All right. Hello, everyone. My name is Rohit Kulkarni. I'm really excited to welcome Vishal Garg, founder and CEO of Better.com, ticker is B-E-T-R. I think Better has been one of the most disruptive AI-native companies in digital mortgage, and right now, as we move forward, they're moving towards a more agent-driven, autonomous future, and Better is directly leaning into this shift. Vishal, great to have you here. Thank you so much. I guess maybe let's go back to the origin story first. At a very high level, for those not familiar with Better.com, what was the original mission? How has that evolved? And why do you believe the company is particularly well positioned at this moment in time with all things AI?
Sure, thanks. Rautha, I've been doing consumer fintech for now 26 years, right from the beginning of the dot-com boom. and basically in 2014, I went to go buy a place and the process was so broken, it took Citibank over 60 days to get the mortgage done. And at that time, I was trading mortgage-backed securities and student loan ABS, and I could price any loan inside any mortgage-backed security in seconds, and I was wondering why it took a bank 60 days. And so I decided to stop doing what I was doing, managing a fairly large portfolio, and actually create better.com. And the idea was, can we take the process of making a loan in mortgage land, which is 800 pages, 28 people involved, $12,000 of cost that every American consumer has to bear, and turn that into a digital process, one where the system uses the humans as an exception and not as a rule, and in doing so, dramatically lower the cost of achieving the American dream for all American families.
Fantastic. And just a quick earnings recap. You disclosed a lot of things. I think two things caught my eye in the most recent earnings. One is you think you'll hit a billion dollars in monthly loan volume later in May. And then you also said that you might reach EBITDA break-even. Can you unpack these, what's driving the inflection and growth and even profitability?
So from 2016 to 2021, we were the fastest growing fintech in America, grew from about 500 million in volume to 58 billion in volume. We had to reposition the business for the rise in interest rates, and we reached a bottom of about 3 billion of funded volume in 2023. Since that time, we have now doubled our revenue run rate and volume run rate to exiting December at about a $6 billion volume run rate, or about $500 million a month. And the pace of growth is accelerating with our recent launch of Credit Karma Home Loans, powered by Better, and through a bunch of other partnerships that we have signed on. And so we are fairly confident in our ability, despite the macro picture, to grow very rapidly, to double the business over the coming three to four months. And from there, as a result of doubling the business, mortgage as a scale business, achieve EBITDA break-even by the end of Q3 2026. We also announced in December the launch of other partnerships, a top three fintech that has now adopted the platform and is using it for HELOCs and HELONs, and then for a segue into the mortgage market. Not the same level of customers, 140 million that Credit Karma has, but just under 10 million customers. And we talked about, most recently, a launch with ChatGPT to create the first credit decisioning engine inside ChatGPT, which enables banks, fintechs, mortgage lenders around the world to be able to decision any mortgage anywhere in as little as 47 seconds compared to the industry average of 21 days, which we think is going to be pretty revolutionary for expanding our partnerships. I think I publicly stated that we've had over 50 banks and mortgage brokers from around the world in just the last two weeks respond unanticipated without any ads or anything else like that and line up demos. Two of the three largest banks in the country, many of the largest fintechs. And so we feel very excited about our prospects going forward.
Awesome. Awesome. Lots to unpack there, Vishal. We'll take it one at a time. the the partnerships overall and going from 500 million dollars to a billion dollars in a matter of five months that's a pretty steep curve can you unpack what's how much do credit karma type partnerships account for and how much does everything else and just overall how do you think about partnerships and the success factors behind them I think with partnerships it's all in
what is the economic benefit to the partner? And then from there, what is the penetration rate of their customer base? Long term, we believe the penetration rate of our partner's customer basis should equal about 15 basis points. So if a partner has, for instance, 10 million customers, that should result in us funding somewhere on the order of 15,000 mortgages for their clients annually. 15,000 mortgages at $400,000 alone is about $6 billion of volume. So if you get a partner with 10 million customers, our current volume run rate is $6 billion. We could easily double volume just by that one partner. But it takes time to then penetrate. You've got to go and advertise to that partner. You've got to embed it inside their app. You've got to do all these things. And so the growth is going to be lumpy as we ramp up partners and we sign up more and more
partners okay and operationally speaking you have credit karma you had one more large fintech company how should investors think about the ramp of those partnerships into 2026 so the fintechs will ramp
faster uh than your traditional mortgage companies we have one of the top five mortgage companies in america they did over 50 billion of volume last year signed as a partner they have 3 500 loan officers and 750 branches around the country we've got to go train each and every one of those loan officers to work on our product rather than their product. And so each of those things takes a longer time with a traditional mortgage partner, particularly where we have to train their people or their loan officers or their salespeople to adopt the platform. Whereas on a fintech, it's just mostly intermediated through their app. And so it's a function of their customer adopting the platform. And customers have traditionally been very prone to adopt our platform, particularly when embedded inside somebody else's brand, because it's faster, cheaper, and easier to use.
