Figure Technology Solutions, Inc. Q1 FY2026 Earnings Call

Welcome to the Figure Technology Solutions First Quarter 2026 Earnings Conference Call. The call is being recorded. I will now turn the call over to Bryan Michaleski, Head of Investor Relations. Please go ahead.

Good morning. Welcome to Figure's First Quarter 2026 Earnings Call. My name is Bryan Michaleski, Head of Investor Relations here at Figure. Joining me on today's call are Michael Cagney, Executive Chairman and Co-Founder at Figure; Michael Tannenbaum, our Chief Executive Officer; and Minchung Kgil, our Chief Financial Officer. Before we begin today, I'd like to briefly note that in today's call we will refer to certain non-GAAP measures. These measures have been reconciled to their GAAP equivalents in the earnings release we issued today or yesterday as well as in the appendix to our supplemental slide presentation posted to our website. As a reminder, non-GAAP measures are not intended to be a substitute for GAAP results. I'd also highlight that certain comments made today may be considered forward-looking statements under federal securities law. The company cautions you that forward-looking statements involve substantial risks and uncertainties and a number of factors, many of which are beyond the company's control, can cause actual results, events or circumstances to differ materially from those described in the statements. For more information, please refer to the risk factors we've identified in our most recent 10-K and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. And with that, I'll turn the call over to Michael Cagney. Michael, please go ahead.

