Better Home & Finance Holding Company

Ladies and gentlemen, thank you for joining us and welcome to the better home and finance holding company third quarter 2025 results call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute. I will now hand the conference over to Tarek Afifi corporate finance at better Tarek, please go ahead.

Hello everyone, and welcome to Better Home & Finance Holding Company's Third Quarter Earnings Conference Call. My name is Tarek Afifi, on Better's corporate finance team. Joining me today is Vishal Garg, Founder and Chief Executive Officer of Better. In addition to this conference call, please direct your attention to our Third 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 SVC filings that can 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 10Q filed with the SEC. Amounts described as of and for the quarter ended September 30th, 2025 represent a preliminary estimate as of the date of this earnings release. on our quarterly report on Form 10Q with the SEC. For more information as of and for the end of the quarter ended September 30th, 2025, will be provided upon filing our quarterly report on Form 10Q with the SEC. I will now turn the call over to Vishal.

Thank you, Tarek, and welcome to our third quarter 2025 earnings call. This has been a pivotal quarter with significant developments for Better as the leading AI home finance company. We have rapidly evolved from a dominant direct-to-consumer business into a platform powering the entire home finance ecosystem, both for consumers directly and increasingly through our growing list of institutional partners. These partners include both local mortgage lenders and financial institutions, and we empower them with our Tin Man AI platform to serve their customer needs better. In summary, over the last couple of months, we announced three new partnerships, which we see as deeply validating and believe will meaningfully expand our market reach across the home finance landscape and drive profitability as we track to break even adjusted EBITDA by Q3 2026. We're already pacing to fund 500 million in monthly volume as a result of the growth through these partnerships, and that momentum is accelerating rapidly. In the next six months, we are comfortable that this will double to at least a billion a month in funded loan volume. Our progress comes mostly from our soft launch during which we have marketed the Power by Better solution to only a small fraction of our partner's customer basis and seen great success. This partnership represents the most significant opportunity in Better's history. Excitingly, thanks to our strong unit economics and best-in-class experience powered by Betsy and Tin Man, our pipeline of additional partners continues to expand rapidly. We expect to share further updates on these partnerships and additional ones in Q4. Our pipeline of Tin Man AI platform clients and partners keeps expanding as the industry is seeing what our platform can deliver. We are in late stage conversations to land partners in some of the biggest, most strategic verticals in consumer finance. Examples include one of the top home improvement lenders, two of the top servicers in the country, one of the top personal lenders, and an additional mid-sized bank. These additional partnerships will add an additional 10 million American homeowners to whom we can algorithmically qualify and market mortgage and home equity products to. All of these events validates our strategy of diversifying our distribution channels, as our AI-driven platforms, Betsy and Tin Man, deliver the lowest unit costs in the industry while providing the best experience for both customers and partners. This gives us strong conviction that our peak volumes in this rate cycle should comfortably exceed those achieved in the last rate cycle, when we originated approximately $60 billion in one year, or almost $5 billion a month. We've built a platform that is AI first. We are one of the few players, if not the only one in the US, with a single full-scale tech stack, all in one place, all in one flow, and entirely API-able via our proprietary MCP server, the only one in the mortgage industry to agentic AI, which allows us to deliver a better experience at lower costs, scale faster than anyone else, and really continue to define the future of this $15 trillion industry. Better is the network for the largest tangible asset class in the US. residential real estate. On one side of this network are the end consumers directly, and on the other side are consumers using the Tin Man AI platform, similar to that of merchants on platform networks like Stripe or Visa and MasterCard. On the other side are investors seeking to buy cash flow producing assets secured by U.S. residential real estate. We are the matching processing and fulfillment engine in between the two sides of this network. Our engine is called TinMan, which uses machine learning to triangulate consumer attributes, property attributes, and the unique criteria of over 40 institutional investors on the platform, including the GSEs, the FHA, and the VA. We have built a multi-sided matching engine, something that simply cannot exist outside of what we have built inside TinMan. To contrast, most fintechs operate on a single platform and distribute the product through securitization. With better, the result for the consumer is a significantly higher approval rate and generally lower interest rates because Tin Man matches consumer and property specific attributes across a broad cross section of the investors on our platform on a single loan by loan basis. Further, despite better being balance sheet light and not taking any credit or prepayment risk, the default rate of our mortgages is one third that of the industry average on over 100 billion of originated volume over the past nine years. So the proof is in the pudding. Our deep proprietary data mode has been instrumental in training our AI models and powering our platform. Betsy, our generative AI home finance agent, built