The third thing you mentioned was OpenAI, ChatGPT. Talk about that a little bit more. How did that come about, and what are the immediate next steps in terms of getting those leads coming in from that product into actual loan volumes growing?
Sure. So we've partnered with OpenAI for almost three years now. We were the earliest adopter of putting LLMs on top of the machine learning-driven rules engine that we had built to intermediate mortgages and home equity loans, and we've leaned in very, very hard on that. The goal for creating the TinMan AI app inside ChatGPT was to shorten what I was just talking about earlier. Right now, when I go to a partner and I have their loan officers or their processors or their underwriters try to learn TinMan, it can take anywhere from six weeks to three months for that partner's people to learn that. With the TinMan AI ChatGPT app, I can just give them a ChatGPT enterprise instance with the TinMan app loaded into it, and they can just talk to it. And so the entire concept of having to learn a system goes away, and the adoption curve increases dramatically. We believe all of this sets us up for eventually introducing the consumer side of an app for all of ChatGPT's 80 million U.S. customers and 800 million global customers, where using chat gpt mortgage because it's a purely digital product home equity because it's a purely digital product and with the features that we have built which are very similar to what stripe has built to enable checkout where the underlying personally identifiable information about you your social security number how much money you make all that is sent to better like sort of wormhole in so it never sits in the llms it just sits with us all of that we believe is going to enable us to be one of the earliest loan engines inside ChatGPT. And we're very excited about that.
OK, that's fantastic. We'll talk about D2C in a bit. But you mentioned TinMan. I know for people who are new to the story, what capabilities does TinMan, what does that product enable you to do, and recent successes with what you've been able to achieve?
So the traditional mortgage industry software stack includes eight different disparate systems, Many of them built in the 90s and the 2000s on Microsoft SharePoint type of architecture where only one person can be in a file at any time. Actually, 85% of the mortgage industry on the loan origination platform side operates on platforms that only permit one person in the file at any time. What we built was an entirely new way to intermediate mortgages. It takes all the power of eight different systems, your CRM system, your point of sale system, your loan origination system, your pricing engine, your eligibility engine, your compliance engine, and your document generation engine, and puts them all into one platform where agentic AI is intermediating the workflow. We call it Tin Man because it's the machine, and then the human brings the heart to the machine. And so, and so.
I like that, I like that. Was that your idea?
I know, it was the guy who, it was our product manager, Phil, who came up with that. But yeah, and the value proposition of Tin Man is that unlike other systems that are sold by the seat or sold by the hour, Tin Man is sold by the outcome. So the adoption curve is very high because our clients, when they buy Tin Man, they're buying per transaction. So they're suddenly taking something that costs them six, eight, 10 grand a loan to make that they bleed out on hours and seat licenses and just turning it into a per loan cost paid at the time of funding. So they match their revenue event and their cost event perfectly and we think that that's why tin man adoption has increased so dramatically and it's interesting when i first started with it uh selling it i thought it was going to be a lot of small mortgage brokers and retail mortgage lenders but the adoption has been some of the biggest players in the industry across different verticals in the industry have been adopting tin man finance of america the largest reverse mortgage lender in the country our partner that is not yet named the largest retail lender in the country Credit Karma, the largest fintech platform in the industry. All of these players that have been adopting it are the largest, best, most forward-thinking players in the industry.
And then in terms of the economic model for Tin Man, do you anticipate that at some point it may be a pure subscription model or do you see a transaction model or a take rate model?
I think most AI forward companies are selling outcome as a service. And so if you sell outcome as a service, the client is delivering, delivered so much value that it's hard, it's even more stickier than a subscription model. Because a subscription model, you've still got to renew them every year, every two years, every three years. Outcome as a service, like, wow, you're delivering value every single day because you're improving their revenue. The team of retail lenders that joined our platform last year, and I think we've publicly disclosed this with metrics in our most recent quarterly earnings deck, they came on board, they were doing a billion and a half of volume. This year, just 12 months later, they're doing $3.2 billion of annualized volume. They've gone from doing two loans a month funded to four loans a month funded. They've cut their operational costs by 30%, and that's after being six months fully loaded on TinMan. And so we think that when we deliver value every day, it's way stronger than any contracted subscription.
