Figure Technology Solutions, Inc.

Welcome to the Figure Technology Solutions third quarter 2025 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. To get to as many questions as time permits, we kindly ask that you limit yourself to one question and one follow-up. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, today's call is being recorded. I would now like to turn the call over to Craig Stream, Investor Relations.

Thank you, Nikki. Good morning, everybody. Welcome to our third quarter 2025 earnings call. This is Craig Stream in the Investor Relations team at Figure. Joining me on today's call are Mike Cagney, Executive Chairman and Co-Founder of Figure, Michael Tannenbaum, our Chief Executive Officer, and Macrina Gill, our Chief Financial Officer. In today's call, we will refer to certain non-GAAP measures which are reconciled to GAAP measures in the earnings release we issued yesterday after the market closed and in the appendix to our supplemental slide presentation posted to our website. Non-GAAP measures are not intended to be a substitute for GAAP results. Certain statements made during today's call may contain forward-looking statements, which may vary materially from actual results. Information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings and set forth on page three of the earnings presentation we've posted in the IR section of our website and in the risk factors we've identified in our third quarter 10Q filed earlier today, as well as in other SEC filings. We're not undertaking any commitment to update these statements if conditions change, except as required by law. and a recording of the conversation will be made available on our website following the conclusion of today's call. Following the formal remarks, we will also open the line for questions, and I would encourage you to follow along in the posted earnings presentation as we go through our formal remarks. And with that, I'll turn the call over to Michael Tannenbaum. Michael, please go ahead.

Thanks, Greg, and thanks to all of you who are joining us this morning. Let's begin by turning to slide four. As you saw in the earnings press release we issued after the close yesterday, we had a very strong third quarter with great results in all of our key performance metrics. Adjusted EBITDA, the measure that most clearly demonstrates the profitability of our business, reached 86 million in the quarter, an increase of 75% year over year, and EBITDA margin reached 55%. Net income for the quarter was nearly 90 million, more than triple last year's quarter. Total consumer loan marketplace volume reached almost $2.5 billion in the third quarter, representing a 70% increase year over year. This growth reflects continued expansion across our origination partner network and increased utilization of FigureConnect for liquidity. As more partners leverage the platform to fund and sell loans, we're seeing meaningful gains in both scale and efficiency. A standout example being FirstLean Lending, where adoption has accelerated sharply among both new and existing partners. First lean volumes nearly tripled year over year, making it one of our fastest growing products this quarter. Partners are leaning into Figure Connect as a liquidity solution, enabling faster funding, improved execution, and lower cost versus traditional channels. This momentum demonstrates how our marketplace model extends beyond home equity and into the broader consumer ecosystem, capturing a larger share of the housing finance value chain. We also continue to see encouraging progress from new product categories, which together contributed more than 80 million in volume in the third quarter. These include innovative blockchain-based solutions for crypto-backed loans, loans to small and medium businesses, and debt service covenant ratio, or DSCR, loans. Each of these products leverages the same origination and trading infrastructure that powers our core marketplace. This combination of core growth and product innovation reinforces the scalability of the figure ecosystem. By expanding both vertically within home lending and horizontally across adjacent asset classes, we're creating multiple avenues for growth and ensuring that figure remains the leading blockchain marketplace for consumer credit origination and liquidity. Now let's turn to slide five. Given it's our first earnings call as a public company, I want to share a bit about our evolution and how we have succeeded in delivering against what we see as a generational capital markets opportunity. From the beginning of the company, we've had a relentless focus on innovation and technology, in particular on the use of blockchain to drive scale, achieve competitive differentiation, and disrupt incumbents. With mortgage and home equity, we identified a greenfield product set where we could improve the product experience and capital market. But our ultimate objective has always been to create a true marketplace that will connect assets with the capital markets in a capital-light manner that generates the sort of margins you see in this quarter's results. Over time, we believe this will translate into lasting shareholder value. On slide six, I'll start by going back to 2018, when we became one of the first entities to originate consumer