Finance Of America Companies Inc. (FOA) Q1 2026 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us, and welcome to the Finance of America First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Michael Fant, Senior Vice President of Finance. Michael, please go ahead.

Thank you, and good afternoon, everyone, and welcome to Finance of America's First Quarter 2026 Earnings Call. With me today are Graham Fleming, Chief Executive Officer; Kristen Sieffert, President; and Matt Engel, Chief Financial Officer. As a reminder, this call is being recorded, and you can find the earnings release and related presentation on our Investor Relations website at ir.financefamericacompanies.com (sic) [ ir@financeofamerica.com ]. 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-K for the year ended December 31, 2025, filed with the SEC on March 13, 2026. 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. 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 in our earnings press release and presentation on the Investor Relations page of our website. Now I will turn the call over to our Chief Executive Officer, Graham Fleming. Graham?

Thank you, Michael, and good afternoon, everyone. The first quarter of 2026 was an outstanding quarter, with operational momentum in originations driving an acceleration of volumes, excellent profitability in our Portfolio Management segment, and steady improvement in our financial results, liquidity, and capital position. On our call today, I will take you through the highlights, then spend a moment commenting on the market opportunity in reverse mortgages, which we believe is significant; Kristen will dive into our originations performance; Matt will comment on the financials; and then we will take your questions. To start with, if you turn to Slide 5 of the accompanying presentation, Finance of America generated net income of $35 million and adjusted net income of $26 million, or $1.10 per share, up 112% from last year's first quarter results. This powered a strong increase in tangible equity to $268 million, or approximately $15 per share. These results are consistent with the guidance we have issued for 2026, which Matt will update you on in a moment. From a production standpoint, we funded $596 million in the quarter, up 6% year-over-year. As you will recall, we talked about operational enhancements to our platform, driving an inflection point in results, and we are starting to see that in the March and April fundings, consistent with the volume guidance we have shared with you. Separately, I'm excited to see us rolling out a new second-lien reverse mortgage line of credit, which is a great product to help seniors tap directly with the timing and amounts that precisely suit their needs. Regarding the previously announced PHH transaction, the transaction has been modified to close in 2 distinct phases. The first phase, consisting of the origination, marketing of our products and subservicing components, is expected to close in May. The second phase, which includes the purchase of HECM servicing rights, will follow as we continue to work with our primary regulator, Ginnie Mae, on the related approval. Additional information can be found in today's 8-K filing with the SEC. Before turning the call over to Kristen, I would like to spend a moment on the opportunity in reverse mortgages, which are typically viewed as a niche product in the broader mortgage universe, and in our experience are not well understood by investors missing the growth potential. If you turn to Slide 6, let me share with you a snapshot on current industry volumes. As you can see from the top chart of this slide, government-insured reverse mortgages, or HECMs, have been running roughly flat for the last 3 years at approximately $4 billion per year, down significantly from the boom experienced during the pandemic, driven by refinance activity. What is noteworthy, but is somewhat hard to see given the lack of consistently available industry data, is the market expansion related to proprietary products. This is one of the reasons we believe the equity markets have been slow to pick up on the opportunity. These proprietary products significantly expand the market by making reverse mortgages available to borrowers aged 55 and older in certain states, compared to age 62 for government-insured products, and by offering jumbo balances and a range of product structures, including first liens, second liens, and lines of credit. For example, Finance of America's second-lien products can provide a solution for borrowers who want to access home equity while maintaining a low rate primary mortgage. These products are really important to watch because their increasing origination volumes demonstrate the growing mainstream acceptance of reverse mortgages by American seniors. Finance of America has been the market leader in proprietary reverse products for over a decade. These products have been a significant and accelerating driver of our growth over the last 3 years as they continue to gain acceptance from our customers and from our investors alike. With this thought in mind, if you will turn to Slide 7, I will end my prepared remarks by reminding you that American seniors control a massive amount of home equity, approximately $14.6 trillion. And this equity is expected to continue to grow as homes continue to appreciate and as the population ages. Between 2024 and 2026, census data shows that over 11,000 Americans turn 65 every day. Now these are big numbers, making the addressable market more than 100x greater than the size of the entire reverse mortgage population outstanding today, and not everyone is going to become a reverse customer. However, as the proprietary product set continues to expand and American seniors turn to home equity for an ever -widening set of use cases, we believe there is a massive multiyear growth opportunity shaping up for Finance of America. And with that, I'll turn the call over to Kristen.