Thanks. I want to thank everyone for taking the time to join us on the call today. We've got a lot to cover and a very strong quarter. Before we kick off, I know there were some questions about my absence from the earnings call last quarter, so I wanted to set expectations. In my role as Executive Chairman, I am focused on the long-term strategy of Figure. I'll join these calls when we're spending time on that topic, like today. You should expect to hear from me about every other call, but that will vary based on what's happening with the business. I understand that for an investor looking at Figure for the first time, there's a lot to take in and it often leads investors to assume Figure is a HELOC company, but Figure is not a HELOC company. Figure is a company building a capital markets ecosystem native to blockchain — this is a total overhaul of the existing market. To kick off this call, I'd like to lay out the ecosystem we're building, how we plan to scale it and why it matters. Figure's ecosystem has three verticals: debt and structured finance; equity and non-debt digital assets; and capital and financing markets. YLDS acts as the currency that ties these verticals together. With debt and structured finance, our first launch into that vertical was through our own retail HELOC production back in 2018. We quickly evolved that into a B2B business. Today, the vast majority of our mortgage production on the platform comes from our 380-plus third-party partners. Further, over half of that production trades on Connect, our whole loan marketplace. With Connect, we pioneered what we believe to be the only liquid private credit capital markets that are quasi-private. The capital market, not the originating technologies, is the moat in this business and our primary revenue driver for loans in our ecosystem. Last year, we began to bring our digital assets over to DeFi for financing and introduced the problems that remain to all real-world assets on blockchain. DeFi's asset-based lending assumes that the collateral backing the loan is liquid. What is the collateral for a whole loan given an LTV breach? How does a lender take a fractional position in the whole loan? And even if they could, where would they sell it? This is where our platform Forge comes in. We built Forge to transform whole loans into small single-dollar liquid participation units. Loans get pledged or sold into a bankruptcy-remote container; that container issues participation units against the loans. These units have a natural market. When units get expensive, entities will buy loans on Connect, pledge them into the container and then sell participation units in the market. When they get cheap, others will buy them, swap in the loans and securitize them. This two-way arbitrage supports the liquid marketplace. With liquidity, the units work as collateral in DeFi. Lenders can see market liquidity, volatility and advance rates to decide whether to participate, as they would with Bitcoin or other crypto assets. Forge acts as a critical intermediary between on-chain loans and DeFi. We were excited to announce that Agora in Q1 is the first Forge third-party partner and we are building a pipeline of many other issuers across consumer mortgage receivables, SMB and other loan categories, with the goal of bringing these issuers onto blockchain and into Connect via Forge to DeFi. Michael will talk more about the economic model for this and the other two verticals. But essentially, we make money running the marketplace, which is Connect; the bridge to DeFi, which is Forge and DART; DeFi itself, which today is Democratized Prime; and the arbitrage from participating in the token market. For equity and non-debt digital assets, in Q1 Figure launched the on-chain public equity network, or OPEN. With OPEN, we are capturing the blockchain value proposition — transactional efficiency, liquidity and DeFi through public equities native on-chain. On OPEN, stock is registered on the blockchain, not at a centralized depository. Stocks trade on our ATS, which functions like a decentralized exchange with self-custody and self-clearing. The ATS supports direct wallet connect, eliminating the need for introducing brokers. Through self-custody, stockholders can access DeFi for lend and borrow. OPEN delivers important value to companies and investors. First, companies can do proxy and other outreach and distributions directly to wallet holders, eliminating the cost of these services from traditional intermediaries. The combination of 24/7 trading and Wallet Connect opens up access to trading to a global investor base, and a most important value proposition lies in DeFi. With OPEN, shareholders can put their stock up as collateral to borrow in DeFi markets at potentially better advance rates and interest rates and can cross-collateralize, combining stock with Bitcoin, for example, to borrow against both. Most importantly, shareholders control stock loan rather than a prime broker sitting between a stock lender and borrower in an opaque market. The shareholder can lend or borrow directly on a limit order book. This redirects the money that primes make today to the shareholder. It also creates an interesting mitigant to high short interest when the underlying stock is on special. With the shareholder receiving the full stock loan benefit, the company creates a countervailing force for a heavily shorted stock via high coupons from stock loan. OPEN is unique in that the stock is native on-chain, not a DTC copy or an SPV interest. Shareholders have full rights in the stock and can trade in the limit order book. Competing efforts suffer from limited access, for example when copies are only available to U.S. investors; limited liquidity; and regulatory constraints like Reg NMS and best execution that prevent DTCC copies from trading