Q3 2023 Better Home & Finance Holding Co Earnings Call
[music].
Good morning and welcome to the Better Home and Finance Holding Company third quarter 2020 results conference call. Please note that this call is being recorded. All participants are now in listen-only mode. After the speaker's remarks, there will be a question and answer session.
Good morning, and welcome to the better home and finance holding company third quarter twice.
Perfect.
Please note that this call is being recorded.
Participants are now in listen only mode. After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw your question, press star 1 again.
If you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
So withdraw your question press Star one again.
I'll now turn the call over to Hanna coastline, Vice President of Investor Relations. Please go ahead.
I will now turn the call over to Hannah Kosla, Vice President of Investor Relations. Please go ahead.
Welcome to better home in finance holding company's third quarter 2023 earnings conference call.
Welcome to Better Home and Finance Holding Company's Third Quarter 2023 Earnings Conference.
My name is Hana Khosla and I am the Vice President of Investor Relations at Better. Joining me on today's call are Vishal Garg, Founder and Chief Executive Officer, and Kevin Ryan, President and Chief Financial Officer.
My name is on Iqos and I am the Vice President of Investor Relations at better joining me on today's call are Vishal Guard, founder and Chief Executive Officer, and Kevin Ryan President and Chief Financial Officer.
The presentation for today's call can be found on the Better Investor Relations website.
The presentation for today's call can be found on the butter Investor Relations website.
Certain statements we make today may constitute forward-looking statements that 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.
Any statements we make today may constitute forward looking statements that 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.
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.
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 measures should not be considered replacements for and should be read together with our GAP results. These non- GAAP financial measures are reconciled to GAAP financial measures in today's earnings release and webcast presentations, both of which are available on the Investor Relations section of Better's website and in our quarterly report on Form 10Q files with the SEC. I will now turn the call over to the...
non-GAAP financial measures should not be considered 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 webcast presentation, both of which are available on the Investor Relations section of website.
And in our quarterly report on Form 10-Q filed with the SEC I will now turn the call over to Vishal. Thank you Hannah and welcome to our third quarter earnings call. We appreciate everyone joining us today.
Thank you, Hannah, and welcome to our third quarter earnings call. We appreciate everyone joining us.
Since this is our first quarterly earnings call as a public company and many are new to the better story, we wanted to first spend some time introducing the business.
Our first quarterly earnings call as a public company and many are new to the better story I wanted to first spend some time introducing the business better.
Better was founded as a digitally native mortgage company seeking to fundamentally transform the entire homeownership process by delivering the best experience to customers at the lowest cost.
To respond to the digitally native mortgage company seeking to fundamentally transform the entire homeownership process by delivering the best experience to customers most call.
We currently have approximately 760 hard-working, mission-driven, customer-focused employees across the U.S., India, and the United States.
Currently have approximately 760 hardworking mission driven customer focused employees across the U S, India and the United Kingdom are.
Our mission is to make home ownership better, faster, and cheaper by building a technology platform that revolutionizes the experience of finding financing and selling all.
Our mission is to make homeownership better faster and cheaper by one building a technology platform that revolutionized the experience of finding financing and selling at all.
Since our founding in 2016, we've achieved over 100 billion loan origination volume entirely digital and offer multiple product solutions across the mortgage real estate and insurance verticals.
Since our founding in 2015, we've achieved over $100 billion in loan origination volume entirely digitally and offer multiple product solutions across the mortgage real estate and insurance verticals. The homeownership journey.
The homeownership journey remains mired in legacy efficiencies high transaction costs regulatory complexity legacy multiple middlemen come at the expense of the consumer and slow the pace of digital innovation and adoption.
High transaction costs, regulatory complexity, legacy systems, and multiple middlemen come at the expense of the consumer and slow the pace of digital innovation and adoption.
Relative to almost any other consumer category, the home ownership experience will be slow, costly, and analog. In some, we believe it is unnecessarily broken.
Relative to almost any other consumer categories homeownership experience will be slow costly and analog in sum we believe it is unnecessarily broken.
We see a future in which every customer can seamlessly buy, sell, refinance, and insure their home, digitally online, instant.
We see a future in which every customer can be lifted by refinancing the shorter therefore digitally online instantly.
The home is among the world's largest and oldest tangible asset classes with spend across the global housing market accounted for approximately 13 trillion annually and specifically.
The home is among the world's largest and oldest tangible asset classes would spend across the global housing market accounting for approximately 13 trillion annually and specifically residential mortgage origination in the United States being over two and a half trillion.
