Finance of America Companies Inc.

Hello, and welcome to the Finance of America fourth quarter and full year 2021 earnings call. My name is Katie, and I'll be coordinating your call today. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. I'll now hand over to your host, Michael Fant, Senior Vice President of Finance to Begin. Michael, please go ahead.

Thank you, and good morning, everyone. and welcome to Finance of America's fourth quarter and full year 2021 earnings call. With me today are Patty Cook, Chief Executive Officer, and Johann Garrick, 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'll 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'd like to remind everyone that comments on this 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 yesterday'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 Form S-1, originally filed with the SEC on May 25, 2021, as well as our subsequent filings with the SEC. We are not undertaking any commitment to update these statements if conditions change. Please note, these are year-end and interim period financials and are unaugmented. Now, I would like to turn the call over to Finance of America's Chief Executive Officer, Patty Cook. Patty?

Thanks, Michael, and good morning, everyone. Thank you for joining us for our fourth quarter and full year 2021 earnings call. I am extremely proud of what the Finance of America team has accomplished, delivering a solid performance in our first financial year as a public company. On a full year basis, Finance of America delivered $1.7 billion in revenue and adjusted net income of $308 million. Our specialty finance and services business had a standout quarter and beat the high end of our adjusted net income guidance. Notably, our reverse business outperformed again with revenue growth of 3% quarter over quarter and 101% year over year increase. Our continued success is a direct result of Finance of America's unique business model and the reverse commercial lender services and capital markets capability that collectively form SF&S separate us from other lenders in the category. This model also helps FOA maintain operating profitability despite the mortgage market evolution. As many of you know, the mortgage industry is currently facing a tough environment and persistent headwinds. The demand for refinancing has dramatically decreased from the highs of 2020 as rates have increased. These macro conditions have led to a shift from refinancing to home purchase. We believe Finance of America is well positioned to take advantage of the expected growth in the purchase and non-agency market, yet remain able to leverage the episodic refinance opportunities as we did in 2020. In the fourth quarter, SF&S accounted for 51% of our revenue and the bulk of our adjusted net income. These businesses continue to perform well, and we expect SF&F to be the main driver of our profitability and growth in the foreseeable future. To continue building on this momentum, while also managing against the broader economic outlook, we are committed to executing the three strategic priorities that I outlined last quarter. These are, one, optimizing our mortgage business. Two, investing in our high-growth SF&S businesses. And three, leveraging our technology, data, and operating model to transform from a product to customer-centric company. First, we have taken steps to position our mortgage business for dramatically reduced refinance volume, while still maintaining our ability to benefit from expected growth in the purchase and non-agency markets. This quarter, our mortgage segment posted a loss, which can be primarily attributed to our nascent home improvement business that is reported as part of the mortgage origination segment. Excluding the loss from home improvement, our mortgage business broke even, and we expect the mortgage business will return to profitability as the home buying season approaches. We are also focused on our non-agency proprietary products that caters to borrowers who don't qualify for agency loans. This recently launched product doesn't change our credit risk, but allows us to serve a broader subset of qualified customers who don't fulfill the traditional requirements, such as a customer who has an independent business and doesn't get a W-2, or a customer who is a consultant or receives income from multiple jobs. or a customer who briefly fell on hard times due to COVID and has a gap in their income history. We're looking at those who are just outside the agency guidelines and providing a solution to help them achieve their dream of home ownership. Our non-agency product is becoming a much bigger piece of the mortgage market, contributing 18% of our total mortgage originations during the fourth quarter. Lastly, Our distribution network of loan officers and brokers is an untapped asset that can help sell other Finance of America products. As refinance volumes decline, it allows our roughly 1,100 loan officers and 1,250 broker relationships to supplement their business by selling reverse and commercial mortgages. In 2021, our LOs and brokers each sold, on average, half a reverse and one-tenth of a commercial loan. And we believe there is opportunity to increase this meaningful. Our second strategic priority is focused on investing in our high-growth SF&S businesses. As noted earlier, our specialty finance and services segment is a significant contributor to our business. In the fourth quarter, it contributed $196 million in revenue and $73 million in adjusted net income. This follows an impressive two years of adjusted net income growth with SF&F delivering a 90% CAGR over the period. A key driver of our SF&F success is our reverse mortgage business, which offers products and services designed to help older Americans tap home equity as part of their retirement plan. The strength in this market is driven by both new originations and refinancing due to recent home price appreciation. In the fourth quarter, we set another production and revenue record as our proprietary products fuel strong growth. The reverse eligible population in the US is growing at baby boomers age. In addition, many boomers have not saved enough to maintain their current lifestyle. A reverse mortgage is an attractive solution to not only allow homeowners to age in place, but also to fund their lifestyle. We are continuing to invest in education and advertising to drive market awareness around the benefits of a reverse mortgage and the responsible use of home equity as an effective means to help fund retirement. Our commercial business also generated a record quarter with 580 million in funded volume. Demand for commercial investor loans is being driven by the aging housing stock and a large number of first-time millennial home buyers who are looking for updated homes. Our pipeline remains strong despite the recent market volatility. Our home improvement business while a smaller and newer piece of our product offering remains a very efficient customer aggregation tool. Home improvement is benefiting from an aging housing stock, lack of supply, and a greater number of people working from home. A home improvement loan allows owners to stay in their current home and create the modern living spaces they require. While we expect the home home improvement business to be profitable later this year and provide strong growth year over year, we believe the real value is in the customers we acquire. Ultimately, these customers who refinance or purchase additional Finance of America products are acquired at essentially zero cost. And finally, our London services business continues to build momentum. While we expect to see a decline in revenue from refinance volume, there has been strong growth in new clients and client penetration. Specifically, Lenders Services added over 500 new clients in 2021, bringing total third-party client relationships to over 1,940. Client penetration also increased with clients on average now using two or more products. Our third and final strategic priority is to leverage our technology, data, and operating model to monetize the substantial lifetime household value inherent in our business. We touched on this briefly during our last call, but I want to spend a moment covering our efforts in more detail. Today, FOA exists to help people thrive. we do this by developing indispensable solutions that empower our customers illuminating pathways that can lead to greater financial freedom we want to give our customers choices bring them into our ecosystem and build enduring relationships so we can offer them tailored financing solutions to meet their needs at every stage of life this is not an overnight transition instead It will manifest over the coming quarter and beyond through incremental building blocks that we will share with you along the way. The result will be a complete end-to-end consumer lending platform that is aligned with customers and households throughout their financial journey. To demonstrate our commitment to this effort, we recently hired Jason Rudman as our new Chief Customer Officer. Jason brings a wealth of experience helping companies enhance customer loyalty and retention while increasing enterprise value. We look forward to sharing more on our progress as Jason settles into his new role in the coming months. Finance of America has a strong foundation to execute these strategies. We present all the building blocks necessary to be successful. a broad distribution network and extensive customer data, market-leading positions in high-growth, profitable businesses, and best-in-class capital market capabilities that drive product innovation. Ultimately, this will fuel long-term growth and allow us to maximize lifetime household value. In all, it's been an exciting year for our business, and I am pleased with the progress we have made to date We maintained a high level of profitability, even as the mortgage market declined materially, and in the process, demonstrated the value of our unique business model. I will now pass the call to Johan to discuss the financial results.