Better Home & Finance Holding Company Q2 FY2025 earnings call

Key managerial messages include: - AI advancements: Betsy executed approximately 600,000 consumer interactions in Q2, AI underwriting accounted for over 43% of locked loans with a clear path to 75% in the near future, and loan officer productivity in terms of funds per month increased to over 3x the mortgage industry median. - Path to profitability: The company now expects to achieve adjusted EBITDA breakeven by the third quarter of 2026. - Business segments: D2C has funded over $100 billion in loans, and HELOC and home equity loans saw a 166% year-over-year growth. The Tinman AI platform had Q2 funding of 429 million loans for 1,009 families, up 164% and 176% respectively from the prior quarter. - Partnerships: The company is working with various partners such as next-gen wealth management companies, traditional fintech lenders, and mega fintechs, and its first bank partner on the Tinman AI software platform has begun funding loans.

In the second quarter of 2025, Better Home & Finance Holding Company achieved a 25% year-over-year growth in funded loan volume, reaching $1.2 billion, and revenue grew 37% to $44.1 million. By channel, 64% of funded loan volume in Q2 was from the direct-to-consumer segment, and 36% from the Tinman AI platform and B2B. For the D2C segment, in Q2 2025, revenue per loan was $78.86, the cost per fund was $68.22, resulting in a contribution profit of $1,064 and a contribution margin of 13%. The Tinman AI platform had a revenue per loan of $15,538 in Q2 2025, with a contribution profit of $6,172 and a contribution margin of 40%. Sequentially, Q2 funded loan volume increased by approximately 39% and revenue by around 36%, driven by increased volume from NEO Powered by Better and a loan loss reserve release.

Management's forward-looking guidance includes: - Expecting to reach adjusted EBITDA breakeven by Q3 2026. - For 2025, funded loan volume is projected to increase year-over-year due to growth initiatives like the Tinman AI platform, but offset by macroeconomic pressure and the loss of the Ally business (a roughly $1 billion headwind). - Birmingham Bank in the U.K. saw a 90% sequential growth in its loan book in Q2 2025, and divestitures of smaller noncore U.K. businesses are expected to benefit adjusted EBITDA in the second half of 2025. - Anticipating further improvements to adjusted EBITDA losses in 2025 through AI-driven conversion rate improvements, efficiency gains, and corporate cost reductions.

Risks discussed include: - Market challenges and macroeconomic volatility that can impact the mortgage industry and the company's financial performance. - Regulatory environment changes that may affect the company's operations and partnerships. - Dependence on AI adoption and consumer acceptance, which could face delays or lower-than-expected growth.

Q: When you talk about partners trying to enter the space using your technology, can you help characterize who they are?

A: Vishal Garg said there are next-gen wealth management companies wanting to offer mortgage as an additional product, traditional fintech lenders looking to enter home equity, and mega fintechs with large customer bases seeking scalable solutions.

Q: When you talk about, Kevin, the cost to originate at the industry average and declining, how much volume do you need broadly on the overhead side just to have that benefit really kind of drop to the bottom line more meaningfully?

A: Kevin J. Ryan said D2C's labor cost per fund is favorable compared to industry, data cost per fund is coming down with improved conversion rate, and gain on sale revenue has improved, and the B2B platform business with higher margins is key to reaching breakeven.