Better Home & Finance Holding Company

Good morning and welcome to the Better Home and Finance Holding Company third quarter 2020 results conference call. Please note that this call is being recorded. All participants are now in listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. I will now turn the call over to Hannah Kosla, Vice President of Investor Relations. Please go ahead.

Welcome to Better Home and Finance Holding Company's third quarter 2023 earnings conference call. My name is Hannah Kosla, and I am the Vice President of Investor Relations at Better. Joining me on today's call are Vishal Garg, Founder and Chief Executive Officer, and Kevin Ryan, President and Chief Financial Officer. The presentation for today's call can be found on the Better Investor Relations website. Certain statements we make today may constitute forward-looking statements that are subject to risks, uncertainties, and other factors, as discussed further in our SEC pilot, that could cause our actual results to differ materially from our historical results. We assume no responsibility to update forward-looking statements other than as required by law. During today's discussion, management will discuss certain non-GAAP financial measures, which we believe are relevant in assessing the company's financial performance. These non-GAAP financial measures should not be considered replacements for and should be read together with our GAAP results. These non-GAAP financial measures are reconciled to GAAP financial measures in today's earnings release and webcast presentation. both of which are available on the investor relations section of Better's website and in our quarterly report on Form 10Q files of the SEC. I will now turn the call over to Vishal.

