Better Home & Finance Holding Co Q1 FY2025 Earnings Call

Welcome to Better Home & Finance Holding Company's first quarter earnings conference call. My name is Tarek Afifi, Corporate Finance at Better. Joining me on today's call are Vishal Garg, Founder & Chief Executive Officer of Better; and Kevin Ryan, Chief Financial Officer of Better. In addition to this conference call, please direct your attention to our first quarter earnings release which is available on our Investor Relations website. Also, available on our website is an investor presentation. Certain statements we make today may constitute forward-looking statements within the meaning of federal securities laws that are based on current expectations and assumptions. These expectations and assumptions are subject to risks, uncertainties, and other factors as discussed further in our SEC filings that could cause our actual results to differ materially from our historical results. We assume no responsibility to update forward-looking statements other than as required by law. During today's discussion, management will discuss certain non-GAAP financial measures, which we believe are relevant in assessing the company's financial performance. These non-GAAP financial replacements for and should be read together with our GAAP results. These non-GAAP financial measures are reconciled to GAAP financial measures in today's earnings release and investor presentation, both of which are available on the Investor Relations section of Better's website, and when filed in our Quarterly Report on Form 10-Q filed with the SEC. Amounts described as of and for the quarter ended March 31st, 2025 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our quarterly report on the Form 10-Q with the SEC. More information as of and for the quarter ended March 31st, 2025 will be upon filing our quarterly report on Form 10-Q with the SEC. I will now turn the call over to Vishal.