on top of Tin Man, has learned from over 12 million recorded phone calls, 6 million approved customers, 600,000 funded loan documents, and almost 5 billion pages of property and consumer data information. all in one place, all in one end to end platform with all of the things that were done by humans on those data, all in one place and recorded through the platform. We believe that this is something that does not exist in anywhere else in mortgage lending or even broadly in consumer finance. Today, we are at feature parity between Betsy and the bottom 80% of human loan officers. Betsy communicates across voice, chat, text, and email with consumers nearly instantly to compute various scenarios and learns how to better understand consumers' needs every day through every interaction. What's more is Betsy can handle millions of consumer conversations at the same time, enabling infinite scalability without adding additional headcount as consumers learn to adopt and integrate their consumer finances and transact with an agentic AI. Betsy is not just a voice agent or chatbot. Betsy can perform the functions of a human loan officer, processor, underwriter, and closer. Betsy is the user interface, helping consumers step by step through their home ownership journey, performing hundreds of thousands of consumer interactions per month, and remarkably good at detecting fraud throughout the entire platform. Additionally, Betsy has mastered finding ways to get an approval with the lowest possible interest rate across our network of investors with the lowest post-closing defect rate in manufacturing a mortgage, approximately 19x lower than the industry average. In fact, as of September, no human underwriter is allowed to decline a loan in our system without checking with Betsy first as to the alternatives that are available to restructure the loan so that the consumer can be approved and move forward in their homeownership journey. We believe this is a first across lending in the United States. Since we've launched Betsy, our lead to lock conversion rate has increased by approximately 84%, from 3.3% to 6.1%. This has been transformative to our platform in driving incremental volume and revenue through our platform, and it's still very early days. As we scale Betsy at near zero marginal cost, we expect to further improve our unit economics through cost efficiencies on a per loan basis. During the quarter, Betsy performed approximately 700,000 customer interactions and our AI underwriting approved over 61% of locked loans with a clear path to 75% in the near future and 90% after that. And our loan off-roaster productivity in terms of funds per month increased to over 3X the mortgage industry median. We have been heads down over the past few years, honing our technology and optimizing the business for efficiency. With Tin Man and Betsy, we removed the traditional constraints to growth in the mortgage industry, which is typically throttled by a lack of specialized licensed labor, whether it's loan officers, processors, appraisers, or underwriters. We can now grow infinitely with AI and with a single unified tech stack at the core. There's almost no better use case for AI to disrupt a market than the massive and antiquated mortgage market. The majority of the mortgage market still operates on what was built in the 1990s, where eight different separate systems were integrated through dated middleware, old school FTP servers, and disparate databases. What's more, this dominant platform, which has over 80% market share, only allows one person to work in the loan file at any time, a file that costs the mortgage industry more than twice as much as Better2Make. AI was designed to disrupt industries like this and yet fails in most cases due to the lack of a singular database architecture, causing huge latencies for any LLM to intermediate data and capture context quickly between disparate systems. Further, the lack of a unified interface prevents LLMs from being able to handle every single task required to fulfill a mortgage. Those limitations do not exist in Tin Man. Tin Man shines as a brand new modern tech stack with AI in action delivering real tangible measurable results in a multi-trillion dollar industry at a fraction of the cost. I often think back to when we were building our AI platform. One of the point solutions CEOs said to the then CEO Fannie Mae that he thought better was trying to boil the ocean. And here we are, we have gotten the ocean hot, and it's starting to drive tangible results in a way that is groundbreaking for the industry. With some macro green shoots in our favor and momentum in winning new partnerships, we believe we are in a position to scale rapidly, profitably, and with AI, infinitely. When you look back at the last time rates declined, Better grew its volume by over 100x over a five-year period and over 10x over a two-year period in 2020 and 2021. We're positioned to do it again, this time more efficiently and much more profitably. And we believe we can achieve significant market share as this next cycle unfolds. Betsy and Tinvan is our flywheel. That flywheel is turning. The opportunity is massive and we are ready to monetize. I'll now turn to our third quarter results. Starting with growth, we continue to propel opportunities independent of broader economic and mortgage market conditions. In the third quarter of 2025, on a year-over-year basis, we grew funded loan volume by 17% to approximately $1.2 billion and revenue by 51% to approximately $44 million, driven by funding more loans, both through our D2C channel and our Tin Man AI platform. Byproduct year-on-year funded loan volume growth during the quarter was driven by home equity volume increasing by 52% year-on-year, refinance loan volume increasing by 41%, and purchase loan volume increasing by 5%. We have been rapidly growing our home equity business, taking share in a market that is coming back quickly as Americans are sitting on $35 trillion of home equity, the largest untapped