Figure Technology Solutions, Inc.

Stand by, your meeting is about to begin. Good morning, everyone. Welcome to the Figure Technology Solutions second quarter 2026 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. If at any point your question has been answered, Thank you.

Good morning, and welcome to FIGURE's second quarter 2026 earnings call. My name is Bryan Michaleski, Head of Investor Relations here at FIGURE. Joining me on today's call are Michael Tannenbaum, Chief Executive Officer, and Macrina Gill, our Chief Financial Officer. Before we get started, I'd like to note that today's call will refer to certain non-GAAP measures. These measures have been reconciled to their GAAP equivalents in the earnings release we issued earlier this morning, as well as an appendix to the supplemental slide presentation posted to our website. As a reminder, non-GAAP measures are not intended to be a substitute for GAAP results. I'll also highlight that certain comments made during today's call may be considered forward-looking statements under federal securities law. The company cautions you that forward-looking statements involve substantial risks and uncertainties, and a number of factors, many of which are beyond the company's control, can cause actual results, events, or circumstances to differ materially from those described in these statements. Please note the risk factors we've identified in our most recent PENQ and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. A recording of this conversation will be made available on our website following the conclusion of this call. Following the conclusion of the prepared remarks, we'll open the line for questions. And with that, I'll turn the call over to Michael Tannenbaum. Michael, please go ahead.

Thank you, Bryan. Good morning, everyone, and thank you for joining today's call. FIGURE delivered another great quarter as more and more partners see our vision for bringing the capital markets on chain. As previewed in July, FIGURE generated $4.3 billion of consumer loan marketplace volume, being the top end of our guidance by 4%, with 132% year-over-year growth. This was our strongest ever quarter, and we've seen continued strength in Q3, with application volumes on our platform surpassing $1 billion per week for the first time in early July. The continued rapid growth extends to our origination partner ecosystem as well, We now have 489 partners on our platform, up 102 from last quarter, with growth across all segments, including independent mortgage banks, servicers, depositories, and fintech SMB. Importantly, recently closed partners are ramping faster than we traditionally see, aided by our investments in AI-enabled onboarding processes, thereby proving the scalability of our model and the value we drive for partners. Overall, our flywheel is spinning faster and our blockchain-based infrastructure and marketplace advantages are compounding. Prospects are hearing about the benefits of our disruptive capital marketplace and our liquidity that's soon approaching what they get from the likes of Fannie Mae. The volume is improving our execution and pricing, adding loan buyers and in turn attracting more prospects. The investor side of the marketplace is also building momentum with large demand. Our recent pre-funded securitization is a great example. Thank you for joining us today. Our EBITDA margins were strong at 55% this quarter, reflecting the growth of the Capital Light, Figure Connect marketplace and our ongoing commitment to capital discipline. We are continuing to make progress towards our medium-term goal of 60% margins through the growth of Connect and the operating leverage inherent in our business model. This growth and margin profile puts us at a Rule of 150 in the Rule of 40 investor framework. This quarter marked two years since the June 24 launch of our tokenized loan marketplace, Figure Connect, which now represents 65% of our consumer loan marketplace volume, up from 56% last quarter. This is very material growth, especially considering that aggregate volume is growing 130% plus. That zero to 65 in just 2.0 years. Turns out, when you build a better highway on chain, capital moves at high speeds. As a result, more of our growing volumes are generated off balance sheet, again, demonstrating the momentum of our partner flywheel. Growth and Connect has been broad-based with both new partner additions and expanding wallet share with existing partners. In terms of new partners, our trend has been increasingly aggressive. At the time of our IPO, we had around 250 partners, which then was roughly three years after being in the B2B business. and recent quarters have been 307, then 387 and now 489 this quarter. One new partner in Q2 on board straight to Figure Connect and has already become the largest or second largest partner we have, depending on the month. Importantly, most whale-sized new partners are going direct to Connect, which means lots of incremental volume is skipping the Figure S intermediary phase. This gives us an updated line of sight to predict that Figure Connect is likely to approach 70% of volume in the medium term, rather than our previous estimate of 60%. Each point of mixed shift to connect reduces balance sheet usage, increases fee-based economics, and builds towards our medium term 60% EBITDA margin goal. We've said before that we're a company that does what we say. We don't just whale watch. We bring the whales, and