BETR Better Home and Finance Holding Company

• Q3 Funded Loan Volume of $1.035 billion, up 42% year-over-year and 8% quarter-over-quarter
• Launched Betsy™, the first voice-based AI loan assistant for the US Mortgage Industry, to enhance customer experience, improve loan-team efficiency, and further accelerate our end-to-end technology platform Tinman™
• Plan to further diversify Better’s distribution channels by leveraging Tinman to power local loan officers through ‘NEO Powered by Better’
• Expect Q4 Funded Loan Volume to be approximately in-line with Q3 given softer seasonality partially offset by continued growth initiatives
• Remain focused on managing towards profitability in the midterm. Expect to drive growth through technology efficiency, diversified distribution channels, and optimized marketing, while balancing growth expenses with corporate cost reductions

Better Home & Finance Holding Company (NASDAQ: BETR; BETRW) (“Better” or the “Company”), a New York-based digitally native homeownership company, today reported financial results for its third quarter ended September 30, 2024.

“We are pleased with the year-over-year growth we achieved in Q3 and the opportunity to help thousands of Americans achieve their homeownership goals this quarter. Our team delivered these results despite limited interest rate relief and continued macro headwinds,” said Vishal Garg, CEO and Founder of Better. “Our technology advances continue to propel the industry forward with the launch of Betsy, the first voice-based AI loan assistant for the US Mortgage Industry. Betsy is our latest innovation built through Tinman, the company’s proprietary loan origination platform, and enhances the operational efficiency of our licensed Loan Officers, Processors and Closers. We anticipate that Betsy will also help ensure our customers can instantly receive intelligent, instant and accurate answers throughout their loan journey with Better.”

Third Quarter 2024 Financial Highlights:

Given a number of significant one-time financial items relating to the closing of Better’s de-SPAC business combination that impacted Q3’23, we are also highlighting the quarter-over-quarter changes from Q2’24.

GAAP Results:

• Revenue of $29.0 million, compared to $32.3 million in Q2’24 and $4.9 million in Q3’23. As a reminder, Q2’24 revenue included certain nonrecurring benefits to Gain on Sale Revenue related to a positive mark-to-market impact on our lock pipeline that totaled approximately $5.5 million, which should be excluded when comparing quarters sequentially
• Net loss of $54.1 million, compared to $41.4 million in Q2’24 and $353.9 million in Q3’23
• Ended Q3 with $480.1 million of cash, restricted cash, short-term investments, and Self-Funded Loans

Key Operating Metrics and Non-GAAP Financial Measures:

• Adjusted EBITDA loss of $38.7 million, compared to $23.3 million in Q2’24 and $53.9 million in Q3’23
• Funded loan volume of $1.035 billion, compared to $962 million in Q2’24 and $731 million in Q3’23, across 3,443 Total Loans in Q3’24
• Purchase loan volume of $739 million comprised 71% of Funded loan volume; HELOC loan volume (which includes home equity lines of credit and closed-end second lien loans) of $166 million comprised 16% of Funded loan volume; and refinance loan volume of $130 million comprised the remainder of Funded loan volume
• D2C loan volume of $776 million, an increase of 102% year-over-year and 16% quarter-over-quarter, comprised 75% of Funded loan volume, with B2B comprising the remainder

“In Q3 we continued leaning into growth, driving a quarter-over-quarter increase in Funded loan volume in-line with the guidance we provided last quarter, alongside increases in our growth expenses including loan team compensation and marketing. Even with some temporary rate relief, this quarter closed with 30-year fixed mortgage rates well above 7%. As such, we remain focused on driving operating leverage through continued investments in efficiency, corporate cost management, and diversifying our distribution channels,” said Kevin Ryan, CFO of Better.

Third Quarter 2024 Highlights:

• Funded loan volume growth was driven by refinance and home equity product growth, including HELOCs and closed-end second lien loans
• Total Expenses increased by approximately $9.5 million quarter-over-quarter, resulting from increases in marketing spend, loan production team compensation, and loan origination expenses, as well as the absence of certain nonrecurring expense benefits taken in Q2’24
• Favorable early results from AI program investments, including the launch of Betsy, which leverages AI and large language models to accelerate a customer’s entire mortgage journey from pre-approval start to closed loan. Betsy is programmed to verbally communicate with customers to answer mortgage application inquiries and to collect and verify outstanding application data. We expect that Betsy will be able to accurately answer detailed questions and efficiently assist with outstanding tasks, enabling faster service times, enhanced self-service capabilities, improved customer engagement, and greater sales efficiency
• Hired the executive team from NEO Home Loans to build out a distributed retail channel, diversifying Better’s offering, and leveraging Tinman™ to power local loan officers through ‘NEO Powered by Better’
  • Looking to prove out Tinman’s efficiency in the distributed retail channel by providing leading technology to local loan officers to remove friction from their fulfillment process and expand their capacity to serve more customers
  • Expect to leverage Better’s AI technology and digital lead funnel to empower NEO’s Loan Officer teams, who have demonstrated track records in customer service excellence and strong reputations within the communities they serve
  • See a unique opportunity to expand our distribution capabilities and unlock key parts of the market that have historically been challenging for direct-to-consumer digital originators without established local footprints to serve, specifically in the purchase mortgage segment
• Launched a streamlined refinancing product for FHA borrowers, and earlier this week introduced a similar streamlined refinancing product for VA borrowers

For more information, please see the detailed financial data and other information available in the Company’s interim report on Form 10-Q, to be filed with the Securities and Exchange Commission (the “SEC”), and the investor presentation on the investor relations section of the Company’s website.