asset class in the country. We've grown to an approximately billion-dollar-plus quarterly run rate of origination volume in Q3 2025, compared to approximately 100 million in Q3 2023, just two years ago when we launched. Our model does not require us, unlike many others, to take any credit, prepayment, or liquidity risk because we can sell HELOCs onto the investor marketplace we have built. We do not rely on securitization. And we are able to mimic what we have done in the mortgage space in HELOCs, allowing investors to buy and bid on loans at a loan-by-loan level, which is unique in the industry. There are incumbents in the home equity space who have started to create their own version of our investor marketplace. But today, that marketplace only comprises a very small portion of their volume and revenue. Whereas for us, the marketplace is 100% of volume and 100% of revenue in the HELOC space. During the quarter, we broaden our already high approval rates for HELOC products by launching AI-driven HELOC underwriting for small business and self-employed borrowers, making approvals possible using bank statements only. This product opens the door for 36 million self-employed and small business owners who have traditionally been underserved by traditional underwriting methods in the mortgage and HELOC space. It's another example of how we are using AI to widen use cases and enable home finance for more American families to help them save more money. Turning to cost efficiency, total net revenue in Q3 grew 51% year over year, while expenses remained flat, demonstrating our ability to scale revenue at lower marginal costs. We continue to adjust our cost structure to be leaner in overhead, while building adequate resources to support the ramp of our new partnerships, which we expect to drive transformative growth in 2026 and beyond. with the goal of reaching adjusted EBITDA profitability by the end of Q3, 2026. While our initial goal was to achieve further expense reductions this quarter, the team was focused on launching our three new transformational partnerships and engaging with additional partners in our pipeline. As a result, the intensity of our cost cutting was somewhat muted compared to the vigor we've had in prior quarters. Looking ahead as we get these partnerships up and running and to scale, we expect these anticipated cost savings to materialize in Q1 of 2026. With Tin Man AI technology, we automate time and labor-intensive components of the mortgage process, consistently reducing our cost to originate to approximately half of the industry average. I'll now turn to quarterly business developments. Unit economics and our direct-to-consumer channel continue to improve, with revenue per fund increasing to $8,300, while the labor cost of fund continued to decrease to $2,500 and CAC per fund to $3,200, driven by the implementation of AI in every aspect of the sales and operations workflow. resulting in a net contribution margin of $1,772 per fund compared to $1,064 per fund last quarter, an approximately 64% increase quarter on quarter. We have not seen these types of contribution margins since like 2021. We expect to continue to lower the cost to originate as we increase conversion, lower CAC, and improve labor costs. And while our DTC business has always been at the forefront of pushing the envelope of what technology can do in the mortgage industry at its core, we are making great advancements in substantially broadening the use of Tin Man through our partnerships. We are very excited to have recently announced three new partnerships that we see as deeply validating the Tin Man AI platform and believe will meaningfully expand our revenue and drive to profitability in the year ahead. First, we partnered with a top five US personal financial services platform who currently serves over 50 million customers. Under this agreement, our partner will offer home financing products to its end customers using the Tin Man platform on a fully white label solution, and we will earn revenue on a per funded unit basis. Essentially, this is mortgage broker in a box for financial institutions across the American landscape. We are focused on financial institutions that have large banks of customers, 10 million, 20 million, 50 million customers. And we believe that these financial institutions who have traditionally been limited, especially post the global financial crisis in being in the mortgage business or offering mortgage business mortgages to their customer base will dive right in with our mortgage broker in a box Tin Man AI platform. We've brought this fit partner from being just a FinTech to a FinTech plus mortgage broker. There'll be no upfront CAC spend required by Better as our partner will programmatically feed customer data into TinMan. From there, TinMan will manifest offers delivered through our partner's app, which has tens of millions of monthly active users, all nearly instantly and updated daily. We expect transformative volume potential from this partnership as we scale into their vast customer base. Second, we entered into an agreement with a top five US non-bank mortgage loan originator. By migrating from the incumbent solutions that they've traditionally had for years, if not decades, onto Tin Man, our partner's loan officers will dramatically scale their ability to surface eligible customers for HELOC and HELONES within their customer base. They'll also be able to mine their MSR book of over $300 billion to offer HELOCs and HELONs to those customers on a programmatic basis in a way they've never been able to do with the incumbent HELOC solutions that are available to them today. The initial focus will be on home equity products, and we believe there's great potential over time to help the partner unlock new ways to monetize its extensive customer base. in a way that has not been done before. It's important to note that we are not just processing customers who raise their hand and ask for a home finance product. Rather, we are fully integrating Tin