Thank you, and welcome to our first quarter 2025 earnings call. We appreciate everyone joining us today and for your continued support as we advance our mission to make homeownership better, faster, and easier for our customers by building a technology platform that revolutionizes the homeownership experience. I want to set the tone for today's discussion by reiterating that, while the mortgage industry and housing markets are facing challenges, this dynamic creates tremendous greenfield opportunity for us, because we are truly the first scaled-up AI platform built to empower consumers and now also empowering local mortgage brokers and banks with the technology to serve their customers. The mortgage industry is massive, estimated by the MBA to be $2.1 trillion in total origination volume for the full year of 2025, of which approximately $1.4 trillion is purchased and approximately $700 billion is refinancing. So even just a 1% share of this massive total addressable market would result in $14 billion of volume for Better, approximately 3x from where we are today. We continue to drive progress towards our mission in which every customer can seamlessly buy, sell, refinance, insure, and improve their home digitally, online, instantly, and towards executing on our key objectives, which are: One, to lean into growth and AI to drive increased volume and revenue. Two, ongoing efficiency improvements driven by continuous advancements in our technology and the implementation of AI through our entire operating model; and Three, diversification of our distribution channels and corporate cost reductions. In the first quarter of 2025, on a year-over-year basis, we grew funded loan volume by 31% to $868 million and revenue by 46% to $33 million, driven by funding more loans both through our direct-to-consumer and Tinman AI platform channels. Last month, we were very pleased to announce the retirement of Better's outstanding convertible debt and right-size the liability structure. This transaction is expected to create approximately $200 million of positive pre-tax equity value and create a path to long-term value creation for our equity shareholders. Removing this debt overhang is a monumental achievement and a key milestone to our capital structure, and Kevin will talk to this in more detail. In the meantime, we remain focused on driving towards profitability in the mid-term by continuing to lean into Tinman's technology and AI, with the Betsy AI Loan Assistant executing 127,000 consumer interactions in March, our AI underwriting growing from over 40% of lock loans to 75% in the near future, and increasing loan officer productivity in terms of loans per month to over 3x the mortgage median. As we look forward to the second half of 2025 and beyond, our strategic priorities remain focused on what lies in our control. Our first priority is to continue to thoughtfully propel growth. In the first quarter, year-over-year funded loan volume growth was driven by increases across all three of our main product categories, with Home Equity products and Refinance Loans being the largest growth drivers. Specifically, HELOC and home equity loan volume increased 207%, refinance loan volume increased 64%, and purchase loan volume increased 9%. This growth is attributable to the strategic investments we've made in technology, product innovation, and distribution expansion, including the launch of Betsy, a voice-based AI loan officer, deployment of our Tinman AI platform strategy with the addition of Neo powered by Better, and efficient expansion of direct-to-consumer. These strategic initiatives have positioned us to capitalize on market opportunities, enhance operational efficiency, and drive sustainable growth. Our second priority is to continue to reduce expenses and improve operational efficiency with the goal of reaching profitability in the medium-term. While we expect loan origination expenses will increase as we lean into growth, as we further implement Betsy into the sales, processing, and underwriting workflows, we expect continued operating leverage with revenue growth outpacing expense growth. Using our Tinman AI platform, we have been able to automate time and labor-intensive components of the mortgage process and reduce our cost to originate by over 40% compared to the industry average. We believe our continued investments in AI with our product and engineering roadmaps well on track will significantly drive down costs further, resulting in improved operating efficiency and superior customer experience. Lastly, our third priority is to continue diversifying our product and platform distribution channels. We now have three ways of serving the customer using our technology: direct-to-consumer, Tinman AI as a platform, and Tinman AI as software. In our direct-to-consumer business, we serve the consumer directly on better.com. Better was founded on revolutionizing the consumer experience for the home finance process, and as such, our direct-to-consumer business has always been at the forefront of pushing the envelope on what technology can do in the mortgage industry at its core. Within the direct-to-consumer channel, contribution margin or per loan profitability is increasing, as the operating cost to fund is decreasing due to the implementation of AI in both the sales and operations workflows. Next, we serve the consumer through our Tinman AI platform, powering loan officers across the United States locally, for which we are seeing rapid early growth. For context, over $1.2 trillion of mortgage volume in 2024 was originated by retail loan officers on antiquated technology and high operating costs. We are quickly disrupting traditional retail mortgage origination by onboarding loan officers and branches onto our Tinman AI platform, empowering them to do more loans than they've ever done before, removing friction from their fulfillment process, and expanding their capacity to help more customers. These loan officers keep the pricing they've been able to get historically based on the service level that they provide locally and within their communities and networks, all while compressing a staggering 80% of their back-office costs using our platform. As we've discussed on recent earnings calls, NEO Powered by Better, our first and now proven traditional retail mortgage originator leveraging the Tinman AI platform is deeply benefiting from our AI technology and digital lead funnel, supercharging their loan officer teams who have demonstrated track records and customer service excellence within the communities they serve. Further, Betsy, the first AI voice-based loan assistant for the US mortgage industry is being individually branded for each loan officer at NEO and rolled out through their entire sales force. We are making great early progress with NEO Powered by Better, well ahead of our internal expectations and have high aspirations for the road ahead. Since beginning production in January 2025, we have onboarded approximately 115 NEO loan officers across 53 branches. Currently, NEO loan officers are doing three loans a month and we have the goal of tripling their capacity to 10 loans a month, thereby also increasing their earnings and helping them serve even more families than they currently do. In January, we funded $2 million of loans for four families. In February, we funded $42 million for 104 families, and in March, we funded $119 million for 258 families, and this is during the slow season in mortgage origination. This is the first successful launch of taking an entire mortgage company off of their traditional mortgage industry software stack with Encompass and the other antiquated mortgage technology that NEO had been working with before, and within 90 days getting them to exceed the loan volume they previously had while dramatically increasing their efficiency. As we have proven this out with NEO, with the entire mortgage industry watching, we have been inundated with other mortgage teams and companies wanting to move their business to the Tinman AI platform. We see massive opportunity in the road ahead to replicate the success of NEO Powered by Better with other traditional mortgage originators. And lastly, we are serving the customer by powering banks that seek to license our Tinman AI software to become more efficient and customer-centric. We have built a highly fine-tuned platform for our own business and customers, and now there is demand from others in the industry to license our software. This quarter, we are excited to sign an agreement with a bank partner to power their entire mortgage platform from a software perspective, from click to close, with their sales and operations people, across the full range of products they offer, including non-QM and other niche products, entirely on Tinman. As you all know, banks have traditionally had to offer mortgages, but the cost to originate these loans to their customer base has been well over $10,000 per funded loan, making bank origination of mortgages largely unprofitable. To be clear, banks want to originate mortgages, but they know they need to invest in technology to make it a profitable business in any environment. That is a huge opportunity for Better and Tinman. Notably, this will be the first implementation of Tinman as a direct competitor to the point-of-sale system, plus CRM system, plus pricing engine, plus document engine, plus loan origination software, plus underwriting calculation engine setup that the vast majority of the mortgage industry has. Seven to eight systems, all by different vendors with different pricing, with different middleware integrations, mostly not talking to each other, with stale data, with the ability to have only one person logged in at a traditional way. We look forward to sharing more information about disrupting this entire software stack in the coming quarters ahead, as we believe a very large addressable market exists within the mortgage ecosystem for a holistic, one-stop software solution powered by the industry's leading AI engine, Tinman. To put the opportunity into context, over 5 million mortgages were built on the Encompass platform in 2024. To the extent that we can achieve even 1% penetration of the Encompass customer base, we believe, based on our current pricing, that could drive an incremental 50,000 new loans and $75 million of revenue to Better per year. And unlike other traditional mortgage software, our SaaS platform does not charge on a per-seat or a per-application basis; rather, we are uniquely charging on a per-funded loan basis, where the revenue event for the mortgage company is directly tied to the technology cost, which is a fundamentally disruptive model to the traditional software players in the industry and enables the full adoption of AI, because unlike those other players, we are paid on a per-successful-transaction basis, not by filling seats or filling the application funnel. To sum it all up, while our direct-to-consumer business has always been at the forefront of pushing the envelope of what technology can do in the mortgage industry at its core, we have started making great advancements in diversifying our product and platform distribution channels, notably through the Tinman AI platform, both empowering local loan officers and mortgage brokers and empowering banks with our software. Looking ahead to the second half of 2025 and beyond, the opportunity ahead of us has never been more exciting. We remain focused on enhancing our go-to-market with growth being our North Star alongside continued expense management and channel diversification. We will continue to invest in building the leading AI platform in the mortgage industry, Tinman, to improve the customer experience and further drive down labor costs, making our platform more efficient and scalable, ultimately driving the business to profitability. Furthermore, we are substantially broadening the use of Tinman through diversification on both Tinman AI as a platform for other mortgage originators and Tinman AI as software service to solve for the mortgage industry's broken tech stack. With that, let me now turn it over to Kevin Ryan, our Chief Financial Officer, who will discuss the quarterly performance and our financial strategy.