in a limit order book. So copies of assets generally won't work in DeFi protocols. In addition to OPEN, we also support marketplaces for other non-debt digital assets, including crypto. We're not actively trying to grow these markets today; they provide an important laboratory for testing product and technology ideas. Again, Michael will talk about the unit economics, but with OPEN we earn listing fees and trading fees, and the bulk of the economics come from DeFi. On capital and financing markets, the common thread across the debt and equity verticals and the biggest value from blockchain is DeFi. Last year, Figure stood up a custody bilateral marketplace called Democratized Prime. As the name implies, we're building a competitive venue for financing digital assets on blockchain. Democratized Prime currently supports markets across whole loans, loan participations, crypto and equity. Democratized Prime is native to the Provenance blockchain, our primary layer-1 chain. Last year, the Provenance Foundation launched Hastra, a DeFi protocol that swaps wrapped yields for a prime token. The Hastra protocol unwraps yield, takes yield to Democratized Prime prime and passes on the interest less a fee to the prime token holder. There are liquid markets for the prime token and active DeFi protocols away from the Provenance blockchain that provide leverage called looping for prime token holders, boosting returns from mid-single digits to mid-teens. Hastra has accessed markets from third-party Layer 1 blockchains to Democratized Prime. It launched on Solana in Q4 using Camino for financing and Raydium for liquidity. The Prime Token was the fastest-growing token in Camino's history and is the largest actively deployed real-world asset pool in the DeFi ecosystem across any blockchain. Last week, Hastra announced its launch on the Morpho protocol on Ethereum, opening up an even wider addressable DeFi market on blockchain today. Again, Michael will talk in detail about the economics, but the primary driver here is the spread we earn between lenders and borrowers with some protocol fees from Hastra eventually paid back to Figure. In terms of what we're trying to do to scale these verticals, we're pursuing a set of discrete strategies to build out our blockchain-native capital markets ecosystem. First, we're working on growing the first-lien market via first-lien HELOC on Connect. The first-lien market is upwards of 25 times larger than the second-lien space. We've been pushing an innovative solution of using HELOC in a first-lien position, dramatically lowering originations costs relative to traditional mortgages and are beginning to establish dominance in the sub-$300,000 first-lien loan marketplace. Second, we're focused on bringing USDC and USDT utility yields on-chain. While yields appear transferable as the security, they still require a transfer agent and then the name and address of each holder. We're advocating both to the SEC and via clarity to satisfy transfer agent requirements with wallet address. This would bring identical utility to yields afforded to any stablecoin, but with the added feature that yields pay interest. We see this as a significant unlock for applications from DeFi to payments. Third, we're working to build a proof point of the borrower benefit to shareholders on OPEN. We've been working with some of our largest shareholders to migrate their stock positions from NASDAQ to OPEN. We believe this will cause a tipping point where borrow for shorts must happen on-chain. Once we've established this proof point, we'll make a concerted go-to-market push for more listings. Fourth, we're bringing third-party borrow onto Democratized Prime. To scale significantly, we need to make bolder bets in terms of the types of companies we partner with and the structures we use. The team has added 380 partners in our tokenized mortgage marketplace, but we are exploring ways to add additional assets and change the capital markets. In fact, we'll talk about adding SMB as part of Michael's comments. Fifth, to accommodate the expected increase in volume, we're working to bring traditional finance capital onto Democratized Prime. The DeFi ecosystem is still nascent in size relative to TradFi wholesale capital markets. To get DeFi scale, we need TradFi dollars from retail investors and institutional asset managers to begin to use protocols like Democratized Prime to earn yield. We're working with multiple partners on this, including ensuring security perfection on collateral and helping third parties launch dedicated DeFi yield funds where they have guaranteed access to certain Democratized Prime pools. Finally, we're beginning to allocate resources into existential problems for blockchain: a wallet-centric experience. Firms like Coinbase and Robinhood are building super apps — one-stop shops where the firm controls customer data, custody, transactions and experience. Blockchain affords a different user-centric approach, notably with self-custody wallets and distributed applications where users control their data, pick their own transaction venues and maintain a consistent user experience. Blockchain is a very small pond today. The only way to make it a lake is to deliver an experience that both retail and institutional TradFi customers can embrace. You'll hear more from us on this topic over the coming months. Our blockchain ecosystem is a multiyear endeavor with massive upside. I know public companies look quarter-to-quarter, but we want to set expectations on timing. It took us several years to drive mainstream adoption in HELOC and it wasn't an easy path. We expect the same as we build into additional credit, equity and yields, but believe the payoff is worth the effort. To help explain the upside and to provide a recap of the quarter, I'm handing it off to Michael.

