Figure Technology Solutions, Inc. Class A Common Stock Q3 FY2025 earnings call

• Strong third quarter with adjusted EBITDA of $86 million, up 75% YOY, EBITDA margin 55%, and net income nearly $90 million, more than triple YOY. Total consumer loan marketplace volume was almost $2.5 billion, up 70% YOY. - Evolution from direct-to-consumer lender to B2B2C platform with Figure Connect, where origination partners now access capital market liquidity directly, with Figure Connect volume comprising almost half of total consumer loan marketplace volume in the quarter. - Blockchain is a key element, with transactional efficiency (saving ~85 basis points in securitization costs), liquidity (standardization and homogeneity of loans), and lending (lean perfection and cross collateralization) as foundational elements. - Core marketplaces: consumer credit marketplace supports origination partners with digitally standardized and executed loans on chain; digital asset marketplace connects capital seekers and providers. - Partner network spans traditional banks, credit unions, mortgage banks, and fintechs, with onboarding of large mortgage servicers. - Announced filing for a blockchain-native equity share class on Provenance blockchain, a first public equity class entirely on blockchain infrastructure.

In the third quarter, Figure Technology Solutions had strong financial results. Adjusted EBITDA reached $86 million, a 75% year-over-year increase, with an EBITDA margin of 55%. Net income was nearly $90 million, more than triple the previous year's quarter. Total consumer loan marketplace volume was almost $2.5 billion, a 70% year-over-year growth. First lien lending volumes nearly tripled year-over-year. New product categories contributed over $80 million in volume in the third quarter. The consumer credit marketplace and digital asset marketplace are the core marketplaces, with revenue earned through a fee-based take rate on ecosystem volume.

• Target adjusted EBITDA margin above 60% as more activity moves to Figure Connect and Democratized Prime adoption grows. - Confident in continued growth in Figure Connect and progress in Democratized Prime and YLDS. - Acknowledge seasonality in home equity loan origination volumes in Q4 and Q1 historically trending below annual average, but believe diversified partner base and capital-light model will navigate dynamics effectively.

Q: What is either of you most excited about in the business right now?

A: Michael Tannenbaum is excited about existing and future customers coming to them to use blockchain tech to improve their business, with partners increasingly considering blockchain ecosystem aspects. Michael Cagney is excited about the announcement of filing for a blockchain-native equity share class on Provenance blockchain, a transformational opportunity.

Q: What's the order of prioritization of your products from here? And comment on TAM and profitability of top few products?

A: Focus on HELOC product with large market opportunity, pushing first lien lending (largest consumer credit asset class). Making significant progress with Democratized Prime and YLDS, aiming to bring more liquidity and ubiquity to these products.

Q: How do you think about the Figure Connect outlook? 46% of volume came from Connect this past quarter.

A: Opened Figure Connect in June 2024, within 2025 reaching close to 50% of Connect volume across overall consumer loan marketplace volume. Mid- to near term, 60% of Connect volume is doable and working hard with partners to get there.

Q: Elaborate on the composition of new partners in terms of size and types of loans expected to be originated, and time to reach run rate?

A: Partner growth includes SMB segment with tailwinds from government shutdown and product improvement allowing underwriting of small and medium business bank accounts. Bring on partners of various sizes, with some able to get up and running in as fast as 2 weeks, and enterprise parties with longer sales cycles. Added major servicers, large independent mortgage banks, and partners with Robinhood partnerships.

Q: Discuss strategies to drive adoption of Democratize Prime and YLDS, including incentives for existing origination partners and consumers?

A: Focus on funding side of Democratized Prime, building out liquidity for assets originated. For YLDS, announcements with Sui and Solana are important for bringing liquidity and ubiquity, with YLDS expected to be a superior collateral type due to yielding nature. Making headway with YLDS in terms of collateral on exchanges and expecting acceleration from Sui and Solana deployments.

Q: Do you think we should expect the quarter-over-quarter cadence in 2025 to reflect what happened in 2024? Any differences?

A: Expect some level of seasonality in Q4 and Q1, but with strong partner interest, it's a balanced approach.

Q: Talk about sources of advantage in tokenization, especially for tokenized equities compared to consumer credit?

A: Tokenization of equities brings DeFI construct, ability to cross collateralize with other assets, and ability to lend stock out with limit order book, unlike opaque locate market in traditional prime brokerage. The upcoming blockchain-native equity share class will build on transactional efficiency, liquidity, and financing benefits demonstrated in credit side.

Q: Outlook for non-HELOC loan growth, which was ~$80 million in the quarter?

A: First lien lending volumes nearly tripled YOY, primary focus. SMB and crypto-backed loans also important. Expect growth as new products expand, pursuing B2B2C approach.

Q: On first lien growth, is it first lien HELOC or primary? Update on expansion outside HELOC?

A: It is a first lien HELOC, used for replacing existing loans. DSCR is part of non-QM, and the capital market built transcends specific asset classes. Figure's ambitions are broad, with plans to expand into more segments beyond mortgage and HELOC in coming quarters.