In our case, the initial keying material is the output of PBKDF; and the two outputs we use are used as an encryption key and a bearer token (essentially a password but I call it an authentication token to avoid confusion with your actual password). There are less complicated ways to do this; but this one is cryptographically conservative.
"essentially requires the server to be able to reverse HMAC-Hash to find the encryption key from the the authentication token" - the server can't do that; which is why the server can't figure out your encryption key from your authentication token. (The best the server could do would be to try a password guessing attack.)