Replay Acquisition : Earnings Call Transcript - Dec 1, 2020

Finance of America 3Q20 Earnings Conference Call Script

December 01, 2020

Conference Call Introduction Operator

Good afternoon, ladies and gentlemen, and welcome to the Finance of America Third Quarter 2020 Earnings Conference Call. I would now like to turn the conference over to Michael Fant, Senior Vice President of Finance at Finance of America.

Please go ahead, Michael.

Forward-Looking Statements

Michael Fant, Finance & Investor Relations

Thank you and good afternoon everyone, and welcome to Finance of America's third quarter earnings call. With me today is Patti Cook, Chief Executive Officer, and Graham Fleming, President. As a quick reminder, this call is being recorded and you can find the Earnings Release on our investor relations website at www.financeofamerica.com. During the call we may refer to our unaudited financials and non-GAAP measures, which are reconciled to GAAP results, to the extent available without unreasonable efforts, in our earnings release. Also, I would like to remind everyone that comments on this conference call may be forward-looking statements 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 news 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 that are described in Finance of America's Form S-4 recently filed with the U.S. Securities and Exchange Commission. We are not undertaking any commitment to updatethese statements if conditions change. Please note these are interim period financials and are unaudited.

Participating in the call today are Chief Executive Officer Patti Cook and President Graham Fleming. Now I would like to turn the call over to Finance of America's Chief Executive Officer

Patti Cook. Patti?

Section I

Patti Cook, CEO

Thanks Michael and good afternoon everyone. I wanted to start by thanking all of Finance of America's team members and partners for their commitment and hard work over the years, and particularly during the pandemic. I would also like to thank all of our clients for their continued trust and loyalty, and we look forward to building relationships with the investment community and creating shareholder value as we transition to a public company. While we are proud of our accomplishments to date, we are even more excited as we look to the future.

Before I dive into our business segments, I thought it might be helpful to provide a brief, high level overview of our business and our key differentiating factors.

Finance of America is a highly differentiated, diversified lending platform, with exceptional capabilities to develop loan products, while at the same time manufacturing assets that align with prevailing investor demand. Our platform was purpose built to create a business that could better withstand the cyclicality of most consumer lending businesses. The central tenet that drives what we do is to engage in businesses that complement one another but are driven by different tailwinds allowing us to grow earnings in a wide variety of economic conditions. Over the last four years we have maintained strong earnings growth, as new businesses came on line. This is in contrast to most other lenders during this period. So, while we continue to take advantage of the favorable rate environment within our forward mortgage segment, we see continued growth in our other lending segments and our non-lending segments. These non-mortgage segments will provide the benefits of diversification and powerful tailwinds as the mortgage market shifts and over time we expect the contribution from these channels to grow meaningfully. This growth will come both organically and through strategic acquisitions.

Low interest rates are the driving force in the mortgage market today while various demographic trends support future lending opportunities. In mortgage it is the increase in household formation that will drive a return to a purchase market. In reverse it is the aging baby boomers who have not saved enough for retirement but want to age in place and have fifty percent of their wealth tied up in their home. Our commercial segment is well positioned to help real estate investors meet the demand of millenials by providing the money they need to rehab the homes millenials will want to rent or buy.

Importantly, our business model is built with technology that enables all that we do. It is key to delivering a best in class customer experience. It gives us the flexibility to launch new products quickly. It enables us to onboard new businesses and people efficiently and to support sophisticated capital markets activity. A key aspect of a lender's platform is the customer point of sale. Needless to say, today's borrowers demand a process that is quick and easy. Similarly, our sales team demands a set of tools that make their job easy. Our technology coupled with our high-touch mortgage advisor approach produces customer satisfaction and loyalty. This is reflected in our 90-plus net promoter score.

Now turning to our business segments, let's start with our lending business. Our multiproduct lineup includes mortgages, reverse mortgages, and loans to residential real estate investors. These products are distributed through multiple channels including distributed retail, third-party brokers and digital direct to consumer. These combine to give us great reach and allow us to connect with our customers however they choose.

In 2020, we have experienced record mortgage origination volumes and record margins. We are at historic lows in mortgage rates and given the Fed's current posture on employment and inflation, we are likely to remain here for some time. This has created a massive incentive for homeowners to refinance their mortgages. In fact, research by Credit Suisse estimates 75-80% of all 30-year GSE mortgages have at least a 50 basis point incentive to refinance.

Similar to others across the industry, our origination volumes have remained strong through