Better Home & Finance Holding Company

hello and welcome to the better home and finance holding company fourth quarter full year 2024 results call all lines have been placed on mute to prevent any background noise after the speaker's remarks there will be a question and answer session and if you would like to ask a question during this time please press star 1 on your telephone keypad i would now like to turn the conference over to hannah kosla vice president of corporate finance and investor relations You may begin.

Welcome to Better Home and Finance Holding Company's fourth quarter and full year 2024 earnings conference call. My name is Hana Khosla, and I am the Vice President of Corporate Finance and Investor Relations at Better. Joining me on today's call are Bashal Garg, Founder and Chief Executive Officer of Better, Kevin Ryan, Chief Financial Officer of Better, and Ryan Grant, Co-Founder and President of Retail Lending at Neo Home Loans. In addition to this conference call, please direct your attention to our fourth quarter and full year earnings release, which is available on our investor relations website. Also available on our website is an investor presentation. Certain statements we make today may constitute forward-looking statements within the meaning of federal securities laws that are based on current expectations and assumptions. These expectations and assumptions are subject to risks, uncertainties, and other factors as discussed further in our SEC filings 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 investor presentation, both of which are available on the investor relations section of Better's website and when filed in our annual report on Form 10-K filed with the SEC. More information as of and for the period ended December 31, 2024, will be provided upon filing our annual report on Form 10-K with the SEC. I will now turn the call over to Vishal.

Thank you, Hannah, and welcome to our fourth quarter and full year 2024 earnings call. We appreciate everyone joining us today and for your continued support as we drive towards our mission to make homeownership better, faster, and easier for our customers by building a technology platform that revolutionizes the home ownership experience. We continue to make good progress towards our vision in which every customer can seamlessly buy, sell, refinance, insure, and improve their home digitally, online, instantly. I'd like to start by highlighting some of our key achievements. We went into 2024 with the goal of leaning into growth and AI to drive increased volume and revenue, balance with ongoing efficiency improvements, diversification of our distribution channels, and corporate cost reductions. We executed against these objectives, growing full-year funded loan volume by 19% year over year, revenue by 50% year over year, and reducing our adjusted EBITDA losses by 26% year over year. We made some big bets in Tin Man AI and launched a distributed retail channel through NEO Powered by Better, both of which are showing early positive momentum. Even in a market that remained challenged with historically low housing affordability and persistently high mortgage rates, we made progress in 2024 against the roadmap we set out at the start of the year. For the full year 2024, we did $3.6 billion in funded loan volume, $108 million of revenue, and had an adjusted EBITDA loss of $121 million. In the fourth quarter, funded loan volume was $936 million, a year-over-year increase of 77% driven by growth across all three main product categories, purchase, refinance, and second lien loans. On a sequential quarter-over-quarter basis, funded loan volume was down approximately 10% given normal seasonal slowness in the fourth quarter purchase market. Q4 revenue was $25 million compared to $18 million in the fourth quarter of last year and $29 million in the quarter prior. We continue executing on strategies to increase conversion through additional products and services as well as improve sales efficiency to drive higher customer pull-throughs. Through 2024, we continue to increase revenue per loan through pricing and marketing channel optimization, resulting in year-over-year gain-on-sale margin improvement from 1.95% in 2023 to 2.17% in 2024. As we look forward to 2025 and beyond, our strategic priorities remain largely consistent with those we've discussed with you on prior earnings calls. Our first priority is continuing to thoughtfully lean into growth, against which we showed progress through 2024. In the fourth quarter, year-over-year funded loan volume growth was driven by increases across all three of our main product categories, with home equity products and refinance loans being the largest growth drivers. Year-over-year purchase loan volume increased 25%, and refinance loan volume increased 611%. from what was a seasonally and historically low quarter at the end of 2023. Our year-over-year HELOC and home equity loan volume increased 416% in the fourth quarter of 2024. TransUnion recently reported that the overall number of HELOC and HELON originations increased 10% in the third quarter, whereas better grew origination volume in the third quarter by 619%. So if HELOC market trends remain stable or even improved in Q4, we believe that our current triple-digit growth is continuing to outpace the industry in the fourth quarter as our superior offering drives gains in market share. On a sequential basis versus Q3, Q4 refinance volume increased 34%, home equity loan volume increased 3%, and purchase loan volume decreased 10% due primarily to seasonally slower home buying in the fourth quarter of the year. While the mortgage market saw improvements in Q4 compared to the same period in 2023, 30-year fixed-rate mortgage rates remained in the high 6s to low 7% range, putting continued strain on mortgage demand. We expect near-term rates to remain elevated, driving continued demand for our home equity products. Our second priority is continuing to reduce expenses and improve operational efficiency, with the goal of reaching profitability in the medium term. In the fourth quarter, total expenses remain approximately flat versus Q3. However, included in these was approximately $17 million of non-recurring restructuring expenses attributed primarily to the wind down of our UK businesses, as well as approximately $4 million associated with the termination of certain leases. Excluding these one-time expenses, total expenses decreased approximately 24% quarter over quarter, Due to expense management initiatives across all major expense line items, we reduced adjusted EBITDA losses by approximately 11 million or 28% in Q4 compared to Q3, even with lower revenues due to a seasonally slower quarter. Specifically, we decreased our loan origination expenses by 28%, decreased our compensation-related expenses by 21%, and decreased marketing and advertising by 27% compared to an only 10% decline in volume. demonstrating the impact of the AI and automation initiatives that drove operating leverage within the business. Utilizing Tin Man's capabilities, we have been able to automate time and labor-intensive components of the mortgage process and reduce our cost to originate by over 35% of the industry average. We believe our continued investments in technology and AI will significantly drive down costs further, resulting in improved operating efficiency and superior customer experience. Continuing our discussions from the past two quarters around our investments in AI, we are seeing benefits from further expanding Betsy, the first AI voice-based loan assistant for the U.S. mortgage industry, which leverages large language models to take a customer through pre-approval and now rate quote and rate lock autonomously. Betsy is programmed to verbally communicate with consumers, to answer mortgage application inquiries, and to collect and verify outstanding application data, Similar functions traditionally performed by sales staff with the goal of enabling faster service times, enhanced self-serve capabilities, improved customer engagement, and greater sales efficiency. In terms of tangible numbers, Betsy went from approximately 5,000 customer interactions in June of 2024 to completing over 115,000 consumer interactions in February of 2025, a growth rate of over 20x, all while we kept increasing the range of functions that Betsy performed. Last quarter, we shared with you an early clip of Betsy interacting with a customer on a call. We are excited to now show you a demonstration of Betsy taking a customer all the way through mortgage rate lock, which would traditionally have involved separate conversations with up to three sales team members and multiple phases of manual data entry. Through Tin Man technology, this can now be completed 100% autonomously through AI 24-7. Betsy meets the customer anywhere and anytime they want.