Better Home & Finance Holding Company Q3 FY2025 earnings call

• Better has transformed from a direct-to-consumer business into a platform powering the home finance ecosystem with institutional partners. Three new partnerships were announced, expected to expand market reach and drive profitability, aiming for breakeven adjusted EBITDA by Q3 2026. Pacing to fund $500 million monthly and expecting to double to at least a billion a month in six months.
• Betsy, the generative AI home finance agent, has boosted the lead-to-lock conversion rate by 84%, carried out approximately 700,000 customer interactions, and AI underwriting approved over 61% of locked loans with a path to 75% and 90% in the future. Loan officer productivity soared to over three times the mortgage industry median.
• Total net revenue in Q3 grew 51% year-over-year while expenses stayed flat. Adjusting the cost structure to support new partnerships. Unit economics in the D2C channel continued to improve with higher revenue per fund, lower labor cost to fund, and increased net contribution margin.
• New partnerships include a top five US personal financial services platform, a top five US nonbank mortgage loan originator, and Finance of America. These partnerships are live and set to ramp, with the Tinman AI platform enabling partners to offer home financing products and mine customer data for relevant offers.

In 2025, on a year-over-year basis, Better saw funded loan volume grow by 17% to approximately $1.2 billion and revenue increase by 51% to around $44 million. By product, home equity volume rose 52% year-on-year, refinance loan volume increased 41%, and purchase loan volume went up 5%. In the direct-to-consumer channel, revenue per fund reached $8,300, labor cost to fund dropped to $2,500, CAC per fund was $3,200, and the net contribution margin was $1,772 per fund. The Tinman AI platform funded approximately $483 million in funded loan volume for 1,148 families in the third quarter, a 13% increase from the prior quarter. The Tinman AI software channel has a disruptive pricing model charging on a per-funded loan basis.

• Anticipate over $600 million of AI platform originations in Q4 2025, a growth of over 24% compared to Q3. For the full year 2025, total funded loan volume is expected to increase year-over-year due to growth initiatives like the Tinman AI platform, offset by macro pressure and the loss of the Ally business. Expect further improvements to adjusted EBITDA losses for the full year 2025 through AI-driven improvements in conversion rates, efficiency gains, and corporate cost reductions. Expect partnership channels to scale faster, making D2C a smaller part of the total revenue mix.
• Pacing to fund $500 million monthly and expecting to double to at least a billion a month in six months owing to growth from partnerships.

• Expectations and assumptions are subject to risks, uncertainties, and other factors as detailed in SEC filings that could cause actual results to differ materially from historical. The CAC acquisition cost issue is compounded by the long gestation cycle of consumers getting preapproved and then finding a house. The path to adjusted EBITDA breakeven is unlikely to be linear quarterly, and burn reduction may not be consistent each quarter.
• Incumbent solutions in the mortgage and home equity spaces may react, potentially affecting market share and growth.

Q: Can you dive a bit deeper into the three recent partnership announcements and how you expect each of these to ramp as we head into 2026?

A: With the large financial services platform, expect to ramp over time by increasing penetration in the partner's app, staffing a specific pod, and working out details on AI and human interaction. With the large mortgage originator, start with the direct-to-consumer team, then roll out to MSR and loan officer teams. With Finance of America, launch HELOCs and HELOANS first to the customer base, then to partner originators and the wholesale channel, and ramp up the reverse second lien HELOC product.

Q: How would you characterize the future partnership pipeline right now? And what does that look like today? And maybe how has this pipeline evolved over the last few months?

A: The partner pipeline has exploded as partners witness the success of earlier launched partners, the quality of the user experience, and the ability to algorithmically do things traditionally done passively. The largest incumbent solution forcing SDK changes has created opportunity for Better's pipeline.

Q: Just looking at the guidance, really implying strong growth there, I think, from the 500 million monthly loan volume run rate to about a billion. What's really underpinning that outlook? Is it just strictly the partnerships? Is it a growth in D2C? Is there any interest rate assumptions there?

A: Assuming interest rates stay the same. D2C has been focused on making more money per loan and has had organic growth over 50% when excluding Ally volume. Partnerships are also a key driver.

Q: The press release indicated that you anticipate about a billion dollars of loan volume in the next at the end of six months because of these partnerships. Does that assume that each of these partners will be fully ramped or get fully integrated? Or are you anticipating the ramp to take longer?

A: It could be a lot more once fully integrated, and the ramp will take longer, with different timelines for each partnership.

Q: Just walking through the ways in which AI efficiencies increase revenue per funded loan?

A: Betsy enables enhanced sales and operational performance, allowing for more responsive service, higher gain on sale, and not having to staff up as much with volume growth, thus increasing revenue per funded loan.

Q: Can you just help us understand what types of incumbent solutions you're replacing in your partnership? Is it both the LOS system and POS system?

A: Generally replace the incumbent LOS, and in many cases, also replace the POS, pricing engine, CRM system, document generation engine, notary, closing engine, and warehouse software.

Q: As you're guided to getting back to breakeven and to profitability, what type of volumes do you need to accomplish that?

A: Depending on the mix, expecting to get to a billion plus in volume, with partnership business margins higher than D2C, and D2C also having healthy contribution margins.