
|
|
10 |
|
|
|
|
7 |
|
Adjusted net income (loss) |
$ |
7 |
|
|
$ |
(27 |
) |
|
|
$ |
(20 |
) |
|
|
|
|
|
|
|
||||||
($ amounts in millions, except shares and $ per share) |
|
|
|
|
|
|
||||||
NON-GAAP PER SHARE MEASURES |
|
|
|
|
|
|
||||||
Adjusted net income (loss) |
$ |
7 |
|
|
$ |
(27 |
) |
|
|
$ |
(20 |
) |
Weighted average diluted share count |
|
187,877,936 |
|
|
|
187,877,936 |
|
|
|
|
187,877,936 |
|
Adjusted diluted earnings (loss) per share |
$ |
0.04 |
|
|
$ |
(0.14 |
) |
|
|
$ |
(0.10 |
) |
($ amounts in millions) |
SF&S |
|
Mortgage |
|
|
Total |
||||||
Reconciliation of net loss before taxes to adjusted net income (loss) for the nine months ended |
|
|
|
|
|
|
||||||
Net loss before taxes |
$ |
(324 |
) |
|
$ |
(227 |
) |
|
|
$ |
(551 |
) |
Adjustments for: |
|
|
|
|
|
|
||||||
Changes in fair value(2) |
|
323 |
|
|
|
— |
|
|
|
|
323 |
|
Amortization and impairment of intangibles and other assets(3) |
|
45 |
|
|
|
135 |
|
|
|
|
180 |
|
Share-based compensation(4) |
|
17 |
|
|
|
6 |
|
|
|
|
23 |
|
Certain non-recurring costs(5) |
|
12 |
|
|
|
9 |
|
|
|
|
21 |
|
Adjusted net income (loss) before taxes |
|
73 |
|
|
|
(77 |
) |
|
|
|
(4 |
) |
Provision (benefit) for income taxes(6) |
|
(20 |
) |
|
|
20 |
|
|
|
|
— |
|
Adjusted net income (loss) |
$ |
53 |
|
|
$ |
(57 |
) |
|
|
$ |
(4 |
) |
|
|
|
|
|
|
|
||||||
($ amounts in millions, except shares and $ per share) |
|
|
|
|
|
|
||||||
NON-GAAP PER SHARE MEASURES |
|
|
|
|
|
|
||||||
Adjusted net income (loss) |
$ |
53 |
|
|
$ |
(57 |
) |
|
|
$ |
(4 |
) |
Weighted average diluted share count |
|
188,375,945 |
|
|
|
188,375,945 |
|
|
|
|
188,375,945 |
|
Adjusted diluted earnings (loss) per share |
$ |
0.28 |
|
|
$ |
(0.30 |
) |
|
|
$ |
(0.02 |
) |
(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, 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 an impairment charge on intangibles and other certain long lived assets recognized in the third quarter of 2022. |
|
(4) |
Funded |
|
(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). |
|
|||||||
Selected Financial Information |
|||||||
Consolidated Statements of Financial Condition |
|||||||
(In thousands, except share data) |
|||||||
(Unaudited) |
|||||||
|
|
|
|
||||
ASSETS |
|
|
|
||||
Cash and cash equivalents |
$ |
169,072 |
|
|
$ |
219,033 |
|
Restricted cash |
|
210,147 |
|
|
|
354,803 |
|
Loans held for investment, subject to HMBS related obligations, at fair value |
|
10,916,551 |
|
|
|
10,882,441 |
|
Loans held for investment, subject to nonrecourse debt, at fair value |
|
6,741,391 |
|
|
|
6,600,762 |
|
Loans held for investment, at fair value |
|
1,307,413 |
|
|
|
1,058,410 |
|
Loans held for sale, at fair value |
|
859,650 |
|
|
|
1,229,594 |
|
Mortgage servicing rights ("MSRs"), at fair value, |
|
103,069 |
|
|
|
359,006 |
|
Derivative assets |
|
89,899 |
|
|
|
55,186 |
|
Fixed assets and leasehold improvements, net |
|
19,828 |
|
|
|
29,805 |
|
Intangible assets, net |
|
438,300 |
|
|
|
575,284 |
|
Other assets, net |
|
334,577 |
|
|
|
371,902 |
|
TOTAL ASSETS |
$ |
21,189,897 |
|
|
$ |
21,736,226 |
|
|
|
|
|
||||
LIABILITIES AND EQUITY |
|
|
|
||||
HMBS related obligations, at fair value |
$ |
10,784,841 |
|
|
$ |
10,745,879 |
|
Nonrecourse debt, at fair value |
|
6,745,526 |
|
|
|
6,752,084 |
|
Other financing lines of credit |
|
2,305,999 |
|
|
|
2,593,290 |
|
Payables and other liabilities |
|
395,635 |
|
|
|
428,768 |
|
Notes payable, net |
|
382,810 |
|
|
|
353,005 |
|
TOTAL LIABILITIES |
|
20,614,811 |
|
|
|
20,873,026 |
|
|
|
|
|
||||
EQUITY |
|
|
|
||||
Class A Common Stock, |
|
6 |
|
|
|
6 |
|
Class B Common Stock, |
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
876,140 |
|
|
|
860,232 |
|
Accumulated deficit |
|
(577,272 |
) |
|
|
(492,786 |
) |
Accumulated other comprehensive loss |
|
(367 |
) |
|
|
(262 |
) |
Noncontrolling interest |
|
276,579 |
|
|
|
496,010 |
|
TOTAL EQUITY |
|
575,086 |
|
|
|
863,200 |
|
TOTAL LIABILITIES AND EQUITY |
$ |
21,189,897 |
|
|
$ |
21,736,226 |
|
|
||||||||||||||||||||
Selected Financial Information |
||||||||||||||||||||
Consolidated Statements of Operations |
