Earnings call transcript: Finance of America sees strong Q2 2025 growth, stock rises

Finance of America Companies Inc. reported robust financial results for the second quarter of 2025, showcasing significant growth in funded volume and net income. The company’s stock price increased by 4.23%, closing at $21.96, as investors responded positively to the earnings report and the company’s strategic initiatives. According to InvestingPro data, the stock has delivered an impressive 225% return over the past year, while trading at an attractive P/E ratio of 4.15. The earnings call highlighted advancements in digital innovation and a strong competitive position in the reverse mortgage market. InvestingPro analysis suggests the stock is currently undervalued based on its Fair Value assessment.

Key Takeaways

• Funded volume increased by 35% year-over-year to $602 million.
• GAAP net income reached $80 million, with a basic EPS of $3.16.
• Adjusted net income was $14 million, translating to an adjusted EPS of $0.55.
• The company launched a digital prequalification experience and plans to introduce an AI-powered virtual call agent.
• Finance of America maintained a 28% average market share in the HMBS sector.

Company Performance

Finance of America demonstrated strong performance in Q2 2025, driven by a 35% increase in funded volume compared to the previous year. The company continues to capitalize on its leadership in the reverse mortgage market, with a significant HMBS market share. The emphasis on digital transformation and technology integration has bolstered its competitive edge, allowing it to expand its reach through innovative digital platforms.

Financial Highlights

• Revenue (excluding fair value changes): $84.8 million, a 22% increase year-over-year.
• GAAP net income: $80 million, basic EPS of $3.16.
• Adjusted net income: $14 million, adjusted EPS of $0.55.
• Adjusted EBITDA: $30 million.
• Year-to-date adjusted net income: $27 million, compared to a $7 million loss in 2024.

Outlook & Guidance

Finance of America provided guidance for the remainder of the year, expecting full-year originations to be between $2.4 billion and $2.7 billion. The company anticipates an adjusted EPS of $2.60 to $3.00 for the full year. In Q3 2025, funded volume is projected to range from $600 million to $630 million. Analysts maintain a consensus target price of $25, reflecting potential upside from current levels. The company plans to continue focusing on enhancing digital tools and improving customer experience, supported by its strong liquidity position with a current ratio of 15.56.

Executive Commentary

Graham Fleming, CEO, emphasized the company’s commitment to innovation, stating, "There is a better way to age, a better way to manage financial uncertainty and a better way to tap into the value they’ve built through homeownership." Kristen Seifert, President, highlighted the importance of digital transformation, noting, "Customers want speed and simplicity, and our digital experience is being designed to deliver both."

Risks and Challenges

• Market volatility could impact future earnings and funding volumes.
• Potential regulatory changes in the mortgage industry could affect operations.
• The competitive landscape in digital financial services may pose challenges.
• Economic downturns could reduce demand for home equity solutions.
• Interest rate fluctuations might influence profitability and consumer behavior.

Q&A

During the earnings call, analysts inquired about the company’s capital structure and debt refinancing strategies. Finance of America has paid off an $85 million working capital line, replacing it with $40 million in exchangeable notes at 0% interest, which is expected to reduce annual interest expenses by $10 million. The company also announced plans for an equity buyback in November, indicating confidence in its financial health and future prospects.

For detailed insights into Finance of America’s financial health, growth prospects, and comprehensive analysis, explore the full Pro Research Report available exclusively on InvestingPro, covering over 1,400 US stocks with expert analysis and actionable intelligence.

Full transcript - Replay Acquisition Corp (FOA) Q2 2025:

Conference Operator: Thank you for standing by, and welcome to the Finance of America Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to Michael Fent, Senior Vice President of Finance.

Please go ahead.