Thank you, Vishal. As we've discussed on prior calls, even through a continued challenging market environment and now heightened macro volatility, we continue to make great progress towards our goals of increased volume and revenue balanced with ongoing expense management and improved efficiency. In the first quarter of 2025, on a year-over-year basis, we grew funded loan volume by 31% to $868 million and revenue by 46% to $33 million driven by funding more loans built through our direct-to-consumer channel and Tinman AI platform. We had an adjusted EBITDA loss of $40.4 million and total GAAP net loss of approximately $50.6 million. By channel, first quarter funded loan volume was 71% generated through direct-to-consumer and 29% generated through Tinman AI platform, along with B2B home equity, and 15% refinancing. On a sequential quarter-over-quarter basis versus Q4 2024, Q1 funded loan volume was down approximately 7%. As Q1 is always seasonally the slowest quarter in the direct-to-consumer business, this compares quite favorably to our prior guidance of down 10% to 15%. We are pleased that despite the sequential quarter-over-quarter decline in volume, revenue was up approximately 30%. Revenue grew in the quarter despite the expected decline in volume due to volume from NEO coming on board with higher gain on sale margins, our continued push towards increased pricing, and a tailwind from the loan loss reserves. Turning to expenses during the quarter. When excluding one-time costs related to clean-up items from the SPAC transaction, total expenses decreased approximately 11% in Q1 compared with Q4 of 2024, and we reduced the adjusted EBITDA loss on a month-over-month basis during the quarter. Loan origination expenses were down in Q1 on a sequential basis versus Q4 2024. While these loan volume-related expenses will increase as we further lean into growth, operating leverage will rise as revenue growth outpaces expense growth. Turning to our balance sheet and capital structure. Last month, we announced the retirement of approximately $530 million of convertible notes, creating approximately $200 million of positive pre-tax equity value to continue expanding our AI mortgage platform. We are very pleased to reduce the debt overhang and improve our balance sheet positioning and strategic optionality. With the completion of the debt restructuring, our priorities squarely remain growth and profitability. We continue building out our Tinman AI platform and Tinman software channels, lean into productivity-driven savings through AI deployment across the mortgage business, and drive costs down further in our corporate functions. We are excited about using AI to drive the business towards growth and profitability, similar to the advances we experienced from 2016 to 2021 when we grew originations by over 100 times. Turning now to our outlook. We remain focused on managing towards profitability in the mid-term, and we expect to drive growth through efficiency from Tinman AI, distribution channel diversification, and optimized marketing, while balancing these growth expenses with further corporate cost reductions. For the second quarter of 2025, we expect funded loan volume to be up compared to the first quarter of 2025, driven by efficiencies in our Tinman AI platform. We are particularly excited that the Tinman AI platform loan volume is pacing well ahead of our internal plan in March and April, despite the heightened macro volatility, and we expect over $450 million of NEO originations in Q2, which is growth of over 250% versus Q1. Additionally, for the second quarter, we expect core expenses, including compensation and benefits, to be down relative to the first quarter. For the full year of 2025, we expect funded loan volume growth to increase year-over-year, driven by tailwinds from the growth initiatives, including NEO Powered by Better, offset by continued macro pressure and the loss of the Ally business, a roughly $1 billion headwind. We expect growth to come particularly in the second and third quarters of the year, at which point, we expect NEO Powered by Better to be more fully ramped and to benefit from improved seasonal tailwinds. We also expect further improvements to our adjusted EBITDA losses in 2025 as compared to 2024 due to a combination of efficiency gains and continued corporate cost reductions. Lastly, we continue to undergo efforts to exit our non-core UK assets, while focusing on growing Birmingham Bank. We expect to more than double UK bank originations again in 2025, as we deploy AI with the goal of building the leading AI-driven specialist mortgage bank in the United Kingdom. We expect the exiting of three smaller non-core UK businesses to start being a benefit to our adjusted EBITDA losses in the second half of 2025 as a result of their disposition. With that, I'll now turn it back to the operator for Q&A.

