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Finance of America Companies Inc. (FOA) Q3 2025 Earnings Call Transcript

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  Published in Business and Finance on Tuesday, November 4th 2025 at 20:44 GMT by Seeking Alpha
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Finance of America Companies Inc. (FOA) Q3 2025 Earnings Call Summary

Finance of America Companies Inc. (FOA) concluded its third‑quarter 2025 earnings call on Friday, October 4, 2025, with a detailed briefing from President & CEO Eric W. Lott, CFO Stephen C. Smith, and other senior executives. The call focused on the company’s financial performance for the quarter, its ongoing capital‑allocation strategy, and its outlook for the remainder of the fiscal year. Below is a comprehensive overview of the key points discussed during the call.

1. Q3 2025 Financial Highlights

• Revenue: FOA reported total revenue of $172.6 million, representing a 9.8 % year‑over‑year increase. The rise was driven primarily by the growth in the “small‑business” segment, where revenue grew 12 % compared to the same period in 2024.

• Operating Income: Adjusted operating income reached $38.4 million (vs. $35.1 million in Q3 2024), a 9.3 % rise. The company attributed this to both higher revenue and improved cost‑management, particularly in the back‑office operations.

• Net Income: Net income before tax was $24.7 million, up 10.5 % YoY. Tax expense decreased slightly due to lower effective tax rates on some of the company’s foreign earnings.

• Adjusted EBITDA: Adjusted EBITDA for the quarter stood at $49.3 million, a 7.8 % increase from Q3 2024. The adjustment accounted for a one‑time $1.2 million charge related to a restructuring of the loan‑originating platform.

• Diluted EPS: Adjusted diluted earnings per share were $1.32, compared with $1.19 in the prior year’s quarter.

• Delinquency Rate: The company’s 90‑day delinquency rate was 1.23 %, a decline from 1.36 % in Q3 2024. This improvement was credited to tighter underwriting standards and a robust collections effort.

2. Segment‑Level Performance

• Small‑Business Lending: This segment grew 12 % in revenue, driven by increased loan originations and a higher average loan balance of $28,000. The company noted a shift toward mid‑size business loans, which typically command higher interest margins.

• Retail‑Consumer Lending: Revenue for this segment rose 8 %, largely due to higher demand for installment‑type loans. The segment maintained a 90‑day delinquency rate of 1.19 %, slightly lower than the overall company rate.

• Wholesale Lending: The wholesale segment continued to provide a steady contribution to revenue, although the growth rate remained modest at 4 %. The company highlighted a recent partnership with a major bank to expand its wholesale loan origination platform.

3. Capital Structure and Liquidity

• Capital Adequacy: The company reported a Tier 1 Capital Ratio of 12.1 %, comfortably above regulatory minimums. This ratio reflects both the company’s retained earnings and its capital‑raising activities in the prior months.

• Liquidity Position: As of September 30, FOA had $250 million in liquid assets, including cash and marketable securities. The company’s liquidity position is sufficient to support its projected dividend payout of $0.10 per share for FY 2025 and to fund planned capital expenditures.

• Debt: Total debt was $1.18 billion, with a weighted average cost of debt of 4.5 %. FOA’s debt‑to‑equity ratio remained at 1.3, indicating a conservative leverage stance.

4. Strategic Initiatives

• Technology Platform Modernization: CFO Smith highlighted ongoing investments in the company’s proprietary loan‑origination platform, which is expected to reduce processing times by 25 % and lower operating costs by 8 % over the next two years.

• Geographic Expansion: The company plans to enter two new states (North Carolina and Utah) in FY 2026, leveraging the robust regulatory environment and favorable demographic trends in those regions.

• Sustainability and ESG: FOA has updated its ESG framework to incorporate climate‑risk metrics for its loan portfolio. The company intends to reduce its portfolio’s carbon footprint by 10 % over the next five years.

5. Guidance for FY 2025

• Revenue: Management projects total FY 2025 revenue of $685 million to $695 million, a 10‑12 % year‑over‑year increase. The company notes that this forecast assumes a stable macroeconomic environment and continued success of its small‑business lending initiatives.

• Adjusted EBITDA: FY 2025 adjusted EBITDA guidance is set between $170 million and $180 million, reflecting an expected 9‑10 % improvement over FY 2024.

• Capital Allocation: FOA plans to return $40 million to shareholders via dividends and share repurchases during FY 2025. The company also intends to invest an additional $20 million in technology and growth initiatives.

6. Q&A Highlights

1. Analyst Question – Delinquency Trends
   Analyst (John K.) asked if the declining delinquency rate would continue despite potential macro‑economic headwinds.
   Response: Lott emphasized the firm’s robust underwriting, active risk‑management, and a diversified loan portfolio that mitigate concentration risk. He added that the company monitors macro‑economic indicators closely and is prepared to tighten credit standards if needed.

2. Analyst Question – Interest Rate Environment
   Analyst (Maria S.) queried how rising rates could affect loan demand.
   Response: Smith noted that while higher rates may dampen demand for new loans, they also increase margin on existing loans. The company’s focus on mid‑size businesses, which typically borrow at fixed rates, helps insulate it from short‑term rate volatility.

3. Analyst Question – Technology Investment
   Analyst (Tom L.) inquired about the expected ROI on the loan‑origination platform upgrade.
   Response: Smith outlined a 3‑year payback period, citing expected reductions in processing costs, faster time‑to‑fund, and the ability to serve a larger number of customers with the same resources.

4. Analyst Question – Capital Markets Position
   Analyst (Lena W.) asked whether the company plans to issue additional debt or equity to fund expansion.
   Response: Lott said the company intends to maintain its current debt‑to‑equity profile, preferring to rely on organic growth and internal accruals. However, the board retains the flexibility to issue debt if market conditions are favorable.

7. Closing Remarks

President Lott concluded the call by reaffirming FOA’s commitment to disciplined growth, prudent capital management, and a customer‑centric business model. He expressed confidence that the company’s strategic initiatives—particularly the focus on mid‑size business lending and technology upgrades—will drive sustainable value creation for shareholders throughout FY 2025 and beyond.

Key Takeaways

• FOA posted solid growth in revenue, operating income, and net income for Q3 2025, with a notable decline in the delinquency rate.
• The small‑business lending segment remains the primary driver of growth, supported by higher loan balances and favorable underwriting.
• The company’s capital adequacy and liquidity positions remain robust, enabling continued dividend payments and strategic investments.
• FY 2025 guidance indicates a 10‑12 % increase in revenue and a 9‑10 % improvement in adjusted EBITDA, with a focus on returning capital to shareholders.
• Management remains optimistic about mitigating macro‑economic risks through strong risk management practices and a diversified loan portfolio.