So mortgage origination in the United States being over to an accelerated.
Our market is enormous and we are penetrating less than half of a percent of that today, leaving tremendous room for growth.
Our market is enormous and we have penetrated less than half of a percent of that today, leaving tremendous room for growth.
We are seeking to disrupt the antiquated model by leveraging our proprietary technology platform, Tinman, to improve the efficiency and customer experience of the mortgage process. We aim to reduce the cost of the produce alone and create a single one stop shop platform with multiple home ownership products embedded into a highly automated single flow from lead to fund along as to pass along savings from automation to our customers in the form of a lower rate and it improved experience.
We are seeking to disrupt the antiquated model by leveraging our proprietary technology platform tinman to improve the efficiency and customer experience at the mortgage problem.
We aim to reduce the cost of the produce alone and create a single one stop shop platform with multiple homeownership product embedded into a highly automated single quote from lead to fund, allowing us to pass along savings from automation to our customers in the form of a lower rate and an improved experience.
Well, it's well understood that the mortgage macroeconomic environment has recently been challenging we remain focused on what we do best optimizing the customer experience and innovating on our products and technology.
While it's well understood that the mortgage macroeconomic environment has recently been challenging, we've remained focused on what we do best optimizing the customer experience that innovating on our products and technology.
The long-term opportunity remains resilient with clear, secular tailwind towards homeownership. We believe low-cost, customer-friendly, transparent, and digital home ownership products have strong cut consumer burn demand throughout macroeconomics.
The long term opportunity remains resilient with clear secular tailwind towards homeownership, we believe low cost customer friendly transparent digital homeownership products have strong consumer demand throughout macroeconomic cycles no doubt about it just like in most major e-commerce categories consumers prefer a digital experience and are becoming increasingly.
No doubt about it, just like in most major e-commerce categories, consumers prefer a digital experience and are becoming increasingly comfortable completing their mortgages and real estate transactions online.
Fully comfortable completing the mortgage and real estate transactions online.
We're just getting started.
I'd like to discuss our market positioning and share just how unique and differentiated better is in the industry. Allow me to expand on each differentiating factor.
Like to discuss our market positioning and share just how unique and differentiated batteries in the industry allow me to expand on each differentiating factor.
First, we were founded as a digitally native platform and launched our product in 2015 with our proprietary technology at the forefront of our innovation day. 1. We rebuilt the entire end to end loan origination infrastructure from scratch, leveraging digital automation to remove manual tasks and expedite the locking processing, underwriting and closing of a loan.
First we were founded as a digitally native platform and launched our product in 2015 with our proprietary technology at the forefront of our innovation day, while we rebuilt the entire end to end loan origination infrastructure from scratch leveraging digital automation through manual tasks and expedite the locking processing underwriting and closing of alone.
We believe our production costs are significantly lower than the industry average and our fulfillment team productivity in the third quarter of 2023 was approximately three times the industry average with our U S. Fulfillment employees closing an average of nine six loans for a while.
We believe our production costs are significantly lower than the industry average, and our fulfillment team productivity in the third quarter of 2023 was approximately three times the industry average, with our US fulfillment employees closing an average of 9.61 per month.
In turn, this enabled us to offer a lower mortgage rate to our customers and a vastly superior customer experience. For example, we believe that our one day mortgage offering with an average turnaround time since the product launch of eight hours from locking the loan to receiving a commitment letter compares to the 25 to 40 days that we believe is initial.
In turn this enables us to offer a lower mortgage rates to our customers in a vastly superior customer experience. For example, we believe that our one day mortgage offerings with an average turnaround time since the product launch eight hours from walking alone to receiving a commitment letter compares to the 25 to 40 day week that we believe is industry standard.
demonstrate how our platform deficiency has a direct impact on customer
Demonstrating how our platform deficiency has a direct impact on customer experience.
Further, digitizing the process in a single end-to-end system brings us a unique data advantage. For example, we capture over 10,000 data points per loan, all on the same system.
Further digitizing the process in a single end to end system brings up a unique data advantage. For example, we capture over 10000 data points per loan all on the same system to.
The data advantage provides transparency and auditability into the underwriting of each loan file results in lower defects and higher loan costs.
The data advantage provides transparency and audit ability into the underwriting of each loan.
The result of lower defects in iron loan quality.
It's all made possible through our machine-driven workflows in Tinman. Tinman sits at the center of our loan manufacturing process, interacting with customers, loan team members, marketplace participants, and loan participants.