loans on blockchain. In 2020, we did the first securitization of blockchain assets. In 2023, we did the first AAA-rated securitization of blockchain assets, and now our securitizations have AAA ratings from both S&P and Moody's. To date, we've originated over $18 billion in loans on the provenance blockchain and executed over $60 billion in blockchain transactions. We believe we are by far the largest player in the public blockchain real-world asset space, and our lead is growing. We began as a direct-to-consumer lender, using our balance sheet to originate loans. we very quickly grew to a business-to-business-to-consumer platform and now have nearly 250 third parties, that's up a lot from last quarter, who use our technology to originate blockchain-native assets. Originally, we used our balance sheet to bridge between our partners in the capital markets, but we began to move away from that in June of 2024 with the launch of Figure Connect, where we allow our origination partners to access capital market liquidity directly. Instead of intermediating with our balance sheet, our partners sell directly to the capital markets using our marketplace. This fee-based model is more profitable for us, and in addition, does not require us to use our equity capital. We went from zero volume in the marketplace of June of 2024 to having it comprise almost half of our total consumer loan marketplace volume in this quarter. Turning to slide seven, I want to share a bit more about why blockchain is so important to our approach and how it has become the backbone of our entire strategy. We focus on three foundational elements of blockchain, transactional efficiency, liquidity, and lending, and each of these is an essential element contributing to our ability to transform capital markets. Starting with transactional efficiency, we have found that blockchain has enabled us to save roughly 85 basis points in securitization costs. by taking advantage of the immutability of putting loan attributes on blockchain, which has allowed us to reduce third-party review costs. Moving to liquidity, we create it via standardization and homogeneity in our loans. Every loan originated across our now almost 250 partners is done electronically, end-to-end, on the blockchain without human involvement in the data. Regardless of the partner, every loan is underwritten the same way. and all performance data is captured transparently. We've seen the value of this approach validated recently, given some of the capital markets issues and fraud highlighted by the tricolor and first brand situation. Earlier, I mentioned $60 billion in transactions versus $18 billion in originations, which demonstrates that through FigureConnect, we're turning homogeneity and data integrity into real tradable liquidity. That's a breakthrough for a historically illiquid asset class and is quickly becoming one of figures' strongest moats. Finally, the last element is what we broadly characterize as lending, specifically how lean perfection and cross-collateralization can provide greater economic efficiency for a variety of products. One way we're applying this directly is through democratized prime, where our frictionless, short-term liquidity funding marketplace is delivering financing rates below those achievable in wholesale capital markets. This not only validates DeFi's potential efficiency, but also gives us a roadmap to extend this to other asset classes, something Mike Cagney will discuss later on this call. Turning to slide eight, you'll see the two core marketplaces that anchor the figure ecosystem today, our consumer credit marketplace and our digital asset marketplace. These are the primary engines of our business model. The consumer credit marketplace supports our origination partners, which include banks, credit unions, and mortgage companies. Every loan they originate is fully digitally standardized and executed on-chain, creating homogeneity and transparency across the ecosystem. Our digital asset marketplace provides a connection point between the capital seekers I just spoke about and the capital providers who seek to earn the best possible return. Our digital asset marketplace is a global regulated exchange built on the same blockchain rails as our consumer credit network. Embedded within this marketplace is Democratize Prime, our decentralized short-term funding market. Democratize Prime connects lenders and borrowers directly, eliminating traditional intermediaries. And importantly, it's not isolated from the rest of the platform. It can also finance the same loans originated by our consumer credit partners. These two marketplaces work together. One generates high-quality real-world assets, and the other provides the liquidity to fund them. Across both ecosystems, our revenue model is simple. We earn a fee-based take rate on ecosystem volume. On the next slide, you can see the illustration of the life cycle of a loan within the FIGURE ecosystem and how we capture value at each stage. Let's use a credit union partner as an example. When their customer applies for a loan, the credit union connects directly to FIGURE's system through an API or web app and sends us just a few key data points. things like income, property details, and loan amount. Within seconds, our technology