we bring them into Figure Connect day one. take rate for the quarter was 3.6% towards the low end of our guided range. We know take rate is an area of focus for investors, so I'd like to dedicate some time to addressing the contributing factors. Per figure, take rate is an output of our strategic focus on accelerating our growth flywheel rather than a metric we manage to. The results I've just shared in terms of volumes, partner network expansion, migration of channel mix towards figure connect, and our adjusted EBITDA performance all demonstrate strong execution towards that objective. The take rate performance reflects this in a few ways. First, FigureConnect has the lowest take rate of our three channels, although with strong contribution margin and the least capital intensity. We now have our largest partners going direct to FigureConnect, which is a favorable dynamic to our business, although at the tradeoff of take rate. and was not a dynamic we anticipated to accelerate this quickly when we gave the initial take rate range. Second, interest rates rose meaningfully in the quarter, which hurts our gain on sale and therefore impacts take rate. And third, we've previously mentioned that first lien loans typically have a lower take rate. And this quarter, we saw a 3x growth year over year in first lien volume, although at a flattish mix quarter over quarter. As we expand our first lien origination volumes, it's likely to be a modest headwind to this metric over time. As we're nearly midway through Q3 today, our expectation is that the combination of these dynamics will keep the take rate at the bottom end of the guided range in the current quarter. Stepping back, when we set pricing with our customers, we focus on contribution margin, which includes operations and support costs and therefore better reflects our total earnings power for each dollar of marketplace revenue. This strategy is working, and this is the first quarter in which ecosystem fees are the largest line item on our P&L. This is consistent with our strategic focus on increasing our scale and the network effects from our flywheel, including adding asset classes to our marketplace. To that point, as KIAVI closes later this year, this will add a new dynamic to take rate. We're taking a closer look at this with the goal of giving you a better aligned way to measure our success as we build out the platform with a focus on unit economic margins. More to come on that. FigureConnect's growth is also leading to growth in Democratize Prime. These are two complementary layers of the same capital market stack designed to serve our partners at every stage of their financing journey. First, FigureConnect fast tracks our ability to launch new asset classes. adding auto, small business, and third-party home equity alongside our core HELOC product without needing to build the origination engine ourselves. This expands our platform breadth, adds diversification, and attracts deeper capital supply. Second, that increased supply systematically drives down borrowing costs across the platform. Origination partners can leverage Democratize Prime as a flexible, modern warehouse facility to aggregate loans benefiting from streamlined onboarding and others have significantly reduced operational friction and rates that are closely competitive with legacy warehouse alternatives. Ultimately, growth in Figure Connect fuels growth in Democratize Prime, making it a key value proposition for the broader Connect ecosystem. Given the growth and maturity of these dynamics, we're moving quickly to launch the next phase of this initiative, which includes long-term capital takeout via whole loan sales and securitizations for non-figure assets. Every partner we acquire is an upsell opportunity as we add more products like residential transition loans and DSCR with Kyavi. Our Kyavi acquisition will only serve to strengthen partner interest as their market leading RTL technology was previously not available as a private label marketplace offering and many prospects have therefore expressed excitement. We have started to receive key regulatory approvals for the transaction and anticipate closing by the end of this year. This was a very attractive transaction with an under four-year unlevered payback period and adds 40% to our volume as well as $100 million of EBITDA. This was a great opportunity to use an inorganic approach to make our flywheel spin faster. The opportunity with Kyavi reflects an important point about fintech and the broader problem Figure is solving. The residential transition loans are not agency eligible. and therefore companies like Kyabi use their advantages, underwriting, technology and brand to benefit themselves. But that approach can only go so far. That's why we are so excited about our acquisition, because we can use their market leading technology to develop liquidity and standardization for the space. By putting the marketplace first, we expand access to the advantage that made Kyabi the market leader, which is their post-renovation home loan valuation technology. and then we will make this technology the industry default, driving adoption at scale. We did this in HELOC, we're doing it with Demo Prime and other asset classes and we'll do it with Kyavi as well. So I've shared a lot here on our growing business momentum. Now I'd like to dive in a little deeper on some of the details on the growing volumes our partners are bringing to us. 