It's all made possible through our machine driven workflows, just 10 minutes 10 minutes at the center of our loan manufacturing process interacting with customers low team members marketplace participants that loan purchases 10 minutes decision engine breakdown each loan file into a series of past many of which can be completed autonomously by the system second we position our platforms.
Kinman's decision engine breaks down each loan file into a series of paths, many of which can be completed autonomously by the system.
Second, we position our platform to scale quickly when we market demand return.
Scale quickly when market demand returns as a reminder, we grew our funded loan volume Tenex from 2019 through 2021, reaching over $100 billion accumulative funded loan volume.
As a reminder, we grew our funded loan volume 10x from 2019 through 2021, reaching over $100 billion of cumulative funded loan volume in under five years. It's the breadth and flexibility of Tin Man across product and customer journey pathways that sets us up to scale by providing a superior end-to-end integrated home ownership experience to customers.
Under five years, it's the breadth and flexibility of tinman across product and customer journey athletes vessels up to scale by providing a superior end to end integrated homeownership experienced customers agnostic to whether they are seeking a purchase refinance cash outs or HELOC loan.
agnostic to whether they are seeking a purchase, refinance, cash out, or HELOC.
Our platform is modular nature and new products and partners can be added quickly using the same core code and systems are.
Our platform is mother nature, and new products and partners can be adequately sustained core coated systems architecture.
As an example, we were able to launch our product in the first quarter of 2023 and have already scale to deal with over 100 HELOC loans per month.
As an example, we were able to launch our product in the first quarter of 2023, and I've already scaled to do over a hundred ones per month in a challenging rate environment. Our product provides a solution for those who want to tap into their own equity without impacting the low rate on their firstly.
In a challenging rate environment, our HELOC product provides a solution for those who want to tap into their own equity without impacting the lower rate on their first lien mortgage.
Third our business model is asset light with the majority of production eligible purchased by government sponsored enterprises, such as Fannie Mae and Freddie Mac. This provides access to liquidity for our loans through market cycles and allows us to boost our balance sheet risk and capital requirement.
Third, our business model is asset-like, with a majority of production eligible for purchase by government-sponsored enterprises such as Fannie Mae and Verizon.
This provides access to liquidity for our loans through Microcycle and allows it to reduce our balance sheet risk in capital.
And finally, we offer multiple services within the home transaction ecosystem on an integrated platform with an ability to cross out real estate insurance services directly within the morning.
And finally, we offer multiple services within the home transaction ecosystem on an integrated platform with an ability to cross sell real estate insurance services directly within the mortgage one week.
We go to market through two channels, direct to consumer and B2B for mortgage as a service, as we call it. Our direct to consumer channel is focused on digital customer acquisition through online channels, including Google Facebook and other performance market channels under the better.
We go to market through two channels direct to consumer and VW or mortgages or service as we call. It.
Our direct to consumer channel this focus on digital customer acquisition through online channels, including Google Facebook and other performance marketing channels under at a better rate.
Through our mortgage as a service partnerships, we partner with leading consumer brands that use <unk> technology to power their businesses either through co branded advertising relationship fully integrated mortgage origination.
To our mortgages and service partnerships, we partner with leading consumer brands and use Tin Man technology to power their businesses, either through co-branded advertising relationships or fully integrated mortgage.
Turning to our strategic plan, we have two principal growth strategies. The first strategy is to drive improved customer conversion. The second strategy is to expand the methods and channels by which we reach customers. Let me begin with our first strategy.
Turning to our strategic plan, we have two principal growth strategy. The first strategy is to drive improved customer conversion. The second strategy is to expand the methods of channels by which we reach customers.
Let me begin with our first strategy of improving customer conversion, we plan to do this through three key pillars. The first pillar is to increase the conversion of customers who begin the mortgage applications were up approximately 18500 per month into closed loans, which trended lessons 700 per month on average and at that point.
We plan to do this through three key pillars. The first pillar is to increase the conversion of customers to begin their mortgage applications with approximately 18,500 per month into close loans, which trended less than 700 per month on average in November .
We are working to do this by enhancing the product and customer experience, increasing the breadth of our efforts, specifically, and other non-performing loan types while still providing highly competitive rates compared to other markets.
We are working to do this by enhancing our product and customer experience, increasing the breadth of our athletes, specifically FHA and other nonperforming loan types.
While still providing highly competitive rates compared to other market offer.
We believe that our conversion rate today is near the bottom of the industry, and therein lies the opportunity for...