||||||||||||||||||||
(In thousands, except share data) |
||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||
|
Q3'22 |
|
Q2'22 |
|
Q3'21 |
|
YTD 2022 |
|
|
YTD 2021 |
||||||||||
|
Successor |
|
|
Combined(1) |
||||||||||||||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
||||||||||
Gain on sale and other income from loans held for sale, net |
$ |
36,179 |
|
|
$ |
71,805 |
|
|
$ |
210,095 |
|
|
$ |
226,336 |
|
|
|
$ |
689,006 |
|
Net fair value gains (losses) on mortgage loans and related obligations |
|
(6,376 |
) |
|
|
1,613 |
|
|
|
122,509 |
|
|
|
5,672 |
|
|
|
|
330,323 |
|
Fee income |
|
70,512 |
|
|
|
88,681 |
|
|
|
145,725 |
|
|
|
316,798 |
|
|
|
|
397,960 |
|
Net interest expense: |
|
|
|
|
|
|
|
|
|
|
— |
|
||||||||
Interest income |
|
12,022 |
|
|
|
15,853 |
|
|
|
15,862 |
|
|
|
41,748 |
|
|
|
|
41,674 |
|
Interest expense |
|
(41,236 |
) |
|
|
(36,834 |
) |
|
|
(37,691 |
) |
|
|
(110,900 |
) |
|
|
|
(105,683 |
) |
Net interest expense |
|
(29,214 |
) |
|
|
(20,981 |
) |
|
|
(21,829 |
) |
|
|
(69,152 |
) |
|
|
|
(64,009 |
) |
TOTAL REVENUES |
|
71,101 |
|
|
|
141,118 |
|
|
|
456,500 |
|
|
|
479,654 |
|
|
|
|
1,353,280 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
EXPENSES |
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries, benefits, and related expenses |
|
146,385 |
|
|
|
194,294 |
|
|
|
262,000 |
|
|
|
549,755 |
|
|
|
|
775,261 |
|
Occupancy, equipment rentals, and other office related expenses |
|
7,003 |
|
|
|
7,262 |
|
|
|
8,283 |
|
|
|
22,103 |
|
|
|
|
22,600 |
|
General and administrative expenses |
|
105,533 |
|
|
|
123,457 |
|
|
|
141,595 |
|
|
|
361,613 |
|
|
|
|
388,083 |
|
TOTAL EXPENSES |
|
258,921 |
|
|
|
325,013 |
|
|
|
411,878 |
|
|
|
933,471 |
|
|
|
|
1,185,944 |
|
IMPAIRMENT OF INTANGIBLES AND OTHER ASSETS |
|
(138,184 |
) |
|
|
— |
|
|
|
— |
|
|
|
(138,184 |
) |
|
|
|
— |
|
OTHER, NET |
|
21,330 |
|
|
|
15,132 |
|
|
|
9,928 |
|
|
|
41,234 |
|
|
|
|
(1,067 |
) |
NET INCOME (LOSS) BEFORE INCOME TAXES |
|
(304,674 |
) |
|
|
(168,763 |
) |
|
|
54,550 |
|
|
|
(550,767 |
) |
|
|
|
166,269 |
|
Provision (benefit) for income taxes |
|
(2,974 |
) |
|
|
(940 |
) |
|
|
4,440 |
|
|
|
(17,249 |
) |
|
|
|
6,663 |
|
NET INCOME (LOSS) |
|
(301,700 |
) |
|
|
(167,823 |
) |
|
|
50,110 |
|
|
|
(533,518 |
) |
|
|
|
159,606 |
|
CRNCI |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
4,260 |
|
Noncontrolling interest |
|
(217,214 |
) |
|
|
(127,143 |
) |
|
|
28,726 |
|
|
|
(399,859 |
) |
|
|
|
11,838 |
|
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST |
$ |
(84,486 |
) |
|
$ |
(40,680 |
) |
|
$ |
21,384 |
|
|
$ |
(133,659 |
) |
|
|
$ |
143,508 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
EARNINGS (LOSS) PER SHARE |
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic weighted average shares outstanding |
|
62,804,809 |
|
|
|
62,379,041 |
|
|
|
59,861,171 |
|
|
|
61,993,353 |
|
|
|
|
N/A |
|
Basic net earnings (loss) per share |
$ |
(1.35 |
) |
|
$ |
(0.65 |
) |
|
$ |
0.36 |
|
|
$ |
(2.16 |
) |
|
|
|
N/A |
|
Diluted weighted average shares outstanding |
|
62,804,809 |
|
|
|
187,818,225 |
|
|
|
191,161,431 |
|
|
|
188,375,945 |
|
|
|
|
N/A |
|
Diluted earnings (loss) per share |
$ |
(1.35 |
) |
|
$ |
(0.70 |
) |
|
$ |
0.22 |
|
|
$ |
(2.34 |
) |
|
|
|
N/A |
|
Webcast and Conference Call
Management will host a webcast and conference call on
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:
- 1-833-927-1758 (Domestic)
- 1-929-526-1599 (International)
- Conference ID: 696932
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
About
Forward-Looking Statements
This release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the
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
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
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
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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For Finance of America Media: pr@financeofamerica.com
For Finance of America Investor Relations: ir@financeofamerica.com
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