40% of our FigureConnect volume growth was attributed to customers that have been with us for longer than one year. We have shared previously that over time, we see 100% growth in monthly volumes from existing partners that adopt Connect. And this quarter, we saw a number of existing partners migrate to Connect and expand volume accordingly. Our partner New American Funding is one such example, as they grew volume 80% in Q2 versus Q1. They onboarded onto Figure Connect in early April. As interest rates have risen, end consumers are using their home equity balances to pay off higher interest rate consumer balances. Year-to-date, this has grown four percentage points of our total volume, reflecting the massive opportunity of the $35 trillion of home equity outstanding in the United States. Additionally, as these dynamics drive additional HELOC activity, our credit quality has improved and delinquency performance has remained low. These growth stories are part of a larger winning-with-winners trend that we see at FIGURE. where market-leading companies, forward-thinking business leaders, and those with offensive strategies are leaning into figure and growing their businesses. There has been increased M&A in the mortgage space. Within the past few months, for example, cross-country purchasing Two Harbors and Synergy One buying their retail business from New Res. In each of these cases, for example, you have an existing figure partner buying business from a non-figure partner, allowing us to in turn grow with our customers. Along similar lines, in 2025, 185 of our partners have been live on our platform long enough for the full year of Home Mortgage Disclosure Act data to attribute their volume to us. We ran a counterfactual analysis to get a sense of how that volume compares to what they were doing pre-figure. We took each partner's HELOC activity from before they joined our platform and grew it forward at the rate the rest of the non-figure HELOC market grew over the same period. That's the baseline. What these partners would have produced had they continued at their prior trajectory. The result, our partners originated 2.6 times more HELOC volume in 2025 than their pre-figure baseline would predict. We call this the figure factor. Banks and credit unions are starting to take notice of this momentum. This is a focus area for us, and we move this into our recently launched new verticals go-to-market motion to give it extra attention. Banks are leaning into mortgage and home equity as they see the market opportunity and also the potential capital relief from proposed changes to risk weightings. More recently, we've started to engage with large depositories that have big home equity businesses and are looking to leverage Figure Connect as a way to manage their exposure and even buy Community Reinvestment Act eligible assets, meaning they can use Figure Connect to source loans that meet their regulatory requirements to lend in certain zip codes. It sometimes gets lost on the market that depositories are big customers of Fannie Mae and Freddie Mac. Just because they have deposits does not mean they want to hold fixed rate assets for 30 years. They want connect. That same new verticals go to market motion includes our HELOC sold for business financing and via home improvement partners. These two businesses saw 470 million run rate volume as of June. with SMB growing 57% quarter over quarter at real scale. The partners originating home equity loans for business purpose are also generating opportunities for democratized prime as the SMB market has very little capital market standardization and we therefore launched our SMB pool officially in July. Before I close it out, I'll share a few examples of how important technologies in the market today, AI and blockchain, are making a difference in our marketplace. I'll start with AI. Figure has a large task in that we must standardize multiple asset classes with disparate loan data and naming conventions that must be transformed into a standardized schema with a loan tape as an end product. In response, we built an AI adapter tool that creates this necessary standardization. For the Agora Auto assets alone, the AI adapter accomplished in five weeks what would have been a several months long process and solves a huge partner pain point. This tool is also giving us the confidence to bring in key assets to our marketplace later this year. Similarly, we've been growing the use of Stablecoin, yields in particular, as the payout infrastructure in Figure Connect. Partners selling loans can get paid in yields days faster than the status quo with lower fees. Doing so has us projecting meaningful savings from wire fees and reconciliation time. Stablecoin allows for atomic settlement. which means asset ownership and conveyance can happen at the exact same time as money moves, reducing fraud and reconciliation. We are building the modern capital marketplace and we continue to use cutting edge technology to modernize our products. In summary, our Q2 results demonstrate once again that we are building on our first mover advantage and market leadership amidst a paradigm shift in the capital markets towards tokenization and standardization. This is reflected in the growth of Figure Connect, our Capital Light Marketplace, huge partner acquisition momentum, and diversification of our partner base. The future is bright. The future is tokenized. And with that, I turn it over to Macrina.