Michael Fent, Senior Vice President of Finance, Finance of America: Thank you, and good afternoon, everyone, and welcome to Finance of America’s second quarter twenty twenty five earnings call. With me today are Graham Fleming, Chief Executive Officer Kristen Seifert, President and Matt Engel, Chief Financial Officer. As a reminder, this call is being recorded, and you can find the earnings release on our Investor Relations website at ir.financeofamericacompanies.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 efforts discussed on today’s call in our earnings press release 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 Factors section of Finance of America’s Annual Report on Form 10 ks for the year ended 12/31/2024, filed with the SEC on 03/14/2025, and amended by Amendment one to our Annual Report on Form 10 ksA filed with the SEC on 05/20/2025. 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, today, we will be discussing interim period financials for our continuing operations, which are unaudited. Now I would like to turn the call over to Finance of America’s Chief Executive Officer, Graham Pline.

Graham Fleming, Chief Executive Officer, Finance of America: Graham? Thank you, Michael. Good afternoon, everyone, and thank you for joining us today. The 2025 marked another period of steady progress at Finance of America. Our performance reflects consistent execution, building momentum and ongoing validation of our long term strategy.

We funded six zero two million dollars in volume, exceeding the top end of our guidance range and representing a 35% increase from the 2024 and a 7% increase from the prior quarter. This marks our fifth consecutive quarter of volume growth, a testament to our ability to meet the needs of our customers regardless of market conditions. We delivered GAAP net income of $80,000,000 or $3.16 basic earnings per share. We reported $14,000,000 of adjusted net income or $0.55 in adjusted earnings per share and $30,000,000 of adjusted EBITDA. We continue to deliver consistent improvement with ANI up 8% sequentially compared to the first quarter.

For additional context, the 2024 was the first quarter following our organizational transformation in which we broke even on an adjusted net income. Since then, we have seen positive and improving performance each quarter. Year to date ANI totals $27,000,000 compared to a loss of $7,000,000 in the first half of last year, reflecting the impact of our completed transformation. This performance brings our first half adjusted EPS to $1.07 per share, a strong result given the evolving macro backdrop. We also recently achieved a major milestone in the capital markets.

In July, we completed our first ever $1,000,000,000 plus home safe securitization. This transaction not only validates our ability to scale, but also highlights the strength of investor demand for our assets. Looking ahead, our mission remains clear, drive greater awareness and education around the power of accessing home equity through retirement, which we believe will lead to a broader adoption of our industry leading reverse mortgage solutions. Two strategic priorities are central to that. First, expanding scalable digital tools to improve borrower engagement and second, enhancing the customer experience we offer to drive long term channel growth.

Ultimately, we remain deeply confident in the long term opportunity for reverse mortgages. As more homeowners look to housing wealth to support retirement, we believe Finance of America will continue to lead the market in meeting that demand. And now I’ll turn it over to Kristin for an update on our operations. Kristin?

Kristen Seifert, President, Finance of America: Thank you, Graham. Q2 was a focused high execution quarter. We remained disciplined in advancing our strategic initiatives, keeping the customer and our partners at the center of our efforts. As Graham mentioned, Q2 originations topped $600,000,000 Compared to the first quarter, submissions also rose nearly 11% overall, and our HomeSafe second submissions grew by almost 23%. Wholesale continues to be a cornerstone of our success, with nearly 55% volume growth in Q2 this year relative to 2024.

We also increased our HMBS issuance market share in June to over 29%, our highest monthly share since January 2024. Our Q2 average market share of 28% reflects a 4% improvement over the average of the prior three quarters. These trends reinforce confidence in our growth trajectory. Turning to our retail platform. As of June 30, we fully transitioned to our new A Better Way with FOA campaign, concluding our long standing partnership with Tom Fellick.

Early indicators are promising. In just ninety days, TV leads signal growing appeal among younger demographics and in markets with higher home values. At the same time, our digital acquisition strategy is gaining traction with a 10% increase in leads from digital channels. We’re also making major strides in technology. In June, we launched the industry’s first digital prequalification experience, paving the way for scalable, borrower friendly engagement, especially around second lien home equity loans.