Man into both of our partners' customer data loads and CRM systems. This allows us to algorithmically mine customer data attributes and property data attributes for these customers, match them to products and investors on the Tin Man platform, and use our AI to recommend the most applicable offer directly to the customer. We are also completely agnostic to the user interface, be it an iPhone app or a human loan officer in a branch. We serve all of them. Third, we partner with Finance of America, an industry-leading reverse mortgage lender with access to millions of senior customers who are typically home equity rich but cash flow disadvantaged. Together, we are launching the first HELOC and HELON product offerings to their customers, powered by our Tin Man AI. What's more, leveraging TinMan, we have developed a senior second lien HELOC product that specifically addresses the debt to income challenges that limit traditional HELOC products for being offered to seniors and that you typically see securitized by the incumbent players. Together, we believe these new partnerships demonstrate our evolution, empowering the home finance ecosystem as a full suite platform and software well beyond our direct to consumer origins. These partners are now live and we look forward to sharing updates on our subsequent earnings calls as these partnerships ramp. In addition to our newest partnerships, we continue to make great progress growing our existing Tin Man AI platform with Neo powered by better local loan officer teams across the US experiencing rapid growth. The Tin Man AI platform approach to local retail mortgage loan officer teams is similar to how Amazon opened its D2C model to a third-party seller marketplace. Similarly, Better is enabling retail mortgage lenders to build their business on the Tin Man platform, and in doing so, we provide the compliance and licensing engine, loan origination system, and capital markets marketplace. We have near zero customer acquisition cost on this channel, and as partners fund loans on our platform, we earn a platform fee and a share of profits. We've grown this channel from zero just nine months ago to now approximately 40% of our total revenue. The Tin Man AI platform enables retail loan officer teams to originate more loans, serve more families, and lower their cost of funds, dramatically increasing their profitability and throughput versus traditional platforms that these loan officer teams have been on for decades. These officers are transitioning from dated, expensive tech stacks where origination of a loan could cost over twice as much as Tin Man to Tin Man where the cost is just a fraction of that at approximately $3,000. the savings go straight to their bottom line, allowing them to reinvest in their customers, offer lower rates, and close more deals within their local markets. Further, we've designed an optimization path to retain customers entering through the direct-to-consumer channel who we might otherwise lose to an outside local loan officer. By identifying customers who would benefit from more personalized local support, we connect them early on with a partner loan officer instead of losing them to competitors later on in our direct-to-consumer flow. This approach significantly boosts conversion rates amongst these customers, and in turn, strengthens our overall unit economics. During the third quarter, we funded approximately $483 million in funded loan volume for 1,148 families on the Tin Man AI platform, an increase of 13%, respectively, compared with the prior quarter. And coming back to our multi-pronged distribution, we are also serving the customer by powering banks, credit unions, and other large mortgage originators that are seeking to license our Tin Man AI software to either enter or re-enter the mortgage business. As our Tin Man AI platform approach is like Amazon's third-party marketplace model, you can think of our Tin Man AI software channel as Amazon's AWS software model. A lot of banks and credit unions are taking a refreshed look at the mortgage space as the regulatory environment is becoming increasingly favorable. However, bank origination of mortgages has largely been unprofitable given their high cost to originate. This is where our Tin Man AI software comes in. Our Tin Man AI software essentially provides mortgage in a box, enabling banks to not only use our software, but also gain access to underwriting resources and sales resources if they so desire. And while the broader software industry charges clients on a per seat basis, we have a disruptive pricing model of charging on a per funded loan basis, or outcome as a service, which is very similar to what a lot of the leading AI companies in Silicon Valley are doing. Over time, we expect this channel to be the most profitable of our three channels, with SaaS plus level margins, since most of the costs associated with this initiative have already been spent on developing Tin Man internally for our direct-to-consumer business. Our existing bank partner on the Tin Man AI software platform is ramping as we power its entire mortgage origination business from click to close across multiple products and across multiple channels. And we expect revenue from this partnership starting in Q4 2025 with SaaS level margins. Our overall partnership pipeline is robust, and we are focused on aligning with companies that are leaders in their respective verticals, those with large customer bases and where the Tin Man AI platform clearly outperforms legacy systems. Our strategy is simple yet powerful. Capture a leading player in each vertical, empower them to scale their mortgage business and home equity business with Tin Man, and then expand outward across the ecosystem as others follow suit. Land and expand. Verticals that we are interested in include fintechs, BNPL providers, traditional mortgage lenders, and servicers. Each of these verticals represent hundreds of billions of dollars in annual mortgage origination. So by first securing a partner who