Thanks, Michael. I'll kick it off by covering our strong performance this quarter. Q1 2026 continued our impressive financial performance with again over 110% consumer loan marketplace growth and roughly 50% adjusted EBITDA margins, putting us at a Rule of 140 versus an industry benchmark of 40. Revenue was up 92% and adjusted EBITDA margin was 50% as we continue to see the benefits of our capital-light marketplace, Figure Connect in the financials. In fact, Figure Connect grew to 56% of volume, up from 54% last quarter. In terms of volume, we saw growth across all channels, most notably new partners, depository activity, business-purpose loans and partner growth via Figure Connect. I'll walk through each now. We added 80 new partners — the most ever — and launched partners including the seventh-largest lender in the country. Our business-purpose product, highlighted by the SMB channel, continued its very rapid expansion with volume at almost $60 million this quarter. We've also seen a significant acceleration of depository activity within our pipeline, reflecting a clear and growing demand for Figure's own products from this important market segment. Highlighting this is the recent onboarding of Flagstar Bank, a large regional depository and now the largest bank originator on our marketplace to date. This validates our platform's institutional grade and our ability to support complex, large-scale banking operations. We're currently in the final stages of implementation. We believe this momentum will only be amplified by proposed regulatory shifts. Specifically, Fed guidance regarding reduced risk weightings for mortgage assets and home equity loans serves as a substantial tailwind, further incentivizing depositories to leverage our platform and optimize their balance sheets. The business channel progress coincides with growth we are seeing in DSCR and residential transition loans. These two products, often used by real estate investors, represent a roughly $100 billion addressable annual origination market. DSCR loans focus on rental housing and are one of the fastest-growing pockets of residential lending. Residential transition loans are an attractive category for us on Democratized Prime due to their short-term nature. In Q1, we saw 70% growth from both of these products, and we expect this to be a focus going forward. Last quarter, I dubbed 2026 the "year of the first lien." Today, I'm pleased to share first-lien volume now accounts for 20% of our total, up from 19% last quarter. We compete there primarily in small-balance loans where our $1,000 average cost to originate versus an industry average of $11,500 is most differentiated because the cost savings makes the largest difference on smaller loans. The standardization and liquidity that we are bringing to the mortgage industry is showing up in our strong results, our volume growth and our execution in the face of complex geopolitical and macroeconomic environments. In a recent meeting with a major potential partner, an executive shared that their company sees two existential threats. The first I expected: AI disrupting the value chain such that their company's cost advantage erodes. But the second was that Figure becomes the default capital market and that they're late to partner with us. That company is one we've courted for years and the posture shift was notable. Minchung will cover take rate in more detail, but we achieved a 3.8% take rate this quarter, in line with the guidance we provided. A reminder that our economic levers for Figure Connect and the consumer loan marketplace more broadly are take rate by volume. On this quarter's take rate, we see this result as impressive, especially in light of the volatility and interest rate expectations experienced throughout the quarter. While our take rate is lower on first-lien volume, the total revenue contribution margin and EBITDA we earn on each first-lien loan is higher as balances are significantly larger. For example, we'd rather earn a 2% take rate on a $300,000 first-lien loan — $6,000 — than a 4% take rate on a $60,000 second-lien loan — $2,400 — as the cost to originate is the same. Any decrease in take rate is not a reflection on our competitive differentiation or demand for our platform. Having just recently crossed the $1 billion monthly marketplace origination mark, we see a clear path to $2 billion. On the acquisition side, we benefit from what we refer to as whales, which can do $50 million-plus per month at scale. We've been adding at least one of these per quarter consistently. One of the whales we added in late Q3 did over $150 million this quarter. While smaller partners contribute less, we have also been adding conservatively around 50 per quarter, and with the wide-open TAMs in SMB and depositories, we see lots of opportunity. Then we have growth from existing partners, which continues to exceed expectations. This is fueled by improvements we make to the product as well as the incentives that drive volume on Figure Connect. Think of Figure Connect as the pipeline for these whales; it's the specialized infrastructure that allows them to scale through the capital market and efficiently ingest vast amounts of volume. Just as brain filters everything a whale takes in, Connect standardizes and filters their originations into AAA-quality assets for our capital markets. Three examples: one, product improvements we made in Q3, such as expanding underwriting automation to business bank accounts, now account for almost 10% of our monthly volume. Two, for partners on Connect, on average we see over two times monthly volume on a same-partner basis six months after launching on Connect. And three, in Q1 we saw a fivefold monthly volume increase for Mutual of Omaha, a Fortune 300 financial institution, after upselling to Connect. Ultimately, we see a very clear path forward to continuing to double the business from here. Turning to the blockchain ecosystem, we continue to see rapid growth with YLDS and Democratized