AI is playing a pivotal role here, accelerating development, boosting operational efficiency, and improving analytics and document management. Looking ahead to q three, we’re expanding this digital platform to a wider audience. By combining seamless online access with expert loan officer support, we’re enhancing both scale and service. We will also be introducing our new AI powered virtual call agent to improve off hour engagement and elevate customer experience by the end of the year. Customers want speed and simplicity, and our digital experience is being designed to deliver both.

According to HMDA, subordinate lien loans for senior borrowers grew 20% year over year, reaching $49,000,000,000 in volume. Finance of America is meeting this demand through our HomeSafe second product, while a significant opportunity remains ahead as we continue to expand its reach through digital integration. Overall, Q2 marked continued progress toward our long term vision to become the most trusted brand for homeowners entering the next chapter of life. We’re building a smarter, scalable, and service led retirement solutions platform, and we’re confident these investments will drive sustainable growth through 2025 and beyond. Before I wrap, I want to recognize the incredible impact of Finance of America Cares, our employee funded nonprofit celebrating eight years of service.

To date, Carrots has granted over $3,200,000 to our local communities and employees in crisis, donated twelve thousand hours of service, and positively impacted more than 2,000,000 lives. This speaks volumes about our culture, and we’re just getting started. Thank you to every team member who contributes. With that, I’ll turn it over to Matt to walk through the financials. Matt?

Matt Engel, Chief Financial Officer, Finance of America: Thank you, Kristen, and good afternoon, everyone. Q2 was another strong quarter marked by continued growth and financial discipline. Our funded volume totaled $6.00 $2,000,000 up 7% from the $561,000,000 in ’5 and thirty five percent above the $447,000,000 in the second quarter of last year. This marks our fifth consecutive quarter of volume growth. We continue to see meaningful improvement in our GAAP results this quarter.

For Q2, the company reported GAAP net income of $80,000,000 or approximately $3.16 per basic share compared to a loss of $5,000,000 in the same period last year. These results were driven by steady production momentum and enhanced operating leverage. Fair value marks also remained positive, supported by tighter deal spreads, declining index rates and stable home price assumptions. Adjusted net income came in at $14,000,000 $1,100,000 or 8% higher than the first quarter of $12,900,000 with adjusted EBITDA of $30,000,000 for the quarter, reflecting strength in both top line performance and margin discipline. Our adjusted EPS for Q2 was $0.55 bringing 2025 adjusted EPS to $1.07 Based on our current trajectory, we remain on track to deliver within our full year guidance range of $2.6 to $3 a share in adjusted EPS with continued operating leverage positioning us for higher run rate exiting the year.

Revenue excluding fair value changes from market inputs or model assumptions totaled $84,800,000 in Q2, up 6% quarter over quarter from $79,900,000 in Q1 and up 22% year over year from $69,400,000 This sequential and annual improvement reflects the commitment to our growing originations platform. On the expense side, we remain disciplined. Our cost structure continues to align with our current scale, and we are realizing improved operating leverage as we grow. Compared to the prior quarter, total expenses were higher by approximately 2,700,000.0 While variable expenses, including variable compensation, loan production and portfolio expense and marketing, increased in line with higher volume and strategic marketing investments, this was somewhat offset by continued reductions in our fixed cost base. Compared to Q2 of last year, fixed expenses were lower by $4,000,000 with significant decreases in professional fees and technology related expenses.

These two categories underscore recent efforts by the team to negotiate continued reductions and vendor related spend. Turning to the balance sheet, we ended the quarter with $275,000,000 in tangible net worth, up from $187,000,000 in Q1, driven by our retained earnings. Book equity totaled $473,000,000 at quarter end. On the capital markets front, we securitized over $800,000,000 in proprietary loans during the second quarter. In July, we built on that momentum by closing a $1,200,000,000 transaction, our largest to date and the first in company history to exceed the $1,000,000,000 mark.

This milestone not only reinforces the strength of investor demand for reverse assets, but also positions us well to execute on our broader capital plan. We reaffirm our full year guidance of 2,400,000,000.0 to $2,700,000,000 in originations and 2.6 to $3 in adjusted EPS. For the third quarter, we expect funded volume in the range of 600,000,000 to $630,000,000 With that, let me hand it back to Graham for closing remarks.

