Better Home & Finance Holding Company

Hello and welcome to the Better Home and Finance Holding Company first quarter 2025 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. 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 Tarek Afifi, Corporate Finance. You may begin.

Welcome to Better Homeland Finance Holding Company's first quarter earnings conference call. My name is Tarek Afifi, corporate finance at Better. Joining me on today's call are Vishal Garg, founder and chief executive officer of Better, and Kevin Ryan, chief financial officer of Better. In addition to this conference call, please direct your attention to our first quarter 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 quarterly report on Form 10-Q filed with the SEC. Amounts described as of and for the quarter ended March 31st, 2025 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our quarterly report on the Form 10-Q with the SEC. More information as of and for the quarter ended March 31st, 2025 will be upon filing our quarterly report on form 10 Q at the SEC. I will now turn the call over to Vishal.

Thank you and welcome to our first quarter 2025 earnings call. We appreciate everyone joining us today and for your continued support as we advance our mission to make homeownership better, faster, and easier for our customers by building a technology platform that revolutionizes the homeownership experience. I want to set the tone for today's discussion by reiterating that while the mortgage industry and housing markets are facing challenges, this dynamic creates tremendous greenfield opportunity for us because we are truly the first scaled-up AI platform built to empower consumers and now also empowering local mortgage brokers and banks with the technology to serve their customers. The mortgage industry is massive, estimated by the MBA to be $2.1 trillion in total origination volume for the full year 2025, of which approximately $1.4 trillion is purchased and approximately $700 billion is refined. So even just a 1% share of this massive TAM would result in $14 billion of volume for better, approximately 3x from where we are today. We continue to drive progress towards our mission in which every customer can seamlessly buy, sell, refinance, insure, and improve their home digitally, online, instantly, and towards executing on our key objectives, which are, one, to lean into growth and AI to drive increased volume and revenue. Two, ongoing efficiency improvements driven by continuous advancements in our technology and the implementation of AI through our entire operating model. And three, diversification of our distribution channels and corporate cost reductions. In the first quarter of 2025, on a year-over-year basis, we grew funded loan volume by 31% to $868 million and revenue by 46% to $33 million. driven by funding more loans both through our DTC and Tin Man AI platform channels. Last month, we were very pleased to announce the retirement of Better's outstanding convertible debt and right-size the liability structure. This transaction is expected to create approximately $200 million of positive pre-tax equity value and create a path to long-term value creation for our equity shareholders. Removing this debt overhang is a monumental achievement and key milestone to our capital structure. And Kevin will talk to this in more detail. In the meantime, we remain focused on driving towards profitability in the midterm by continuing to lean into Tin Man Technology and AI. With the Betsy AI Loan Assistant executing 127,000 consumer interactions in March, our AI underwriting growing from over 40% of locked loans to 75% in the near future, and increasing loan officer productivity in terms of loans per month to over 3x the mortgage industry median. As we look forward to the second half 2025 and beyond, our strategic priorities remain focused on what lies in our control. Our first priority is to continue to thoughtfully propel growth. In the first 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. Specifically, HELOC and home equity loan volume increased 207%, refinance loan volume increased 64%, and purchase loan volume increased 9%. This growth is attributable to the strategic investments we've made in technology, product innovation, and distribution expansion. including the launch of Betsy voice-based AI loan officer, deployment of our Tin Man AI platform strategy with the addition of Neo powered by Better, and efficient expansion of D2C. These strategic initiatives have positioned us to capitalize on market opportunities, enhance operational efficiency, and drive sustainable growth. Our second priority is to continue to reduce expenses and improve operational efficiency with the goal of reaching profitability in the medium term. While we expect loan origination expenses will increase as we lean into growth, as we further implement Betsy into the sales, processing, and underwriting workflows, we expect continued operating leverage with revenue growth outpacing expense growth. Using our Tin Man AI platform, we have been able to automate time and labor-intensive components of the mortgage process and reduce our cost to originate by over 40% of the industry average. We believe our continued investments in AI with our product and engineering roadmaps well on track will significantly drive down costs further. resulting in improved operating efficiency and superior customer experience. Lastly, our third priority is to continue diversifying our product and platform distribution channels. We now have three ways of serving the customer using our technology. Direct-to-consumer, Tin Man AI as a platform, and Tin Man AI as a software. In our D2C business, we serve the consumer directly on Better.com. Better was founded on revolutionizing the consumer experience for the home finance process. And as such, our D2C business has always been at the forefront of pushing the envelope on what technology can do in the mortgage industry at its core. Within the D2C channel, contribution margin or per loan profitability is increasing as the operating cost to fund is decreasing due to implementation of AI in both the sales and operations workflows. Next, we serve the consumer through our Tin Man AI platform. powering loan officers across the United States locally for which we are seeing rapid early growth. For context, over $1.2 trillion of mortgage volume in 2024 was originated by retail loan officers on antiquated technology and high operating costs. We are quickly disrupting traditional retail mortgage origination by onboarding loan officers and branches onto our