Webcast

Better will host a live webcast of its earnings conference call beginning at 8:30am ET on November 13, 2024. To access the webcast and the related presentation, or to register to listen to the call by phone, go to the investor relations section of the Company’s website at investors.better.com or click the “Attendee Registration Link” below. Please join the webcast at least 10 minutes prior to start time. A replay will be available on the investor relations website shortly after the call ends.

* Webcast Details *

Event Title: Better Home & Finance Holding Company Third Quarter 2024 Results

Event Date: November 13, 2024 08:30 AM (GMT-04:00) Eastern Time (US and Canada)

Attendee Registration Link:

https://events.q4inc.com/attendee/158563083

About Better

Since 2017, Better Home & Finance Holding Company (NASDAQ: BETR; BETRW) has leveraged its industry-leading technology platform, Tinman™, to fund more than $100 billion in mortgage volume. Tinman™ allows customers to see their rate options in seconds, get pre-approved in minutes, lock in rates and close their loan in as little as three weeks. Better’s mortgage offerings include GSE-conforming mortgage loans, FHA and VA loans, and jumbo mortgage loans. Better launched its “One Day Mortgage” program in January 2023, which allows eligible customers to go from click to Commitment Letter within 24 hours. Better was named Best Online Mortgage Lender by Forbes and Best Mortgage Lender for Affordability by WSJ in 2023, ranked #1 on LinkedIn’s Top Startups List for 2021 and 2020, #1 on Fortune’s Best Small and Medium Workplaces in New York, #15 on CNBC’s Disruptor 50 2020 list, and was listed on Forbes FinTech 50 for 2020. Better serves customers in all 50 US states and the United Kingdom.

Forward-looking Statements

This press release contains certain forward-looking statements within the meaning of federal securities laws. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this communication. Such factors can be found in the Company’s annual report on Form 10-K and the Company’s quarterly reports on Form 10-Q, which are available, free of charge, at the SEC’s website at www.sec.gov . New risks and uncertainties arise from time to time, and it is impossible for Better to predict these events or how they may affect us. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and Better undertakes no obligation, except as required by law, to update or revise the forward-looking statements, whether as a result of new information, changes in expectations, future events or otherwise.

Amounts described as of and for the quarter ended September 30, 2024 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Quarterly Report on Form 10-Q with the SEC. More information as of and for the quarter ended September 30, 2024 will be provided upon filing our Quarterly Report on Form 10-Q with SEC.

SELECTED FINANCIAL DATA, NON-GAAP MEASURES AND DEFINITIONS

Following are tables that present selected financial data of the Company. Also included are reconciliations of non-GAAP measures to their most comparable GAAP measures and definitions of certain key metrics used herein.

Results of Operations

Three Months Ended September 30,

Three Months Ended June 30,

(Amounts in thousands, except per share amounts)

2024

2023

2024

Revenues:

 

 

 

Gain on loans, net

$21,503

$11,553

$24,229

Other revenue

3,070

4,009

2,881

Net interest income

 

 

 

Interest income

9,867

4,043

9,397

Interest expense

(5,446)

(14,698)

(4,245)

Net interest income/(loss)

4,421

(10,655)

5,152

Total net revenues

28,994

4,907

32,262

Expenses:

 

 

 

Compensation and benefits

37,752

84,329

35,254

General and administrative

12,481

14,234

15,155

Technology

7,249

6,349

6,582

Marketing and advertising

12,101

5,064

8,531

Loan origination expense

3,774

627

791

Depreciation and amortization

8,259

10,491

7,990

Other expenses/(Income)

1,332

237,043

(879)

Total expenses

82,948

358,137

73,424

Loss before income tax expense

(53,954)

(353,230)

(41,162)

Income tax expense/(benefit)

126

659

203

Net loss

($54,080)

($353,889)

($41,365)

Use of Non-GAAP Measures and Other Financial Metrics

We include certain financial measures not presented in accordance with generally accepted accounting principles (“GAAP”) including Adjusted EBITDA, Adjusted Net Income (Loss) and other key metrics.