determines whether that loan meets pre-specified underwriting parameters. If approved, Figures' platform automatically verifies both income and property value by linking to the consumer's bank account and third-party data sources. In nearly all cases, there's no human touch. The resulting data, credit score, income, and property valuation are written immutably to the blockchain, forming a digital audit trail that dramatically reduces quality control costs as those loans move through the capital markets. Loans are then aggregated and financed either through warehouse lines or increasingly on democratized prime before being sold to loan buyers. At sale... Figure earns a roughly 3% ecosystem fee, which is deducted from proceeds, meaning our partners are not out of pocket. If the loan is later securitized through our platform, we earn an additional 40 basis points. Separately, we earn a 25 basis point annual servicing fee for as long as the loan remains outstanding, which typically runs about five years. Across this life cycle, Automation and blockchain verification translate to meaningful cost savings in origination, diligence, and secondary market execution, all efficiencies that directly strengthen the partner economics while creating recurring high margin revenue for FIGURE. These improved economics for all parties involved have been a significant contributor to the growth in relationships you'll see on the next slide. Our partner network is one of FIGURE's most powerful differentiators. Today, that network spans traditional banks and credit unions, more than half of the top 20 independent mortgage banks, and a growing base of fintechs, solar, and home improvement companies. As highlighted in our earnings release, this quarter we onboarded one of the largest mortgage servicers in the United States to our marketplace. These partners rely on our infrastructure to originate and distribute consumer credit products more efficiently, creating a nearly continuous flow of high-quality assets. Because our partners can originate, fund, and sell loans seamlessly, their economics improve and our overall reach continues to expand. As a result, over the past five years, partner-originated volume has grown at roughly a 74% CAGR. This network is a core part of our flywheel, broadening access to borrowers while also increasing liquidity for investors across our platform. Turning to slide 12, expanding the supply side to meet this demand for credit is an important part of our mission to be a marketplace for these products. We are achieving this through FigureConnect, a purpose-built marketplace that enables buying and selling of standardized blockchain-native assets for all counterparties in the transaction. We now have a diverse range of participants on the platform. These are high-grade institutional counterparties such as banks, asset managers, and insurers looking for transparent, data-rich credit exposure that settles faster and more efficiently than anything available in traditional markets. On this same note, in Q3, we added seven new buyers to our securitization program, including a prominent sovereign wealth fund who has become a programmatic buyer, benefiting our broader ecosystem. In short, FigureConnect is transforming what used to be a fragmented and opaque process into into an always-on, data-transparent, and institutionally-funded marketplace, redefining how real-world assets move throughout the capital markets. Before concluding on slide 13, I want to also note that in the conversations with investors, we frequently hear we have a high, quote, due versus say ratio. This slide summarizes some of the operational proof points we have been highlighting recently. The first is expanding our consumer loan marketplace to first lien. which is up almost 3x year over year and is rapidly proliferating through our partner ecosystem. The second is the progress on our blockchain pillars with our blockchain native equity listing and our growth in our stablecoin yields or YLDS. The third is the ubiquity we have been building for our yield stablecoin, including recent expansions into the SWE and Solana ecosystems. We are committed to continued delivery on the growth of our marketplace and our vision of bringing the capital markets on chain. So before I hand it over to Mike, I want to take a step back and put this quarter in context. What you've heard today, strong financial results, growing partner adoption, and continued product innovation, all reflect the strength of Figure's platform and the durability of our business model. We're executing with discipline, scaling a capital-light marketplace, and translating technology investment into measurable financial performance. At the same time, we're still in the early stages of an even larger opportunity. which is transforming the capital markets themselves. The traction we're seeing in Democratize Prime, the expansion of yields, and the upcoming equity initiative underscore how blockchain is driving real change here at Figure. I'm incredibly proud of the progress our team has made and confident in the foundation we've built for sustainable long-term growth. With that, I'll turn it over to Mike Cagney to share his perspective on the broader opportunity ahead and the next phase of innovation at Figure.