Thanks, Graham, and good afternoon, everyone. Last quarter, I said we were reaching an inflection point in the platform. What we saw in the first quarter reinforces that view, and we can see it clearly in the numbers. Turning to Slide 8. Overall originations were up 6% year-over-year, and first quarter submissions reached a new high of $918 million, which is up 20% year-over-year. Submissions represent customers who've completed their application and provided all supporting paperwork. They're one of our clearest leading indicators of future funded volume and why we remain confident in our volume guidance. Our volumes reflect a mix of both HECM and proprietary products across first and second liens. I specifically call out our HomeSafe Second, which reached a high watermark in the quarter, increasing 32% year-over-year. And as Graham mentioned, we rolled out a new line of credit option for HomeSafe Second, further expanding the use cases for our customers. Finance of America has long been a leader in proprietary products supported by our understanding of the customer and strong capital markets relationships, which continue to support growth across both our retail and wholesale channels. While HECM is structured to a one-size-fits-all approach, FOA's industry-leading product development and partnerships allow us to better target the various and bespoke needs of our massive customer base, which will lead to continued profitable growth. Turning to Slide 9. At the top of the funnel, momentum exiting the quarter was strong. Inquiry volume in March was up 84% versus the 2025 average, while cost per inquiry declined 19%. Opportunities, defined as qualified warm transfers to loan officers, also reached a new high in March, up roughly 58% over 2025 levels. Further down the funnel, we're seeing equally strong progress in early conversion. Borrowers opting into our digital prequalification experience more than doubled sequentially, and submissions per loan officer in March reached the highest level in the history of our retail channel, up 47% compared to 2025 levels. These improvements are being driven by the operating model we've been building. Helix is our proprietary, industry-first, end-to-end platform that connects how we acquire, evaluate, and move customers through the process, with Joy operating as the AI layer across that system. The deployment of AI is helping us in 2 ways: first, by allowing us to more consistently match customers with the right solution and improve their overall experience; and second, by improving our top-of-funnel marketing and resulting cost per lead. Incorporating AI across the platform is driving meaningful improvements that will compound as we grow and scale. Helix and Joy give us a competitive advantage over peers who rely on vendor systems, and I look forward to updating you on our progress as we build out new capabilities. Stepping back, this is happening in a market that remains significantly underpenetrated. As Graham mentioned, today, there's less than $100 billion of reverse mortgage volume outstanding compared to an estimated $14.6 trillion of senior home equity. As the category leader with approximately 30% market share, our scale, product breadth, and operating model position us to capture more of this underpenetrated opportunity, supporting better outcomes for customers in retirement, and strengthening the durability and scalability of our earnings. With that, I'll turn it over to Matt.

Thank you, Kristen, and good afternoon, all. Graham already gave you the headline results, so I'll give you some added color for the quarter, which you can find in today's earnings release and summarized by segment on Slide 11. As mentioned, we generated $35 million of net income and $26 million of adjusted net income. Adjusted earnings per share of $1.10 was up 112% year-over-year. Starting with Retirement Solutions, which represents our originations platform, adjusted net income was $14 million, down from the fourth quarter due to the typical seasonality in originations, but up substantially year-over-year, in fact, up by 56%. Driving these results was the higher conversion rates Kristen mentioned, as well as improved revenue margins, which increased year-over-year, reflecting the strong execution we are seeing as proprietary production continues to grow. Portfolio Management delivered strong results for the quarter, generating $28 million in adjusted net income. Performance was driven primarily by $1.7 billion of securitization activity across both proprietary reverse and HECM buyouts. Results benefited from favorable market conditions, including tight spreads and relatively lower interest rates, as well as the timing of execution within the quarter. While timing can vary quarter-to-quarter, our results reflect the strength of our platform and our ability to consistently identify and execute on attractive capital markets opportunities. Corporate segment adjusted earnings, which reflects overhead and interest expense on our nonfunding debt, was materially in line with prior quarters, reflecting reduced nonfunding interest expense, offset by investments in technology. Overall, these results drove a sequential increase in tangible equity to $268 million, or approximately $15 per share. With respect to our valuation, we believe the growing origination and earnings power that we continue to demonstrate will, over time, warrant a higher multiple on both an earnings and tangible equity basis. Turning to key balance sheet metrics on Slide 12. You can see that our cash balances increased from $90 million at the end of 2025 to $108 million at the end of the first quarter, and are up by 108% year-over-year. During the quarter, we generated $58 million in cash flow from our originations and capital markets activities, and utilized $40 million to complete the repurchase of Blackstone's equity position. At this time, we view our plan to retire the $150 million balance of our senior secured corporate notes later this year as the most prudent use of our liquidity and capital in the near term. This deleveraging plan will create a very strong balance sheet, which we view as an appropriate foundation for the valuable operating franchise we have built. Having said that, given the strong results we posted this quarter, we also see considerable value in our own shares. We expect to revisit capital allocation priorities as we make progress against the deleveraging plan. If you turn to Slide 13, I'll conclude my prepared remarks by giving you an update on our guidance. For 2026, we are maintaining our funded volume outlook of $2.8 billion to $3.1 billion. We're also increasing our guidance for full year adjusted earnings per share above our previously stated range to between $4.50 and $5.00 per share, reflecting the strong first quarter performance and the momentum we are seeing in our business. With that, I'd like to ask the operator to open the call for questions.