Prime balances both growing roughly 80% quarter-over-quarter. With YLDS, Democratized Prime participants are staking yield via the Hastra protocol as a way to earn yield. Growth also came via a meaningful milestone with an OCC-chartered bank holding yield on its balance sheet for treasury purposes. Lastly, we are working with a large regional bank on a sweep arrangement that we expect to drive significant balances. The economic model of YLDS is a captured spread over SOFR, which is roughly 35 basis points multiplied by the YLDS balance outstanding. Democratized Prime saw the launch of Acura auto assets with $24 million borrowed as of the end of last month. Third-party borrowers are the immediate focus of Democratized Prime and this quarter we have already added three more, including a DSCR originator and Credibly, a fintech lender for small and medium-sized businesses. Credibly highlights the traction we've made in the SMB space as well as the opportunity to build new tokenized capital markets rails. In 2026, we planned to add a total of eight to ten third-party originators, and we are on our way to exceeding that goal. Adding third-party borrower volume on Democratized Prime is important because, one, it's currently the bottleneck to growth; and two, because our revenue model earns economics from the borrower. Fifty basis points has been the baseline, but with the value of Forge, as Mike mentioned earlier, we see upside to that number. On the lend side of the marketplace, the YLDS prime token is now the number one by TVL on the Camino marketplace, and we recently announced an extension into Ethereum. Even though third-party borrow is the current limiter on growth in the marketplace, we maintain robust efforts to diversify our lender mix as well. I mentioned this because, to echo Mike earlier, Figure has ambitions for Democratized Prime to be much larger, and we are seeking to bring entire asset classes on-chain. While the take rate on Democratized Prime is lower than our consumer loan marketplace, the TAM is much larger and the inbound interest we have from borrowers joining the platform is significant. We see a medium-term world where Democratized Prime balances are measured in the tens to hundreds of billions. In terms of OPEN, our on-chain public equity network, we maintain a robust pipeline of issuers with OpenWorld being the second issuer to publicly file a registration statement with the SEC with the intent to use OPEN. Mike outlined a lot of the why with OPEN, but from an economic perspective, we see a number of fee opportunities here. Listing fees and trading fees are endemic to the equity capital markets; the broader prime brokerage activity with the same monetization model we see for debt and Democratized Prime is the largest opportunity by total addressable market. Before turning it over to Minchung for financials, I want to quickly cover private credit and end on AI. In terms of capital markets, our platform was resilient despite industry concerns around retail investor-driven redemptions from private credit funds. In March 2026 alone, when private credit concerns were heightened, over $1.15 billion of whole loan sales were executed on our marketplace. In April 2026, a BWIC bid wanted-in-competition loan auction was completed on Figure's platform that resulted in a record-low spread to the applicable risk-free rate, reflecting strong institutional investor demand for our assets. In fact, we're seeing increased interest in Figure assets as investors rotate out of leveraged loans, where there are more concerns, and into the high-quality, diversified consumer assets on our marketplace. As a reminder, the credit performance of loans in our marketplace reflects a borrower base with strong fundamentals. Turning to AI and building off our discussion from last quarter, we believe rapid AI adoption represents a massive tailwind for blockchain-native companies like Figure, and I'll continue to detail our efforts here regularly. Capital markets are undergoing a simultaneous shift from blockchain and AI and Figure is building the system that connects them. We say AI is the brain, blockchain is the nervous system. Our custom AI platform operates on a structured, time-stamped on-chain financial data set that is directly tied to actual transactions, trained on real outcomes and helps with execution within our marketplace. This is a key point of differentiation and I can't emphasize it enough. Many organizations today are building AI-enabled features or experimenting with agents, but moving capital markets requires an underlying system that is optimized for reliability, control and compliance. As I repeatedly say, you can't AI your way into AAA. To lead this next phase of execution, we recently welcomed back Rod Albuyeh as our Head of AI. Under his leadership, we're developing agentic workflow systems on top of our platform that handle tasks like data onboarding, document validation, underwriting checks and exception handling. Everything we do systematically reduces friction in areas where automation complemented by human oversight delivers the most value. Three specific examples: one, our use of AI in building product; two, our use of AI in customer support; and three, our use of AI in adapting Agora's third-party auto assets to Democratized Prime. In the last year, we've seen a 25% increase year-over-year in story completion, which is essentially engineering projects delivered on flat headcount. In chat containment, we've seen a 70% improvement and are now implementing voice AI. Most significantly, with Agora and now other third-party Democratized Prime assets, we introduced an AI-enabled validation workflow that compares third-party assets against the underwriting criteria those assets were intended to satisfy at origin. The initial results have been encouraging and are helping us build a more scalable workflow and control framework for honoring third-party assets. And now I'll turn it over to Minchung for financials.