Thank you, Hannah, and welcome to our third quarter earnings call. We appreciate everyone joining us today. Since this is our first quarterly earnings call as a public company and many are new to the Better story, we wanted to first spend some time introducing the business. Better was founded as a digitally native mortgage company seeking to fundamentally transform the entire homeownership process by delivering the best experience to customers at the lowest cost. We currently have approximately 760 hardworking, mission-driven, customer-focused employees across the U.S., India, and the United Kingdom. Our mission is to make homeownership better, faster, and cheaper by building a technology platform that revolutionizes the experience of finding, financing, and selling homes. Since our founding in 2016, we've achieved over $100 billion in loan origination volume entirely digitally and offer multiple product solutions across the mortgage, real estate, and insurance verticals. The homeownership journey remains mired in legacy and efficiency. High transaction costs, regulatory complexity, legacy systems, and multiple middlemen come at the expense of the consumer and slow the pace of digital innovation and adoption. Relative to almost any other consumer category, the homeownership experience remains slow, costly, and analog. In some, we believe it is unnecessarily broken. We see a future in which every customer can seamlessly buy, sell, refinance, and insure their home digitally online instantly. The home is among the world's largest and oldest tangible asset classes, with spend across the global housing market accounting for approximately $13 trillion annually, and specifically residential mortgage origination in the United States being over $2.5 trillion annually. Our market is enormous and we are penetrating less than half of a percent of that today, leaving tremendous room for growth. We are seeking to disrupt the antiquated model by leveraging our proprietary technology platform, TinMan, to improve the efficiency and customer experience of the mortgage process. We aim to reduce the cost to produce a loan and create a single one-stop shop platform with multiple home ownership products embedded into a highly automated single flow from lead to fund, allowing us to pass along savings from automation to our customers in the form of a lower rate and an improved experience. While it's well understood that the mortgage macroeconomic environment has recently been challenging, we've remained focused on what we do best, optimizing the customer experience and innovating on our products and technology. The long-term opportunity remains resilient with clear secular tailwind towards home ownership. We believe low-cost, customer-friendly, transparent, and digital home ownership products have strong consumer demand throughout macroeconomic cycles. No doubt about it, just like in most major e-commerce categories, consumers prefer a digital experience and are becoming increasingly comfortable completing their mortgage and real estate transactions online. We're just getting started. I'd like to discuss our market positioning and share just how unique and differentiated Fedora is in the industry. Allow me to expand on each differentiating factor. First, we were founded as a digitally native platform and launched our product in 2015 with our proprietary technology at the forefront of our innovation since day one. We rebuilt the entire end-to-end loan origination infrastructure from scratch, leveraging digital automation to remove manual tasks and expedite the locking, processing, underwriting, and closing of a loan. We believe our production cost is significantly lower than the industry average, and our fulfillment team productivity in the third quarter of 2023 was approximately three times the industry average. with our U.S. fulfillment employees closing an average of 9.6 loans per month. In turn, this enables us to offer lower mortgage rates to our customers and a vastly superior customer experience. For example, we believe that our one-day mortgage offering, with an average turnaround time since the product launch of eight hours from locking the loan to receiving a commitment letter, compares to the 25 to 40-day week that we believe is industry standard. Demonstrates how our platform's efficiency has a direct impact on customer experience. Further, digitizing the process in a single end-to-end system brings us a unique data advantage. For example, we capture over 10,000 data points per loan, all on the same system. This data advantage provides transparency and auditability into the underwriting of each loan file, results in lower defects and higher loan quality. It's all made possible through our machine-driven workflow engine, Kinman. Kinman sits at the center of our loan manufacturing process, interacting with customers, loan team members, marketplace participants, and loan purchasers. Tin Man's decision engine breaks down each loan file into a series of tasks, many of which can be completed autonomously by the system. Second, we position our platform to scale quickly when we market demand returns. As a reminder, we grew our funded loan volume 10x from 2019 through 2021, reaching over $100 billion of cumulative funded loan volume in under five years. It's the breadth and flexibility of Tin Man across product and customer journey pathways that sets us up to scale. by providing a superior end-to-end integrated home ownership experience to customers, agnostic to whether they are seeking a purchase, refinance, cash-out, or HELOC loan. Our platform is modular in nature, and new products and partners can be added quickly using the same core code and systems architecture. As an example, we were able to launch our HELOC product in the first quarter of 2023 and have already scaled to do with over 100 HELOC funds per month. In a challenging rate environment, our HELOC product provides a solution for those who want to tap into their home's equity without impacting the lower rate on their first lien mortgage. Third, our business model is asset-like, with the majority of production eligible for purchase by government-sponsored enterprises such as Fannie Mae and Freddie Mac. This provides access to liquidity for our loans through micro-cycles and allows us to reduce our balance sheet risk and capital requirements. And finally, we offer multiple services within the home transaction ecosystem on an integrated platform with an ability to cross-sell real estate insurance services directly within the mortgage fund. We go to market through two channels, direct-to-consumer and B2B, or mortgage-as-a-service, as we call it. Our direct-to-consumer channel is focused on digital customer acquisition through online channels, including Google, Facebook, and other performance marketing channels under the Better brand. Through our mortgage-as-a-service partnerships, we partner with leading consumer brands and use Tin Man technology to power their businesses, either through co-branded advertising relationships or fully integrated mortgage origination models. Turning to our strategic plan, we have two principal growth strategies. The first strategy is to drive improved customer conversion. The second strategy is to expand the methods and channels by which we reach customers. Let me begin with our first strategy of improving customer conversion. We plan to do this through three key pillars. The first pillar is to increase the conversion of customers who begin their mortgage applications with us, approximately 18,500 per month into closed loans, which trended less than 700 per month on average in the FedCorp. We are working to do this by enhancing the product and customer experience, increasing the breadth of our acronyms, specifically FHA, VA, and other non-conforming loan types, while still providing highly competitive rates compared to other market offers. We believe that our conversion rate today is near the bottom of the industry and therein lies the opportunity for improvement. The second pillar is to grow our purchase business by partnering with local real estate agents and integrating the agent experience deeper into the Tin Man platform. As trusted advisors to most home buyers, agents play a critical role in the purchase transaction. While purchase made up 90% of our funded loan volume in the third quarter of 2023, There's significant opportunity to grow in aggregate to improve purchase distribution and conversion. The third pillar is to continue innovating our technology, making the platform even more efficient and scalable. As we continue reducing labor costs to investments in automation, we seek to continue passing a portion of those savings back to our customers in the form of lower rates, thereby driving the conversion platform. In the third quarter, we continue to invest in building our network of realtor agents, which now includes nearly 500 local partner agents that make sizable strides in our HELOC business. We continue to meet customer demand for faster turnaround time through our one-day mortgage offering, which made up 70% of loans from our direct-to-consumer channel in the third quarter. Our second strategy is to expand our methods of customer acquisition. We plan to do this through two key pillars. The first pillar is focused on reaching more customers through improved data-driven marketing. Examples include further optimizing performance marketing, pay-per-click, digital media channels, and content marketing. We also think about potential investments in our brands, something we have done very little of historically, and in doing so, we would take a highly prudent approach. The second pillar is to add new B2B partners and grow our mortgages and service offerings. Partnering with existing strong brand names in the financial services space and enabling them to leverage our proprietary technology to originate loans more efficiently helps us reach a wider audience of customers and reduces our customer acquisition costs. Last week, we were excited to announce the launch of our partnership with Infosys. Infosys serves many of the largest financial services clients across a range of verticals, including mortgage. We believe integrating our offering with Infosys' client penetration and financial services will enable us to reach mortgage-as-a-service customers far more effectively. In the third quarter, our B2B business made up 47% of our funded loan volume, made up predominantly by our relationship with allies. where how better is the backend origination infrastructure powering allied mortgage originations? We hope this provides a helpful overview of it. We are proud to have successfully listed on the NASDAQ as a public company during the third quarter, which provided us with $565 million of new primary capital to execute on our growth plan and building a household name in home ownership. While the market has been very challenging with continued macro uncertainty ahead, we are starting to see green shoots. We focus on what we can control We are well capitalized and well positioned to emerge as a leader once the market turns. I'm incredibly excited about the opportunities ahead. Let me now turn it over to Kevin Ryan, our president and chief financial officer, who will discuss the quarterly performance and our financial strategy.