Thank you. Your first question comes from Kartik Mehta with Northcoast Research. Your line is open.

Good morning, Vishal and Kevin. Vishal, you talked about the NEO platform and obviously how much success you're having with it. As you've looked early stages, I know you talked about 90 days, but what do you think is a fair number of time before the loan officer really can feel the impact of that model, and how do you expect that to trend over the next 12 months?

I believe they begin to see the effects within 30 days, starting with the significant reduction of sales-related tasks that the loan officer has to handle aside from interacting with the consumer. This allows them to reclaim hours they previously spent entering and retrieving data, as well as following up with processors and underwriters regarding loan and customer files. The system automates all of this, so they immediately start gaining back time. After that, their productivity improves because they no longer have to chase customers for documents; the system does that for them. If there are issues with the documents, the system addresses those directly. They then utilize the AI underwriter, which streamlines the restructuring of loan files by incorporating the logic from all 35 of our investors' guidelines, covering nearly 40,000 pages of guidelines and pricing that is updated three times daily. This enables the loan officer to efficiently respond to customer queries like how to obtain a lower rate, qualify for a larger mortgage, or what is needed for loan approval. Any new scenarios, such as purchasing a car or changes in co-signers, are resolved almost instantaneously. What would typically take a human underwriter three to ten hours can now be addressed in three to five seconds. This immediate feedback is driving traffic from other loan officers who are interested in our service. In addition to the $2.5 billion from Neo, we have received inquiries from loan officers currently funding $50 billion in loans who are eager about the platform. While not all $50 billion will materialize, we have developed a system that provides retail mortgage loan officers and their teams with complete transparency and control while only needing to share a smaller percentage of their profits with our platform, leading to significant productivity gains. We promise the retail loan officer that we can help them triple their earnings while halving their costs, which is a very compelling value proposition.

Yes. So, thank you for that. And just as a follow-up, maybe how many more loan officers in 2025 would you like to onboard? I don't know, if there's a capacity or if there's a way that you wanted to kind of scale that in terms of adding to the platform?

Yes. So, to be honest, like, in 2021, we had 5,000 loan officers. Here we are onboarding 150 of them on the retail channel, right? So the other thing that the platform provides is effectively infinite capacity to any loan officer team, and so I think we'd like to grow. I think we'd like to triple or quadruple the NEO channel. We're already going to dull it this coming quarter as Kevin mentioned in terms of production. So I think there's a lot of capacity ahead.

Question comes from Brendan McCarthy with Sidoti. Your line is open.