Thank you, Michael, and good morning, everyone. As Michael highlighted, the first quarter of 2026 was a period of both significant growth and strategic diversification of our partner network and product offerings for Figure. We are operating at a Rule of 140, a best-in-class standard we've achieved through 92% year-over-year adjusted net revenue growth, combined with an adjusted EBITDA margin of 50%. To put that in perspective, we are performing at more than triple the traditional Rule of 40 industry benchmark. Our consumer loan marketplace volume grew over 110% year-over-year. This brings our Q1 2026 volume to approximately $2.9 billion compared to $1.4 billion in Q1 of 2025. As momentum accelerated coming out of the winter months this quarter, in March, for the first time as a company, we crossed above $1 billion of CLM volume at $1.2 billion. To highlight the scale, March volume alone represented 85% of all of Q1 2025. This momentum has continued into Q2 with our published April volumes continuing to accelerate both sequentially and year-over-year. Our volume on Figure Connect accounted for 56% of overall Q1 volume, suggesting enhanced capital efficiency given the balance-sheet-light dynamic of Figure Connect. Democratized Prime ended the quarter with matched offer balances of $368 million while YLDS ended at $598 million, reflecting continued adoption following the Prime token expansion onto Solana and our broader real-world assets consortium initiatives, which added distribution for these products. Our adjusted net revenue for Q1 2026 was $167 million, an increase of 92% over the prior-year quarter. Adjusted net revenue benefited from higher consumer loan marketplace volume alongside servicing and interest income, which are asset-balance-based revenue lines. Adjusted net revenue directly correlated to consumer loan marketplace volume grew 109% year-over-year while servicing and interest income combined grew by 42%. Our net take rate for the quarter was 3.8%, which is in line with our previous guidance between 3.5% to 4%. We continue to see more first-lien volume, which reached 20% of our total volume this quarter, up from 14% in Q1 of 2025. As we've mentioned, there are a number of inputs to take rate, which is why we do not really view it as the core North Star metric for the business. Mix shift is one factor, and over time you should expect some of our key growth areas, including first-lien and more Figure Connect impact, to push towards lower take rates than junior-lien volume. That said, these businesses are attractive because they are less capital intensive, operate in much larger markets and generate strong contribution margins and profitability for the company. When we evaluate performance, we are much more focused on contribution profit, EBITDA and the absolute dollar economics of the business than just take rate. In this quarter specifically, some of the inputs to take rate were net positive based on normal market variability, including interest rate-related dynamics in some of the higher take-rate portions of the business. More broadly, as we continue leaning into larger opportunities like first-lien — which is roughly 25 times the size of the junior-lien market — we believe that is the right trade-off for long-term growth and profitability. To touch on loan sale execution on Interconnect, it has held quite steady in Q1 2026 and into April 2026 despite the macro and geopolitical environment. Since the beginning of the year, we have priced five securitizations with an aggregate notional value of nearly $1.9 billion and are continuing to see our pools priced competitively in new-issue markets, reflecting a strong market consensus on the quality and resilience of the underlying credit on our marketplace. One further point to add in this revenue discussion section is that we are strategically retaining a portion of our loans, reflected by approximately $350 million on our balance sheet at quarter end — longer than we normally do — which was a deliberate decision to support the buildout of our Democratized Prime DeFi marketplace, as I had indicated during the Q4 earnings call. During our IPO roadshow and recent earnings calls, we have highlighted the importance of using our own inventory to build this marketplace. Lenders on blockchain are showing significant appetite as we see continued interest and growth in lender supply coming into Democratized Prime and Figure-originated loans are supporting the supply to match offers. This translated to higher interest expense of approximately $2 million quarter-over-quarter. Our adjusted EBITDA margin was impacted as a result by approximately 1.4% with a larger revenue denominator for lower-margin interest revenue. As more lenders and asset classes come online into Democratized Prime over the next quarters, as Michael announced today, we expect this interest income, expense and loan balance trend to diminish. As Mike Cagney noted in his remarks and as we have noted a number of times in past remarks, building out marketplaces requires upfront investments. With that, the scale comes quickly and handsomely as with Democratized Prime, where we are already seeing scale benefits into prevailing lending rates which will favorably affect margins going forward. I will cover this further in the balance sheet and liquidity section. Moving to profitability and adjusted EBITDA: our GAAP net income for this quarter was $45 million including a tax benefit of $7 million. Following the post-IPO lockup expiration, we saw a one-time tax benefit from option exercises. While equity activity can continue to create periodic tax benefits, we view the magnitude of the Q1 benefit as elevated and not indicative of the full year expected tax rate. Assuming no additional material tax benefits from option exercises, we currently expect the full-year effective tax rate to be closer to the 20% range. Adjusted EBITDA was $83 million, up approximately 190% year-over-year, and adjusted EBITDA margin was 50% compared to 33% in the prior year period. In addition to the interest income and interest expense impact to our margin that I discussed earlier, from a variable-cost-efficiency perspective, we are making further investments to utilize AI and automate our operations. Our technology platform has proved to be extensible. Even as we have been adding a number of enhancements to mortgage products, such as support for new income types and property ownership models, there has not been a material increase in these costs. Operations and processing income declined 20% from 93 basis points to 74 basis points as a percent of volume as our CLM volume more than doubled from Q1 2025 to Q1 2026. This is the power of our AI-driven efficiency roadmap. Near term, we expect operations and processing costs to remain relatively flat as a percent of volume as we continue these initiatives with AI-driven improvements expected to impact further in the second half of 2026. Moving to our balance sheet and liquidity: we ended the quarter with approximately $1.5 billion in cash and cash equivalents. Loans held for sale were approximately $500 million at quarter end, an increase of $100 million since year-end and on par with a year ago. Our loans held for sale balance typically reflects the periodic timing of loan sale and securitization programs as we generally only hold these for a few weeks. As I mentioned earlier, as we scale Democratized Prime and utilize Figure loans for collateral to meet lender supply, we extended the time we hold certain loans on our balance sheet for this quarter. Available lender supply was 0.9x borrower demand at the end of the year. This is now 1.2x at the end of this quarter. As more third-party borrower demand comes onto the platform — such as Agora data as well as Credibly, which we announced in May — we expect these balances to normalize back to historical trends. In addition, as more lender supply comes in from new networks, we expect to add more lender supply and also bring down cost to borrowers on the Democratized Prime marketplace. I wanted to provide some color on changes to adjusted net revenue. As YLDS in circulation continues to grow, we are updating our definition of adjusted net revenue to deduct YLDS-related interest expense. Bondholders of YLDS earn yield, which today is roughly minus 35 basis points. This better reflects the true spread take rate on YLDS as part of adjusted net revenue. In addition, as our CLM volume continues to grow, we are holding more marketable securities on our balance sheet as a regulatory requirement to hold at least 5% of Figure-sponsored securitization. We are adjusting net revenue and adjusted EBITDA for unrealized P&L volatility from these securities. Note that securitizations issued by our guarantor do not have a risk-retention requirement. Finally, starting this quarter, we are introducing quarterly guidance for our consumer loan marketplace volume. Looking ahead, we are establishing our Q2 2026 CLM volume guidance in the range of $3.8 billion to $4.1 billion. This marks the first quarter in which we are providing formal volume guidance. We believe this is the appropriate inflection point to do so as the increased data transparency from our blockchain integration, combined with more predictable scaling patterns, provides us with requisite visibility to forecast with a high degree of confidence. Our outlook is supported by a robust start to the year. Following a strong Q1, April delivered another record-breaking volume month. That momentum has carried into May where we continue to see strong activity levels ahead of normal holiday-related trends later in the quarter. As Michael noted earlier, our strategy remains focused on onboarding high-volume whale partners. In our guidance, we have been intentionally conservative regarding the ramp-up of larger accounts onboarded in Q4 and Q1, using a three- to six-month timeline. While we have seen partners integrate faster, we believe it is prudent to provide a range that accommodates a more measured ramp-up. This approach ensures our guidance remains grounded as we continue to scale these enterprise-level relationships. Thank you, and we will now open up the queue for questions.