is a leader in their vertical, we establish credibility, create momentum, and open the door to broader adoption across that vertical. Looking ahead, the opportunity has never been more exciting. We continue to make great progress towards our goals of driving increased volume and revenue, balanced with ongoing expense management and improved efficiency. We remain focused on enhancing our go-to-market strategy with growth being our North Star, alongside continued expense management and channel diversification, all with the goal of reaching breakeven on an adjusted EBITDA basis by the end of Q3 2026. Our path to adjusted EBITDA profitability will be multifaceted, driven by volume growth in both our direct-to-consumer and Tin Man AI platform channels, unit economics or per-loan contribution margin continuing to improve as we further lean into AI efficiencies, the scaling of higher margin partnership channels, including Tin Man AI platform and Tin Man AI software, pricing improvements, and continued corporate cost reductions. While our unit economics are already profitable at the contribution margin level, increasing volume will allow us to offset additional corporate expense. We note that these growth opportunities come with varying levels of expansion and profitability profiles and will change based on the broader macroeconomic trajectory. As a result, our path to adjusted EBITDA breakeven is unlikely to be linear on a quarterly basis, and we do not anticipate the same level of burn reduction each and every quarter. During the third quarter, we had an adjusted EBITDA loss of approximately 25 million, down from 27 million last quarter and 39 million one year ago. In particular, for the three large partnerships we signed, we had a significant amount of resources and sales operations and technology dedicated to launching those partners that were not revenue generative, but will create significant growth in the years ahead. As these partnerships launch and start to generate revenue and contribution profit, we expect burn to come down more dramatically in the coming quarters ahead in 2026. Now to touch briefly on our balance sheet and capital positioning. We ended the third quarter of 2025 with $226 million of cash, restricted cash, short-term investments, and assets held for sale. In addition, we continue to maintain strong relationships with our three financing counterparties, which provided a total capacity of 575 million as of September 30th, 2025. We expect that our recently announced partnerships will require us to increase those warehouse lines meaningfully to accommodate the expected funding demand. On capital positioning, we right-sized the capital structure earlier this year, retiring approximately $530 million of convertible notes for $110 million cash payment and $140 million note, generating $211 million of positive equity. As announced in our AK, our CFO, Kevin Ryan, will be concluding his time with us. We are so grateful for everything Kevin has done for this company, taking us public, right-sizing our capital structure, and building out our finance and accounting function. We wish him the very best in his new endeavor and are excited about the strong candidates in consideration for the CFO role. We hope to share the outcome of our new CFO search with you soon. In the UK, we were pleased that Birmingham Bank grew its loan book by 44% in the third quarter sequentially versus the second quarter of 2025 as we have implemented our technology stack into the bank and in doing so enabled the bank to become the fastest growing specialist mortgage lender in the UK. With respect to our non-core UK assets, we continue to exit those positions and expect these divestitures to continue to benefit our adjusted EBITDA through the remainder of 2025. Turning to our outlook, the Tin Man AI platform loan volume continues to grow rapidly, and we expect over $600 million of AI platform originations in Q4, which would be growth of over 24% versus Q3. For the full year 2025, we expect total funded loan volume to increase year over year, driven by tailwinds from growth initiatives, including Tin Man AI platform, offset by continued macro pressure and the loss of our ally business, a roughly $1 billion headwind. We expect further improvements to adjusted EBITDA losses for full year 2025 versus full year 2024 through a combination of AI-driven improvements in conversion rates, efficiency gains, and continued corporate cost reductions. In the medium term, while we expect D2C to continue to grow nicely, we expect it to become a smaller part of the total revenue mix as our partnership channels scale faster. We spent the past three years building for this moment. Our platform is proven, the housing cycle is turning, our AI is scaling, and our partnerships are just beginning to ramp. About a year ago, we met the Neo Home Loans team, and I saw firsthand the experience they were able to deliver in a branch or over a Zoom call. And I thought to myself, how can we make this accessible to everyone? How can we take this four seasons experience that the Neo team delivers and deliver it at a four points price to the average consumer? That got us thinking. At the same time, we had launched Betsy, the first voice-based AI loan assistance, and we've been able to do amazing things with Betsy. Today, we believe Betsy's better than 80% of the typical loan officers operating today. I'm so excited to demo our AI Mortgage Advisor today, which is able to replicate the experience of being in a branch or on a Zoom call with someone with 10, 20, 30 years of experience, with a deep knowledge base, someone who's done billions of dollars of loans and one who can walk you through every aspect of the process that is life's biggest financial transaction. One American families are still fundamentally insecure and unknowledgeable about. We'll be launching the AI Mortgage Advisor in a pre-release, and you can sign up to join us at better.com slash Tin Man. Please take a look and let us know what you think.