Graham Fleming, Chief Executive Officer, Finance of America: Thank you, Matt. Before we open the call for questions, as announced yesterday, we have paid off our higher cost working capital facility and entered into an agreement with Blackstone to acquire the remaining equity stake in Finance of America. This marks a natural evolution in our journey, and I want to take a moment to thank our longtime partners at Blackstone for their support over the last ten years. Their belief in our team and our vision played a meaningful role in shaping the company we are today. Looking forward, we are excited for the further support of longtime investors and bondholders through a new convertible debt facility.

We are well positioned to aggressively pursue our next chapter of growth. As we mark this turning point in our ownership, it’s an appropriate moment to step back and reflect on how far we have come. Just one year ago, we were exiting a period of transformation. Since then, we’ve delivered five consecutive quarters of volume growth, regained profitability, launched a national brand campaign and stabilized our balance sheet. More importantly, we’re helping more people understand that there is a better way, a better way to age, a better way to manage financial uncertainty and a better way to tap into the value they’ve built through homeownership.

There is a better way with FOA. And with that, we’ll open the call for questions.

Conference Operator: And your first question comes from the line of Doug Harter with UBS. Doug, please go ahead.

Doug Harter, Analyst, UBS: Thanks and good afternoon. I wanted to get clarity on your reiterated guidance. Does that factor in paying off the working capital line and the impact of the buyback?

Matt Engel, Chief Financial Officer, Finance of America: So not specifically, Doug. I think we were on track to kind of meet that target even without that. But to give that context, you hit on two important points, which I think should help us obviously meet that target as well. Right? So the first impact on the the path of the higher, cost working capital lines, you know, in gross numbers, we retired $85,000,000 of working capital line at 15% rate of interest, and we replaced it with $40,000,000 of exchangeable notes that bear 0% interest and a $20,000,000 working capital line at 10%.

So we’re going see about a $10,000,000 annualized reduction in our interest expense just from that transaction. Then the timing on the share count, we’ve got a window between one hundred and five and one hundred and twenty days out, which puts that somewhere around the November. Right? So you’d expect to see that reduce your account partially in our Q4 numbers, but more important as we, project into 2026.

Doug Harter, Analyst, UBS: Great. Appreciate that, Matt. And then 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?

Graham Fleming, Chief Executive Officer, Finance of America: Yeah, absolutely. So convertible deal closed yesterday and the work capital was paid off yesterday. So that’s done. We have a series of transactions between now and the end of the year that will fund not just the repurchase of the equity but also the amortizing payment to the bondholders that’s due at the November.

Doug Harter, Analyst, UBS: Great. Appreciate that. If I could just get one more, like, 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?

Matt Engel, Chief Financial Officer, Finance of America: I mean, it’s a fair fair question, Doug. I think, you know, first things first for us is to think about how to retire the the debt we have on hand. Right? So remember a year ago, exchanged that 350,000,000 of debt for 200,000,000, which 50 be paid back this November. With this latest support agreement and amendment, we’ll we’ll pay back 60 of that by November ’26 and the the remaining 90,000,000 in November ’20 So that’s kind of our first order of business in the in the capital structure, thinking.

The remaining 150 convertible note, I think, eventually, will will convert to equity. So I think once we get a, you know, line of sight to just getting past those milestones, we’ll have some additional thoughts as to the capital structure, going forward.

Doug Harter, Analyst, UBS: Great. Thank you, guys.

Graham Fleming, Chief Executive Officer, Finance of America: Thank you, everybody.

Conference Operator: There’s no further question at this time. I will now turn the call over to Graham Fleming for closing remarks.

Graham Fleming, Chief Executive Officer, Finance of America: Thank you, everybody, for joining the call. Another great quarter for Finance of America, and we look forward to updating you on our Q3 numbers later this year. So thank you very much.

Conference Operator: That concludes today’s call. You may now disconnect.

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