We will now take our first question. Our first question is from Dan Dolev with Mizuho.

Guys, excellent results out there, very, very strong. I just had a question about DSCR. It looks really promising. Can you talk about the market opportunity compared to traditional HELOCs and how we should think about it into the future?

Thanks, Dan. We talked both about residential transition loans and DSCR, which is debt-service-coverage-ratio. Both of those are targeted toward traditional investment-oriented borrowers, people using a loan for business purposes, often renovation or fix-and-flip. You are seeing product traction there in markets that have historically been pretty manual, fragmented and operationally intensive. These capital markets have also been really slow with legacy processes and loan-by-loan sales, and so we think this creates an opportunity for modernization. These greenfield opportunities come in that broader business market that I was mentioning, which we see as another avenue to attack that $35 trillion of home equity outstanding. For residential transition loans in particular, we see that as a really nice fit with Democratized Prime because the loans are relatively high-rate, they're collateralized by a home, but they're also short-term. So it's almost a perfect set there.

Our next question is from James Yaro with Goldman Sachs.

Michael, I wanted to touch on your comments on potentially lower bank risk weights for mortgages. I would have thought those could make banks more incentivized to hold assets on balance sheet, but you talked about how you expect this to support volumes. I just want to get a little bit more from you: how do you think that could drive even more activity on Figure?

There's two ways: origination and the capital market. From an origination perspective, if banks are looking to have the flexibility and reenter the mortgage space — as you likely know, it's generally a nonbank market today — then Figure is the easiest way for them to get up and running. It also provides the most flexibility from a capital-markets perspective because they can make and hold some portion and they can also hold just for CRA-eligible positions, for example. We've seen a lot of interest from banks and depositories in doing so. More broadly, in the event that bank balance sheets actually become a strong long-term opportunity for holding mortgages, which today is not the case, many banks participate in Fannie Mae securitizations even though they have the balance sheet, but if that were to change, then we think Figure Connect would be the ultimate rails and pipeline to help those banks aggregate mortgages because they're not going to overnight become large originators of this asset class.

That's super clear. Can I just ask one follow-up here? I'd love to get your sense or your aspirations in the first-lien purchase mortgage market. Is this a goal for you to add to the platform? What do you think you need to build before you could start to tap that very sizable TAM?

It's a medium-term goal for sure. We think it's a large addressable market. We have great relationships across partners and we think as we look to ultimately take the entire capital market on-chain, purchase mortgage will be part of that. We have been contemplating this with some of our larger partners, some of the whales we've mentioned, who have actually come inbound and asked for that. We're currently developing that in connection with some of those partners.

Our next question is from Patrick Moley with Piper Sandler.

This is Will on for Patrick Moley. Earlier in the call, you mentioned upselling Mutual of Omaha to Figure Connect. Can you talk a little bit more about the upsell process to Connect, any sticking points, if any, and the pace at which you expect non-Connect volume to switch to Connect over time?

Thanks for the question. The process generally is a volume-based one. The incentives are naturally aligned. As a reminder, when partners move to Connect, they ultimately earn more of the economics and Figure becomes increasingly balance-sheet-light and earns a higher EBITDA margin as a result. Generally, around $5 million to $10 million of monthly volume is when conversations start regarding Figure Connect. We've made it as easy as possible by building a large ecosystem of products, including Democratized Prime, which is a way that people can finance assets as they aggregate to then ultimately securitize. Everything that we do — Figure Forge, as Mike was mentioning, and all this tooling in the broader ecosystem — ultimately greases the wheels of Figure Connect and that's why you're seeing 56% of volume and why folks like Mutual of Omaha are both moving to Connect and increasing their volume significantly when they do so.

Our next question is from Ryan Tomasello with ABW.

Nice to see the addition of Flagstar. I know you've already given some prepared remarks on it, but I wanted to double-click on the traction you're seeing with traditional depositories, particularly Flagstar. What drove that win? And how did that sales motion differ versus your traditional IMB and fintech partners beyond some of these regulatory dynamics? Michael, what's driving the unlock of those conversations?

The drive toward depositories is personal for me; I was an investment banker covering regional banks right out of school. I've been really focused on the space since I joined Figure. Mike has a similar focus on regional banks, so for both of us it's been a big priority. I think the turning point has been the scale of what we're doing. In the past quarter we crossed over $1 billion a month of volume, which is really significant. Being a profitable public company makes banks more likely to work with us. Years in business also matters; banks care about partners who won't cross-sell or damage their brand. Banks are also not as well equipped for the boom-and-bust cycles that the rate environment has recently brought, so many are looking to outsource to a simpler, faster on-chain solution like Figure. We're a natural choice. Flagstar in particular has been a partner for a long time; Mike can elaborate, but we have known them and we've been a deposit customer, and it was only recently we were able to turn that long-standing relationship into an origination one. We think that will be a major catalyst as we seek to expand to the other thousands of banks and credit unions that currently aren't working with Figure.

Yes. To build on that, the ability for us to offer a competitive product in the sub-$300,000 first-lien category is an enormous opportunity. First-lien is a 25-times larger market than the second-lien space. Many of our big partners have proactively asked for first-lien — not just refinance but purchase — which is a testament to how effective the technology and the marketplace are. In particular, the benefit of a marketplace where those loans can flow is powerful.

Our next question is from Rob Wildhack with Autonomous Research.