[Operator Instructions] Your first question comes from the line of Timothy D'Agostino with B. Riley Securities.

Congrats on the quarter. So on origination volume, it sounds like March was a pretty strong month. And I was wondering if you could add some color as to maybe why March was stronger than February and January. And if that volume that was seen in March persisted through April and into the beginning of May?

Tim, I think a couple of things. One, I mentioned there's some normal seasonality. So our lead generation capabilities in November and December has always curtailed a little bit just from the holiday periods at the end of November and the end of December, of course. So that will lead naturally to some lower fundings in January and February. But as you start to get into the new year and start to crank that engine back up, you start to see a lead flow come in, which really starts to kick in February-March. That's just kind of normal seasonal stuff. I'll maybe let Kristen expand on the improved performance we're seeing from that marketing spend as well.

Yes, I touched on Helix, and really what we saw in March was the work that we've been doing actually producing the results that we expected it to, starting to come together in March. So we really started to hit a different speed as it relates to our origination volume in March as a result, and we expect that to continue for the year.

And then on the funded volume by product, especially thinking about the first quarter, obviously it's shifted more towards that proprietary product. But I guess regarding originations in the first quarter from the HECM product and the proprietary product, was there any changes in demand or any color you can provide on how homeowners are interacting with each product? Is the proprietary product gaining more traction? Just any color on how homeowners are interacting.

Homeowners typically choose a product that best suits their needs, which in most cases is a function of the amount of proceeds relative to the debt that they have and their home value. So where we see proprietary as natural fits are more of the jumbo home sizes on our traditional suite. But the difference for us in Q1 is we're really starting to see our second-lien product increase in originations. And those products are for people that really have a different use case in the sense that they're happy with their first mortgage, typically a low interest rate, they can afford that payment, but they have a tremendous amount of home equity that they'd like to tap and can't afford or don't want another payment to impact their cash flow. So for a HECM versus HomeSafe on the traditional side, it's typically a function of which product provides the customer access to the most funds and dependent on property value. And then on the HomeSafe second-lien, it's based on what I just described, borrowers looking for a different alternative.

[Operator Instructions] And we have a follow-up question from Timothy D'Agostino from B. Riley Securities.

Let's take the third question here. I just wanted to see if you had any more updates or just touch on anything else regarding the PHH acquisition. I know in the slide deck it was mentioned that it was progressing, but I don't know if there was any additional color you could provide.

Yes. All the additional information, Tim, will be in the 8-K that we filed after the market today. So as I said in my remarks, we've bifurcated the transactions and the originations, the marketing of our product, and subservicing, which we expect to close here in May. We have a small pool of HECM MSR in front of Ginnie Mae, which we'll work with Ginnie Mae on gaining the appropriate approvals and then close on that when the timing is correct, and we receive that approval.

We have reached the end of the Q&A session. I will now turn the call back to Graham Fleming for closing remarks.

Yes. Thank you. The takeaway from the first quarter is straightforward. We're seeing clear improvement in the underlying drivers of the business, and that improvement is starting to translate into stronger production and financial results. And with that, we look forward to updating you in August with our Q2 results. So thank you, everybody, for joining the call today.

This concludes today's call. Thank you for attending. You may now disconnect.