Great, good morning, everyone. Thanks for taking my questions here. Just wanted to start off looking at the unit economics. Just curious as to how unit economics at the loan level trended year-over-year, and I guess really aiming to get an idea of how do you quantify the AI functionality, and really you mentioned operating leverage is kind of positioned to improve looking forward. Are you able to quantify maybe how much you expect that to improve looking ahead?

Yes. Kevin, do you want that question, and I can fill in?

Yes. Let me start. So I think, Brendan, there's a couple of things here. So the unit economics have improved. If I just take Q1, February was better than January; March was materially better than February, and when you look at our actual aggregate losses, March came in about $7 million, so materially lower, and the mortgage company essentially was breakeven in March. The unit economics is a direct result of the AI improvements are coming fast and furious. Now, there's always a market cyclicality to it, as it relates to the purchase season, purchase season kind of deferred a little bit here given some of the macro. So, it's not going to be linear, but to date, it's been pretty linear, but I wouldn't assume that that's going to be true month-over-month. Where are you going to see the savings? And so, I'll kind of maybe just guide you through the income statement. The majority of the savings you're going to see through the continued technology improvements are going to be in the compensation and benefits line. That number is going to go up, as we onboard the loan officer that Vishal just talked about, right? As we add LOs, compensation and then is going to go up, but it's going to go up slower than revenue, and it's continued to improve, continue to get better and that's always been one of our challenges. The other place you'll see it is in loan origination expenses. That will continue to come down. So, basically, think of that as non-comp expenses on a per-loan basis. We're safely below $1,000 a loan and going even lower on that line item, and that is really a direct result of being able to deprecate vendors, renegotiate vendors, drive better deals, and use our technology to really lower the expense, the non-comp expense cost of manufacturing a loan. So those are the principal areas you will see.

Great, Kevin. I appreciate your insight.

Yes, I believe the key goal is to reduce the total cost of producing a loan to $1,500, which includes $500 for sales labor, $500 for operations labor, and $500 for expenses related to credit bureau checks, income verification, and other external vendor costs. We are aggressively pursuing this target. Achieving it would make us six times cheaper than the typical industry cost for manufacturing a loan. Currently, retail mortgage originators are spending about $7,500 per loan, excluding sales expenses, to complete the funding process. We see significant potential for further gains from AI, which is already showing positive results in our numbers. As Kevin pointed out, the mortgage company has become profitable this quarter for the first time in many quarters, positioning us for growth. It’s crucial to understand that the mortgage business operates on scale. This quarter, we introduced two new methods for market outreach, one focusing on software and the other on platform capabilities, which will significantly increase our volume throughout the entire process. This will allow us to negotiate better pricing for our vendor contracts, improve hiring and labor deployment, and fully leverage the advantages that AI can provide at scale.

That makes sense. I really appreciate the insight, looking ahead. And then wanted to talk on the balance sheet. First of all, congratulations on the convertible retirement. I think that's a big piece of the story. But just curious as to maybe longer term, what kind of leverage level makes sense for the business, and kind of how do you think about the balance sheet at this point versus where you'd like to be?

Sure. So, I'll start, Vishal may want to supplement. I'll make a few comments as you think about our balance sheet and leverage. The first is, to date, we have always sold servicing released. So, we run a very capital-light business model. We're working on a $1 billion balance sheet, but half of that will be loans held for sale, and those loans are recycling quite quickly, particularly post the SoftBank transaction. Because I think, as we talked about in the 8-K when we did the deal, we didn't use much cash at all to actually do that deal, but we did sell loans held for sale that were unencumbered that we chose not to pledge to warehouse lines in order to fund that transaction. So, from a leverage perspective, we don't really think about it as debt-to-equity per se, like where a lot of other companies may, because they run a big servicing asset on the balance sheet that they presumably for most lever through a financing facility against the MSR. But what I will say, the $155 million of new debt we've put on does not mature until the end of 2028. It's fully picked. Until we're profitable, we've informed our partner, our lender, that we will be picking the interest, and so that will accrue, but we will not cash pay it. And so, we're quite comfortable with $155 million of debt due at the end of 2028. And I think the combination of market improvement and all the self-help we're doing and the work we're doing around technology, we think refinancing that three years from now should be well within our purview. So we feel quite comfortable with our current leverage.