Tin Man AI platform empowering them to do more loans than they've ever done before, removing friction from their fulfillment process and expanding their capacity to help more customers. These loan officers keep the pricing they've been able to get historically based on the service level that they provide locally and within their communities and networks, all while compressing a staggering 80% of their back office costs using our platform. As we've discussed on recent earnings calls, NEO powered by Better, our first and now proven traditional retail mortgage originator, leveraging the Tin Man AI platform, is deeply benefiting from our AI technology and digital lead funnel, supercharging their loan officer teams who have demonstrated track records in customer service excellence within the communities they serve. Further, Betsy, the first AI voice-based loan assistant for the U.S. mortgage industry, is being individually branded for each loan officer at NEO and rolled out through their entire sales force. We are making great early progress with NEO Powered by Better, well ahead of our internal expectations and have high aspirations for the road ahead. Since beginning production in January, 2025, we have onboarded approximately 115 NEO loan officers across 53 branches. Currently NEO loan officers are doing three loans a month, and we have the goal of tripling that plus their capacity to 10 loans a month, thereby also increasing their earnings three X and helping them serve even more families than they do currently. In January, We funded $2 million of loans for four families. In February, we funded $42 million for 104 families. And in March, we funded $119 million for 258 families. And this is during the slow season in mortgage origination. This is the first successful launch of taking an entire mortgage company off of their traditional mortgage industry software stack within Compass and the other antiquated mortgage technology that NIO had been working with before. And within 90 days, getting them to exceed the loan volume they previously had while dramatically increasing their efficiency. And as we have proven this out with NIO, with the entire mortgage industry watching, we have been inundated with other mortgage teams and companies wanting to move their business to the Tin Man AI platform. We see massive opportunity in the road ahead to replicate the success of NEO Powered by Better with other traditional mortgage originators. And lastly, we are serving the customer by powering banks that seek to license our Tin Man AI software to become more efficient and customer-centric. We have built a highly fine-tuned platform for our own business and customers And now there's demand from others in the industry to license our software. This quarter, we are excited to sign an agreement with a bank partner to power their entire mortgage platform from a software perspective, from click to close, with their sales and operations people across the full range of products that they offer, including non-QM and other niche products. entirely on Tin Man. As you all know, banks have traditionally had to offer mortgages, but the cost to originate these loans to their customer base has been well over $10,000 per funded loan, making bank origination of mortgages largely unprofitable. To be clear, banks want to originate mortgages, but they know they need to invest in technology to make it a profitable business in any environment. That is a huge opportunity for Better and Tin Man. Notably, this will be the first implementation of Tin Man as a direct competitor to the point of sale system, plus CRM system, plus pricing engine, plus document engine, plus loan origination software, plus underwriting calculation engine setup that the vast majority of the mortgage industry has. Seven to eight systems, all by different vendors, with different pricing, with different middleware integrations, mostly not talking to each other, with stale data, with the ability to have only one person logged in at a time, creating the massive workload and massive cost that it takes to make a mortgage the traditional way. We look forward to sharing more information about disrupting this entire software stack in the coming quarters ahead, as we believe a very large addressable market exists within the mortgage ecosystem for a holistic one-stop software solution powered by the industry's leading AI engine, Tinman. To put the opportunity into context, over 5 million mortgages were built on the Encompass platform in 2024. To the extent that we can achieve even 1% penetration of the Encompass customer base, we believe based on our current pricing, that could drive an incremental 50,000 new loans and $75 million of revenue to better per year. And unlike other traditional mortgage software, our SaaS platform does not charge on a per seat or a per application basis. Rather, we are uniquely charging on a per funded loan basis where the revenue event for the mortgage company is directly tied to the technology cost, which is a fundamentally disruptive model to the traditional software players in the industry and enables the full adoption of AI because unlike those other players, we are paid on a per successful transaction basis not by filling seats or filling the application funnel. To sum it all up, while our D2C business has always been at the forefront of pushing the envelope of what technology can do in the mortgage industry at its core, we have started making great advancements in diversifying our product and platform distribution channels, notably through the Tin Man AI platform, both empowering local loan officers and mortgage brokers and empowering banks with our software. Looking ahead to the second half of 2025 and beyond, the opportunity ahead of us has never been more exciting. We remain focused on enhancing our go-to-market with growth being our North Star alongside continued expense management and channel diversification. We will continue to invest in building the leading AI platform in the mortgage industry, TinMan, to improve the customer experience and further drive down labor costs. making our platform more efficient and scalable, ultimately driving the business to profitability. Furthermore, we are substantially broadening the use of Tin Man through diversification on both Tin Man AI as a platform for other mortgage originators and Tin Man AI as a software service to solve for the mortgage industry's broken tech stack. With that, let me now turn it over to Kevin Ryan, our Chief Financial Officer, who will discuss the quarterly performance and our financial strategy. Kevin?