We believe that our conversion rate today is near the bottom of the industry and therein lies the opportunity for the <unk>.
The second pillar is to grow our purchase business by partnering with local real estate agents and integrating the Asian experience deeper into the 10 man platform. As trusted advisors to motor home buyers, agents play a critical role in the purchase transaction. While purchase made up 90% of our funded loan volume in the third quarter of 2023, there is a significant opportunity to grow in aggregate to improve purchase distribution
Second pillar is to grow our purchase business by partnering with local real estate agents that integrating the Asian experienced deeper into the tinman platform.
As trusted advisers to multiple buyers agents play a critical role in the purchase transaction, while purchase made up 90% of our funded loan volume in the third quarter of 2023, there is significant opportunity to grow in the aggregate to improve purchase distribution and conversion.
the third pillar is to continue innovating our technology, making the platform even more efficient and scalable. As we continue reducing labor costs through investments and automation, we seek to continue passing a portion of those savings back to our customers in the form of lower rates, thereby driving this inversion cycle. In the third quarter, we continue to invest in building our firm network of realtor pages, which now includes nearly 500 local partner ages that may sizable cost strides in our field.
The third pillar is to continue innovating our technology, making the platform EBIT more efficient and scale as we continue reducing labor, possibly investments in automation, we seek to continue passing a portion of those savings back to our customers in the form of lower rates, thereby driving the conversion, but in the third quarter. We continued to invest in building our network of realtor pages, which now include.
Nearly 500 local partner is just that made sizable strides in our philosophy.
We continue to meet customer demand for faster turnaround time to our one-day mortgage offering, which made up 70% of loans from our direct to super channel and the third quarter. Our second strategy is to.
We continue to meet customer demand for faster turnaround time to our one day mortgage offering which made up 70% of loans from our direct to consumer channel in the third quarter.
Our second strategy is to expand our methods of customer acquisition.
We plan to do this through two key pillars. The first pillar is focused on reaching more customers who improve data-driven marketing. Examples include further optimizing performance marketing, pay-for-click, digital media channels, and content marketing.
We plan to do this through two key pillars. The first pillar is focused on reaching more customers who are good data driven market. Examples include further optimizing performance marketing pay-per-click digital media channels and content market.
We also think about potential investments in our brands something we have done very little of historically and in doing so we would take a prudent approach. The second pillar is to add new <unk> partners and grow our mortgages our service offerings.
We also think about potential investments in our brand, something we have done very little of historically, and in doing so, we would take a highly prudent approach. The second pillar is to add new B2B partners and grow our mortgages and service tolerance. Partnering with existing strong brand names of the financial services space and enabling them to leverage our proprietary technology to originate loans more efficiently helps us reach a wider audience of customers and reduces our customer acquisition costs. Last week, we were excited to announce launch.
Entering with existing strong brand names in the financial services space, enabling them to leverage our proprietary technology, George any loans more efficiently helps us reach a wider audience of customers and reduces our customer acquisition costs last week, we were excited to announce the launch of our partnership with Infosys.
Inputs that serves many of the largest financial services clients across a range of articles, including mortgage, we believe integrating our offering with inputs and client penetration and financial services will enable us to reach mortgage as a service customers far more about.
Of course, it serves many of the largest financial services clients across a range of verticals, including mortgage we believe integrating our offerings with infosys client penetration and financial services will enable us to reach mortgages of service customers far more effective in the third quarter, our <unk> business made up 47% of our funded loan volume made up predominantly of by our relationship with ally.
In the 3rd quarter, our B2B business made up 47% of our funded loan volume, made up predominantly by our relationship with Ally. For how better is the back-end origination infrastructure powering Ally's mortgage origination?
Better is the backend origination infrastructure power allies mortgage origination business.
We hope this provides a helpful overview of where private successfully listed on the NASAC of the public company during the third quarter, which provided us with $565 million of new primary capital to execute on our growth plan and building a household name in homeowner.
We hope this provides a helpful overview.
We are proud to have successfully listed on the NASDAQ as a public company during the third quarter, which provided us with $565 million.
Of new primary capital to execute on our growth plan and building a household name in homeownership.
While the market has been very challenging with continued macro uncertainty ahead, we are starting to see.
While the market has been very challenging with continued macro uncertainty ahead, we're starting to see green shoots we focus on what we can control.
We focus on what we can control. We are well capitalized and well positioned to emerge as a leader wants the market terms. I'm incredibly excited about.