Great. Thanks for the insight there, Kevin. And one more question from me. Yes, this is constantly a point of growth here is the B2B partnerships. What other opportunities are you seeing for B2B partnerships? And maybe you could talk about the pipeline there?

You want to start that one, Vishal?

Yes. I believe there are essentially two types of B2B partnerships moving forward. The first is a software-only partnership. From our experience with Ally and the banks we've pursued for similar deals, we've observed that many of these banks are currently downsizing their mortgage operations. They are hesitant to fully outsource their front and back office functions like we did with Ally. However, with our software, banks can scale their services up or down as needed. They can utilize our services for additional processors or underwriters if required, but they can also simply use the software to improve efficiency for their loan officers, processors, and underwriters. We consider this a more effective go-to-market approach and anticipate rapid scaling. We have numerous fintechs and banks waiting as we finalize this initial bank deployment. To give you perspective, integrating a typical mortgage industry stack for a bank usually costs between $1 million and $5 million and takes about nine months. In contrast, we set up this particular bank for conforming loans within three days. They then requested integration across their full product range, including wholesale, which we completed in 60 days. We incurred no implementation costs or third-party vendor fees; it’s all based on a per-funded loan structure. For this bank, just from transitioning volume to our platform compared to last year, we expect to generate over $4 million in revenue. With the addition of wholesale capabilities, we might reach between $10 million and $12 million in annual revenue from this single bank over the next 18 months, and they fall into the small to medium-sized category. The second opportunity in our B2B pipeline involves fintechs wanting to enter the mortgage sector, including wealth management fintechs, lending platforms, and personal loan platforms. We are seeing significant interest from these entities as they look to diversify into home equity and ultimately into mortgages, aiming to convert their customers into mortgage clients. These platforms have successfully aggregated millions of users in recent years by offering services like Buy Now Pay Later and personal installment loans. We simplify their entry into the mortgage industry by eliminating the need for them to hire loan officers, underwriters, and processors. We anticipate sharing positive feedback and finalizing significant deals with many large fintech platforms over the next nine months. This covers the two distinct types of B2B partnerships we expect to see going forward.

Your next question comes from Eric Hagen with BTIG. Your line is open.

Hi, thanks. Good morning, guys. Back onto the balance sheet maybe, I mean, how does the restructuring give you better negotiating terms with lenders and other counterparties? You guys talked about the bank partnerships. I mean, how does the restructuring itself play a part maybe in your ability to like source and maintain those relationships? And again, like, the restructuring itself, does that make you more competitive with some of the other entities who may be looking at those similar partnerships?

Yes, sure. So, Eric, good morning, it's Kevin. I'll start and then Vishal may want to supplement. It's certainly helpful. I think as we kind of disclosed, we're going to create about $200 million of equity creation as part of the deal. I think there were people who definitely looked at us and said, you have a relatively high debt load, certainly for a company that's kind of at the low point of the cycle; hopefully cycle improves here, and all the AI improvements will kind of drive us through the cycle irrespective of the way the cycle does. But I think we've definitely fixed the balance sheet and that we've taken equity up, debt down as the course of this deal. And so, when people do their kind of high-level diligence on us as a partner, I think they're really looking at us for the technology, what we can provide, all the things Vishal just went through. That is what they're really looking for, but they certainly want to make sure they have a strong counterparty as well that they're going to work with for years and years and years to come, and so we feel like, on the margin, we've improved our pitch to them as a result of the balance sheet transaction. But we did the balance sheet transaction because it was just the right thing to do for shareholders, and it was the right kind of ROI on the use of the cash we used to actually get the deal done.

Great color there. Appreciate that. I mean, we hear constantly about the range of borrower profiles, the need for loan officers to effectively like tailor a loan to the borrower's profile. I mean, how do you guys work with the software to address these different profiles? How do you benchmark that flexibility to again address the different loan profiles, or is it really more effective to instead think of the Better platform as really just being the cheapest and most efficient platform for the borrower whose profile is down the fairway, so to speak? And the niche for the software isn't really trying to be super-tailored, how should we kind of think about where you guys plug in?