Okay. I do want to talk about D2C. Where are you with your direct-to-consumer offering? I know that's a very cyclical business. And given what's happened to market rates in the last, call it three years, probably has gone through the transition to a B2B business that you're doing. What's the outlook for D2C? How should we think about that?
So I love Better.com. I spent seven years building it. People said, you have to have the lowest rate. So we got the lowest rates. People said, you have to have the fastest process. So we got the fastest process. People said, you have to have the easiest process. So we made the easiest process. So on every asymptote of value drivers for the consumer, it is the best platform in the industry. And that is why we were able to go from zero to 58 billion of volume in five years in a relatively static industry from 2016 to 2021. However, what Better.com never had really was distribution and brand awareness. And we don't have the billions of dollars to go and buy Super Bowl ads and create brand awareness. And so when the refinance wave went away and consumers couldn't easily differentiate and they were relying on their local realtor to decide who to get a mortgage from, it became increasingly harder for Better.com to compete in the marketplace where we would buy a lead. So 6% of pre-approvals in America today, hundreds of billions of dollars of pre-approvals are made by Better.com. But 95% of those approvals are then taken away by the local mortgage broker from the local realtor. So I spent eight years fighting the local mortgage brokers and the retail lenders, and now we're just collaborating with them and letting them build on our platform. and we're taking the better.com customers and then transferring them to the local retail lender where if we're going to lose them to them anyway, we might as well get paid to get a share of the revenue that those local lenders create. So D2C is in an evolution phase right now, and we're trying to optimize it for what serves the consumer the best and is also the most economically viable thing for us.
And do you anticipate if rates drop over the next 12, 18 months, having another tailwind in your business through D2C, or how do you see that manifest?
I mean, you could see D2C scale 10x like it did from 2019 to 2021 if rates go down, back down into the five and change or four and change territory. The D2C business was making $50 million a month in profit this time five years ago in 2021. and so and you know my market cap today is 500 million so like literally you know it's the business today trades at less than one times peak earnings so you know we hold on to DTC we use it as a lab we continue to improve the value proposition we continue to use it to show our clients on the platform side what is possible with AI and you know hopefully if rates do come down DTC can absorb all the volume that the rest of the industry can't take I know
Can you also quickly touch on D2C in UK? What is the latest status of and how you're thinking about international D2C?
Yeah, so, I mean, about five years ago when we raised about $2 billion from SoftBank, the mandate was to go take over the world. And so we said, let's start in the UK. So we entered into the UK business and we have extricated ourselves out of the UK business. three out of the four UK businesses have have been extricated out of and the last one is one that made sense when we were going to have a pure D2C strategy but now with the evolution of our strategy to a platform strategy is one that isn't necessary and so we believe that there's going to be substantial capital release from our UK businesses over the course of the next six to
nine months. I see so essentially you're trying to exit from UK that will that will lower your
capital intensity that's right i think we should you know expect to get north of 50 million in
capital release over the course of the next six to nine months okay okay i do want to switch gears and talk about a more broader industry uh question from investors that we get about the impact of ai agents on company x like that that that's been the most common uh investor question and concern over the last four months, a lot of companies have been hurt by the conclusion that investors are reaching that probably AI agents are going to disintermediate a workflow that you're building or have built. How would that, if that reality comes true, that AI agents start getting mortgages for me and refinancing automatically, how does that impact Better.com or how should we think about that?
I think if AI agents start getting mortgages for American consumers, then Better will become easily the largest mortgage company in America. The reason is that the AI agent does not care about brand, which is the core function that most of the other mortgage companies rely on that are direct-to-consumer, or relationship, which is the core utility function that a local mortgage broker or retail lender provides to the local realtor. The AI agents index on price, utility, speed, and the ability to interact with the AI agent, with an MCP server to complete the full transaction. And so in that context, Better is the only company in the entire US mortgage industry out of 6,000 companies that has an MCP server that enables every aspect of the entire mortgage transaction or home equity transaction to be transacted by an AI agent. And so we look forward to an AI-agentic world.