We calculate Adjusted Net Income (Loss) as net income (loss) adjusted for the impact of stock-based compensation expense, change in the fair value of warrants, change in the fair value of bifurcated derivative, and other non-core operational expenses. We calculate Adjusted EBITDA as net income (loss) adjusted for the impact of stock-based compensation expense, change in the fair value of warrants, change in the fair value of bifurcated derivative, and other non-recurring or non-core operational expenses, as well as interest and amortization on non-funding debt (which includes interest on the Convertible Note (as defined in our Form 10-Q)), depreciation and amortization expense, and income tax expense. These non-GAAP financial measures should not be considered in isolation and are not intended to be a substitute for any GAAP financial measures. These non-GAAP measures provide supplemental information that we believe helps investors better understand our business, our business model and how we analyze our performance. We also believe these non-GAAP financial measures improve investors’ and analysts’ ability to compare our results with those of our competitors and other similarly situated companies, which commonly disclose similar performance measures.

However, our calculation of Adjusted EBITDA and Adjusted Net Income (Loss) may not be comparable to similarly titled performance measures presented by other companies. Further, although we use these non-GAAP measures to assess the financial performance of our business, these measures exclude certain substantial costs related to our business, and investors are cautioned not to use such measures as a substitute for financial results prepared according to GAAP. Non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. As a result, non- GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our financial results prepared and presented in accordance with GAAP.

Reconciliation of Non-GAAP Metrics

Three Months Ended September 30,

Three Months Ended June 30,

(Amounts in thousands)

2024

2023

2024

Adjusted Net Loss

 

 

 

Net income (loss)

($54,080)

($353,889)

($41,365)

Stock-based compensation expense

5,487

39,417

7,959

Change in fair value of warrants and equity related

liabilities

(206)

(861)

102

Change in fair value of bifurcated derivative

—

237,667

—

Restructuring, impairment, and other expenses

43

679

184

Adjusted Net Loss

($48,756)

($76,987)

($33,120)

 

 

 

 

Adjusted EBITDA

 

 

 

Net income (loss)

($54,080)

($353,889)

($41,365)

Income tax expense / (benefit)

126

659

203

Depreciation and amortization expense

8,259

10,492

7,990

Stock-based compensation expense

5,487

39,417

7,959

Interest and amortization on non-funding debt

1,631

11,939

1,668

Restructuring, impairment, and other expenses

43

679

184

Change in fair value of warrants and equity related

liabilities

(206)

(861)

102

Change in fair value of bifurcated derivative

—

237,667

—

Adjusted EBITDA

($38,740)

($53,897)

($23,259)

Consolidated Balance Sheets

September 30,

(Amounts in thousands, except share and per share amounts)

2024

Assets

 

Cash and cash equivalents

$207,673

Restricted cash

29,406

Short-term investments

54,414

Mortgage loans held for sale, at fair value

339,485

Loans held for investment

81,401

Other receivables, net

17,337

Property and equipment, net

12,846

Right-of-use assets

3,471

Internal use software and other intangible assets, net

24,684

Goodwill

33,403

Derivative assets, at fair value

4,425

Prepaid expenses and other assets

36,618

Total Assets

$845,163

Liabilities and Stockholders’ (Deficit)/Equity

 

Liabilities

 

Warehouse lines of credit

$134,481

Convertible Note

518,012

Customer deposits

97,782

Accounts payable and accrued expenses

68,427

Escrow payable and other customer accounts

4,736

Derivative liabilities, at fair value

6

Warrant and equity related liabilities, at fair value

1,404

Lease liabilities

4,824

Other liabilities

14,973

Total Liabilities

844,645

Commitments and contingencies

 

Stockholders’ (Deficit)/Equity

 

Common stock $0.0001 par value

2

Notes receivable from stockholders

(9,149)

Additional paid-in capital

1,858,070

Accumulated deficit

(1,851,013)

Accumulated other comprehensive loss

2,608

Total Stockholders’ (Deficit)/Equity

518

Total Liabilities and Stockholders’ (Deficit)/Equity

$845,163

Key Metrics

This press release refers to the following key metrics:

Funded Loan Volume represents the aggregate dollar amount of all loans funded in a given period based on the principal amount of the loan at funding. Purchase Loan Volume represents the aggregate dollar amount of purchase loans funded in a given period based on the principal amount of the loan. Refinance Loan Volume represents the aggregate dollar amount of refinance loans funded in a given period based on the principal amount of the loan. D2C Loan Volume represents the aggregate dollar amount of loans funded in a given period based on the principal amount of the loan at funding that have been generated from direct interactions with customers using all marketing channels other than our B2B partner relationships. HELOC loan volume represents the aggregate dollar amount of HELOC loans funded in a given period based on the principal amount of the loan at funding. B2B Loan Volume represents the aggregate dollar amount of loans funded in a given period based on the principal amount of the loan at funding that have been generated through one of our B2B partner relationships. Total Loans represents the total number of loans funded in a given period, including purchase loans, refinance loans and HELOC loans. Self-Funded Loans is defined as our Loans Held for Sale and Loans held for Investment as presented on our Balance Sheet less our Warehouse Lines of Credit and Customer Deposits as presented on our Balance Sheet.

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For Investor Relations Inquiries please email ir@better.com