I think that's a really great question. So for the first seven years of our life, Better was great for straight down the fairway customers, and we just crushed it in terms of cost and efficiency, unconforming, jumbo, high FICO, medium TI, AD LTV type loans, and that fueled our growth. And I would say, really onboarding the retail loan officers, we've had to build out the functionality for every loan type in Tinman in the past 120 days. So, three plus borrowers, who even knew that was a thing, but apparently the Bank of Mom and Dad is really big in retail, right, and you need to have three plus borrowers. So we had to build that into our system, and now we have infinite borrowers. It can qualify, you can have 12 borrowers on our own file that we had to build all the custody products, and we had to build the construction loan product, we had to build all these additional products all into the system, and now the system crushes all of those loan products. For this bank, we had to onboard bank non-QM, bank statement, doc light; the system now crushes it, and more importantly, the AI underwriting automatically is matching the consumer to the full product set and exposing the full product set. The loan officer doesn't have to do any work to remember any of this stuff. It doesn't have to go from the loan officer, from a conventional product and then go through the funnel, go through underwriting, then get kicked out and then get matched to a different product and so on and so forth. This is all happening instantly. And so, I think one of the things that Tinman is going to now be known for is not just being super cost efficient, but actually capturing the full scope of products that are available on the platform, which, by the way, is helping direct-to-consumer dramatically improve its unit economics, because all these people that we were previously turning away in direct-to-consumer that we didn't have a product for, we now suddenly have a product for. So, this is the growth of Tinman AI, and the breadth of the product offering is improving conversion across all of our channels.

Yes. I mean, Eric, the addition Vishal just said it, but the addition of products is one of the biggest stories for us over the last three to six months. Through Tinman AI, the onboarding of NEO has been a game changer as it relates to rolling out products.

The next question comes from Bose George with KBW. Your line is open.

Hi, guys. Good morning. Actually, that was very interesting on your comments about the way Tinman could disintermediate some of the LOS systems. Are the companies that you're speaking to like the bank you noted generally on a system like Encompass, and then they're looking at you guys as a lower-cost, higher-efficiency alternative, or is it kind of a de novo? Can you just characterize the people you're talking to?

The people we're engaging with are using Encompass and Simple Nexus, and the bank we've onboarded was also on Encompass, while NEO was using Encompass as well. I believe that the efficiency gains from transitioning from those two systems, along with the various vendors in the ecosystem, to our platform are quite significant. These companies have large sales teams and lengthy contract periods, but what has been fortunate for us is that this is all coinciding with a time when everyone is reassessing their technology to see if it can integrate with AI agents and LLMs. Many of the existing technologies in the mortgage industry struggle with this because you have multiple systems. OpenAI indicates that the maximum number of function calls an LLM can handle simultaneously is two to three. So, if there's a limit of two to three function calls, how can you manage across eight systems without facing severe latency issues? No one wants that. You cannot deploy an AI agent on these outdated systems. I view this as a pivotal moment reminiscent of the time between 1995 and 1999 when the Internet became mainstream. Now, AI has emerged, but none of these systems are equipped for it. This explains why, despite having rolled out Betsy six months ago, the industry hasn't produced anything substantial besides an appointment scheduling bot for loan officers—just an interface for booking meetings. I believe that we have a significant generational lead here, and I've been quite surprised by the industry's reaction, especially from large mortgage firms that are reaching out to us, expressing that if it works for them, it will work for us. They want us to come and see them as we aim to scale our solution.

Okay, great. That's interesting. Thanks. And then, actually, have companies that you're speaking to noted any concerns about essentially buying technology from a competitor, and to the extent this thing grows meaningfully, is there any sort of alternatives like maybe separate this out, or is that too early to think about things like that?

I think it's too early to think about that. I think the companies that we're talking to were not in retail. They don't view Better.com as a competitor, and I've been transparent with them. Better.com B2C might become 25% of our business or even 10% of our business over time, and I think, yes, there is that. But then, there's also the fact that when you're facing a potential extinction event, you're less worried about buying a tool that helps you get past that extinction event from someone who could or would be a competitor.

This concludes the question-and-answer session. I'll turn the call to Vishal Garg for closing remarks.

Thank you all for continuing to support us as we build America's leading AI mortgage platform and in doing so help consumers get a better rate, have a better process, which lets them have a better house and a better life. While the past five years have been challenging for us, given the state of the market, we're now playing offense hard again. We're looking forward to executing on our continued efficient growth and to share more positive news with you in the quarters ahead. Thank you.

This concludes today's conference call. Thank you for joining. You may now disconnect.