Thank you for standing by. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Finance of America’s Second Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any feedback noise. After the speaker’s remarks there will be a Q&A session. [Operator Instructions]. Michael Fant, Senior Vice President of Finance, you may begin your conference.

Thank you and good afternoon, everyone. And welcome to Finance of America’s second quarter 2023 earnings call. With me today are Graham Fleming, Chief Executive Officer; and Johan Gericke, Chief Financial Officer. As a reminder, this call is being recorded. 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 effort discussed on today’s call in our earnings press release and presentation on the Investor Relations page of our website www.financeofamerica.com. Also, I would like to remind everyone that comments on this conference call regarding the company’s expected operating and financial performance for future periods may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 Factor section of Finance of America’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 16, 2023. As 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 these are interim period financials and are unaudited. Now, I would like to turn the call over to Finance of America’s Chief Executive Officer, Graham Fleming. Graham?

Thank you, Michael. Good afternoon, everyone. And thank you for joining us on our second quarter 2023 earnings call. Finance of America continues to lead the way in helping provide older Americans with more choices and flexibility when it comes to meeting the evolving needs of today's modern retirees. More importantly, Finance of America is now at an exciting inflection point. Over the last several months, we executed a series of strategic actions, including the sale of our title insurance business, the sale of the majority stake of the remaining Lender Services business, and most importantly the initial steps in the integration of the AAG platform. The completion of these transactions marks an important and pivotal step in the execution of our long-term growth strategy designed to help Americans achieve their retirement goals with the use of home equity. Our business has now fully transformed into a leading modern retirement solutions platform, and we believe it is well positioned for long-term success. For today's call, I'm going to begin by briefly reviewing our financial results for the quarter. I'll then spend time discussing business structure updates and the progress we've made against executing against our strategic priorities. Johan will then discuss our financials in more detail. Our results this quarter illustrate our commitment to streamlining the organization and making significant investments in our retirement solutions business, which we believe is poised for long-term growth due to demographic tailwinds. However, today's cyclical mortgage market has been significantly impacted by wider spreads and higher interest rates, which plays downward pressure on our results due to negative fair value adjustments and reduced volumes. On a continuing operations basis, we recorded GAAP net loss of 221 million or $0.91 per basic share in Q2, driven primarily by negative impact of rates and spreads during…

Thank you Graham and good afternoon everyone. I will provide a brief overview of our financial results before I dive into the specifics on the quarter. Turning to the operating results, the company recognized a net loss of 221 million or $0.91 per fully diluted share, which was driven primarily by negative fair value adjustments to our portfolio as interest rates and spreads were impacted by the fallout from the bank collapses late in Q1. On a continuing basis, the company recognized an adjusted net loss of 26 million or $0.12 per fully diluted share. As Graham mentioned, although we have begun to see an increase in funded volumes, these were outpaced in the quarter by the additional operational infrastructure and further investments we made in the acquired AAG platform. In Retirement Solutions, we funded 447 million in UPB for a 25% increase over the first quarter. We expect to continue to see quarter-over-quarter growth in this business as we fully integrate AAG and fund the increase in submission volume we are already seeing in our pipeline. Revenue margins increased as the shift towards the AAG retail channel leads to higher margin business. For the quarter we saw revenue margins increase from 7.3% in Q1 to 9.2% in Q2. This increase is net of a roughly 1.6% drop in HECM revenue margin quarter-over-quarter. Combined with the increased volume, total revenue grew roughly 58% from the prior quarter. This was, however, offset by expenses attributable to the on boarded infrastructure of the AAG platform. Expenses increased by 65% quarter-over-quarter from 35 million to 59 million. This increase includes transitory costs that were needed to ensure a smooth transition in Q2, and we expect to see those costs declined starting in Q3. In addition, we invested in headcount and marketing to expand…

Yes. Thank you, Johan. We remain focused on executing our strategy as we said we would and took actions we believe will best position our business for the long-term. Looking ahead to the remainder of 2023, we do not expect to achieve our previous full year guidance of $0.09 to $0.12 adjusted earnings per share. That said, we believe the earnings potential of the company is $0.40 to $0.50 per share once the AAG acquisition is fully integrated and the market stabilizes. Through our marketing powerhouse and product innovation, we are confident that we can grow our customer base and meet our customers' needs wherever they are in life to serve them with tailored retirement solutions. And with that, we'll open the call for questions.

[Operator Instructions]. Your first question comes from Stephen Laws with Raymond James. Your line is open.

Thank you. Hi, good afternoon Graham and Johan. A couple of follow-up questions on some of your comments. I guess, first, can you give us an outlook on volume up sequentially, maybe a little below what I was looking for. So can you talk about what July volumes look like and maybe what you think quarterly run rate is going to be as we look at the back half of the year?

Yes, thanks Stephen. So we would -- based on what we see currently in our pipeline and with submissions, we'd expect Q3 to be something in the $500 million to $525 million range. And if we continue on this growth trajectory, we would expect Q4 to look like something in the $600 million range.

To a final point on that, Stephen, if you look at the origination volume in the earnings release, the $447 million, I'd say think about $50 million of that is home improvement, the rest is reverse, right.

Okay. That's helpful. [Multiple Speakers]

Yes. So the numbers I'm speaking with are just the reverse side -- just reverse volumes.

Just reverse on those numbers. Okay. Great. To touch on expenses, I just want to make sure I triangulate the right numbers. Graham, I think you mentioned maybe $20 million more expense reductions. Does that compare to the $59 million number that Johan mentioned and that's what we should look at going to from basically 60 to 40?

No, the $59 million was for the retirement solutions only and the $20 million that Graham is talking is the entire corporate infrastructure for the overall company, Stephen, before allocations, right. And so some of that gets allocated to the retirement solution some of it gets allocated to portfolio management. And then a big chunk of it is unallocated and stays behind in the corporate segment.

Okay. But I think $20 million can be synergies from here and over what time frame do you expect that?

Between now and the end of the year, we expect to generate those savings that, if you look at that -- if you just hit a chalk line today and you hit a chalk line at the end of the year and you look at the delta, just on an annualized basis that delta should be $20 million.

Great. And one last question. Just do you have a quarter-to-date update on fair value marks and the cash balance that you referenced does not include the title sale or the remainder of the lender services sales since from quarter end?

It's a little bit early. We're in the market pricing, and so that will dictate where spreads are. So it's a little bit early to give an indication at this point.

Okay, thanks a lot. Appreciate it.

Alright.

[Operator Instructions]. There are no further questions at this time. I turn the call back over to Graham Fleming.

Thank you. I'd like to thank everybody for joining our call. And we'll update everybody at the end of Q3 on our next earnings call. Thank you very much.

This concludes today's conference call. You can now disconnect.