Okay, and I guess a couple forward-looking questions. In the next 12 months, as a CEO of the company, you have built partnerships, you have built product. Now there are tailwinds, secular and cyclical tailwinds behind your back. What are the top three new chunky things that you are focused on as the CEO at Better.com?
I think the number one thing is doubling volume in the course of the next couple of months ahead and then doubling it again to $2 billion a month. The second thing is driving to profitability on an adjusted EBITDA basis before the end of Q326 and then continuing to grow the profitability of the business as we continue to improve the margins. We've taken margin on the direct-to-consumer business from zero contribution margin this time last year to about $2,000 alone, so about a 28% net contribution margin rate. We hope to continue to expand that. and then on the partnership business we hope to continue to grow those partnerships and over time over the course of the next year two years three years be the default platform of choice for any fintech any mortgage broker any large financial institution and all major banks to enter the
mortgage business okay um and how how are all the large banks large institutions uh there has there's always been like a love-hate relationship between technology and finance so having scaled up fintech companies at some point start to have somewhat of a regulatory or political or some other governors around what they can achieve. So you have built a very large business in the past and now you're trying to rebuild it through collaborative work. So is there a risk at some point where larger financial institutions will insource some of the things that you're doing?
Not likely, because the one benefit that AI does is that with every transaction that the agent learns more, it gets trained further. And so we have 110 billion of transactions that we've done over the past 10 years, where we have a moat of learning data on one clean platform that no one else in the industry does. As we layer on more and more partners, we now understand consumers of a variety of broad circumstances, credit, income, attributes, and so our learning data becomes richer and richer. And so ultimately, the moat expands. What is interesting about mortgage is it's actually not a credit-centric product because 95% of mortgages are guaranteed by the Fannie, Freddie, FHA, VA. And so in that way, we behave much more like a MasterCard or Visa. So we end up becoming the processing, underwriting, and delivery mechanism for delivering mortgages onto bank balance sheets, into investor balance sheets, and for their customers. And so we believe that that, you know, is something that most banks will choose to outsource to us rather than to try to build those functions in-house.
Okay, fair enough. I know in the past we have talked about how a certain point in drop in mortgage rates leads to a certain increase in loan volume. Is there some rule of thumb that you still follow? What if rates go from 6% to 5%? What would that theoretically imply for your loan volume?
Yeah, so if rates go down from 6% to 5%, you'll see another 10 million American families come in the money for a refi. Ten million American families coming into the money for refi and our market share in refi at two and a half percent at best means something in the order of 250,000 mortgages originated by us. 250,000 mortgages originated by us at a $400,000 average balance is $100 billion of origination. So we need more American families to come in the money, you know, on a mortgage, and we think that that will drive a significant scale for us.
Wow, that's a big number. I was thinking more like tens of billions of dollars, but $100 billion of incremental loan volume if we get to a point that rates go lower. A generic question for you, what are the risks here? There seems like a lot of things are going to go in your favor based on what we have heard from you so far. What are the risks? What pushback do you think people will have?
I think the deregulation agenda that the president and the administration has pursued has been really great for bringing banks back into the mortgage market. And so, you know, changes in leadership and regulation, which are probably, you know, again, two years, three years away, can have an impact on the scale that banks will enter the mortgage market. I think, you know, we are likely heading into a recession, and so that's going to have an impact on people buying houses. And so that, you know, that demand may be muted, and our partners in the mortgage brokerage or retail lending business may have their businesses not grow nearly as fast because of that demand is muted. However, if we do go into a recession and rates come down significantly, our refinance business and our home equity line of credit business will increase dramatically. I think those are the two things that I worry about the most. And the third is just continuing to stay on the edge of improving the AI and building on what we've already built.
Okay, fantastic. You've been a great sport, answering all the questions very candidly and in a very rapid-fire manner. Kudos to you. We covered a lot of ground here. In the last 30 seconds, since you've been such a good sport, let's play a quick game. All right, let's do it. The first thing that comes to your mind without blinking your eyes, think of this like a word association you would play with a nine-year-old. Open AI as a partner.
Global domination. That's a good one.
We are in an AI bubble. Yes, no, maybe. We're just getting started. AI agents will take over all of software and all of digital. Yes, no, maybe.
Likely.
harsh. Better.com. Lots of promise. Roth Capital Partners. Amazing. Thank you. On that note, thank you so much, Michelle. Thank you so much.