Just on the volume outlook for the second quarter, you've got about $4 billion at the midpoint, and I think you called out $1.3 billion in April. That suggests May and June on average will be about the same as April. That's a little different from the sequential growth pattern we've seen this year. Is there anything to read into that? My instincts would have been for more sequential growth given seasonally strong spring months and all the new products you've been highlighting.

Sure. As I mentioned in my prepared remarks, when we provide guidance we carefully consider the ramp of our whales that have been coming through for Q4 and Q1; they tend to ramp in a three- to six-month timeline. When we're providing guidance and where we think we'll end up for Q2, we want a balanced approach and have been intentionally conservative on the ramp-up of larger accounts. We could be a little conservative, but we think this is the prudent pace and that's where we think we're going to end up.

Take rate is an output of many inputs. We have mix shift to Figure Connect, mix shift to first-lien, shifts from DTC to B2B, partner-specific annual take-rate tiers as people expand volume, and overall execution on gain-on-sale. All of those items collectively created the 3.8% take rate for the quarter. We view take rate as an output metric. The activities this quarter, considering the puts and takes, ended up at 3.8%, which we view as strong, particularly given the volatility late in the quarter. We reported a range for a reason, because of the variability in inputs, but I will reiterate: focusing on first-lien and product diversification are strengths of the platform in terms of both EBITDA and contribution margin, and that's where we're focused in terms of execution.

Our next question is from Randy Binner with Texas Capital.

The overall volume trend is good for the guide. For HELOC in particular, do you feel that you're gaining share as more banks offer these products? Given announcements from others that got investor reaction, can you give a sense midyear whether you think you're gaining share and where you fit in the overall HELOC competitive market in the U.S.?

Thanks for the question. We don't consider the HELOC market to be the primary frame for what we do. One, much of what we do is greenfield; two, many of our partners don't consider themselves mortgage companies; and three, first-lien activity would historically fall under traditional mortgage. For us, HELOC has been a way to approach the $35 trillion of home equity opportunity and the $2 trillion of annual mortgage origination. Announcements from other firms are welcome as they emphasize the value of the space, but those aren't the main items in our addressable market thinking for Figure.

To add, the sub-$300,000 first-lien category is a loan that wasn't really done before. It's not simply taking share from someone else; many originators weren't addressing that asset class. We're creating a new market. As Anthony mentioned at other firms, partnerships with Figure open up that market for them. So a lot of what we're doing is making bigger pies, not just taking slices from existing pies.

Our next question is from Dan Fannon with Jefferies.

I was hoping you could expand upon your comments on the outlook for new partners. There's a lot of momentum in the numbers this quarter. How does that compare to the beginning of the year? Also, the three- to six-month ramp you highlighted for larger customers — how does that compare to a year ago? Is that ramp shorter as customers become more comfortable with the platform or as you grow in size and scale?

Dan, the future is bright. We see a continued strong pipeline and the momentum hasn't slowed. Implementations are in many cases faster now thanks to tooling, AI and improved onboarding, and being a public company gives more visibility to partners. We don't see longer timelines for partner onboarding nor any reduction in pipeline.

Our next question is from Kyle Peterson with Needham.

Nice results. I wanted to touch on the funding partner mix. It's helpful how you split that out in the slides, but can you give some direction and color, even qualitatively, on what of that is backed by longer-duration institutional capital versus more semi-liquid retail products like BDCs or interval funds? Any color would be great.

We broke that out in terms of types of funds. As I mentioned in the prepared remarks, we have seen somewhat of a rotation into Figure and the consumer loan space given some weakness in other private credit areas. The executions we saw in late March and early April reflect that rotation. From our standpoint, investor demand has been quite robust and diversified across institutional channels.

One follow-up: given the take-rate and mix and what you saw in April, have you seen any change in April that reflects rates spiking back up? How should we think about mix — have you seen any shifts?

Our platform is strong because it's able to create bigger pies regardless of the rate environment. When rates move up, the $35 trillion home equity opportunity is still available and about 20% of loans on our marketplace are used to pay off higher-interest-rate debt like credit cards, student loans and auto loans, so that opportunity actually increases when those rates move up. We're also creating new greenfield markets. Borrowing against your home tends to be the lowest-cost option for many borrowers, which creates a durable opportunity for us. The SMB traction, where partners use home equity to fuel business lending, is a strong example of that dynamic.

To build on that, sub-$300,000 first-lien products don't have the same price elasticity because they simply weren't offered before. The fact that we're unlocking that market means there's less rate sensitivity and more focus on access to credit. While we are somewhat barbelled in that higher rates push toward second-lien and lower rates push toward first-lien, first-lien that is greenfield doesn't have the same rate elasticity you'd expect in traditional mortgage markets.

There are no additional questions at this time. This will conclude today's Figure Technology Solutions First Quarter 2026 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.