Well capitalized and well positioned to emerge as a leader once the market turns I mean.
Credibly excited about the opportunity there.
Let me now turn it over to Kevin Ryan, Our President and Chief Financial Officer, who will discuss our quarterly performance and our financial strategy.
Let me now turn it over to Kevin Ryan, our President and Chief Financial Officer, who will discuss the quarterly performance and our financial strategy. Kevin. Thank you, Vishal, and thank you again to all of you for joining us. We cannot overstate the importance of closing our two-and-a-half-year-long FACT journey and recapitalizing our company at a time when 30-year mortgage rates were quickly approaching 8%. We believe this capital provides us more than sufficient runway and sets us up to be a long-term leader.
Thank you Vishal and thank you again.
You for joining us we cannot overstate the importance of closing our two and a half year long factor knee and recapitalizing our company at the time of 30 year mortgage rates were quickly approaching 8%. We believe this capital provides us more than sufficient runway and sets us up to be a long term leader in the industry.
During the third quarter of 2023, we had funded loan volume of $731 million, revenue of $16.4 million, and an adjusted EBITDA loss of $54.4 million. Our third quarter volume is 53 percent generated to our direct-to-consumer channel, and 47 percent to our B2B partner channel.
During the third quarter of 2023, we had funded loan volume of $731 million.
Revenue of $16 4 million and an adjusted EBITDA loss of 54 $4 million or third quarter volumes, 53% generated through our direct to consumer channel.
47% or <unk> partner channel.
Volume was 90% purchase, 6% refinance and 4% HELOC by dollar volume.
Volume was 90% purchase, 6% need finance, and 4% he-lock by dollar volume. Our third quarter results reflect disciplined expense management through a very difficult market environment characterized by high rates, historic lack of affordability, and reduced homesickness.
Our third quarter results reflect disciplined expense management to a very difficult market environment characterized by high rates historic lack of affordability and reduced home sales compared to the third quarter of 2022, our funded loan volume declined 36%.
Compared to the third quarter of 2022, our funded loan volume declined 36%.
Our revenue, excluding better cash offer, declined 13 percent, and our total expenses, excluding better cash offer, declined 45 percent, which was a dramatic reduction in expenses relative to our revenue decline period over period. Add to this fact that our third quarter total expenses, net loss, and adjusted EBITDA include several one-time expenses relating to the closing of our dispatch transaction that we do not expect to occur in future periods. Throughout this market cycle we
Our revenue excluding better cash offer declined 13%.
And our total expenses, excluding better cash offer declined 45%, which is a dramatic reduction in expenses relative to our revenue decline period over period.
Add to this fact that our third quarter total expenses net loss and adjusted EBITDA includes several one time expenses related to the closing of our lease back transaction that we do not expect to recur in future periods.
So as this market cycle, we are focused on corporate efficiency, which in turn we believe will help us maximize the runway of the capital received from the public listing and drive operating leverage as we grow with the goal of reaching breakeven sooner.
which in turn we believe will help us to maximize the runway of the capital received from the public listing and drive operating leverage as we grow, with the goal of reaching breakeven sooner. We believe to a combination of our discipline, defense, management and capital rating through the listing that we have enough runway for operations over the next several years and have no plans or current needs to raise any capital.
We believe through a combination of our disciplined expense management and capital raise to the lifting that we have enough runway for operations over the next several years and have no plans or current needs to raise any capital.
We've taken out over $1 billion in annualized cost year over year in the nine months ending September 30.
We have taken out over $1 billion in annualized costs year over year in the nine months ending September 30th versus the first nine months of 2022, and even more than a billion dollars since 2021. We decrease our global footprint from a peak of approximately 10,500 full time employees in the 4th quarter 2021 to 760 as of the end of 3rd quarter 2023.
Versus the first nine months of 2022, and even more than $1 billion since 2021.
We decreased our global footprint from a peak of approximately 10500 full time employees in the fourth quarter of 2021 to 760 as of the end of third quarter of 2023.
Additionally, we dramatically decreased our marketing spend, which intentionally reduced our volume, market share, and revenue to focus only on the most profitable business in this tough market environment. We believe this was the right decision as it allows us to reserve capital and drive long-term shareholder value. We continue to reevaluate the tradeoffs between marketing spending volume as the market evolves, but at this time, we remain most focused on expense regaining.
Additionally, we dramatically decreased our marketing spend which intentionally reduced our volume market share and revenue focus only on the most profitable business in this tough market environment. We believe this was the right decision as it allows us to preserve capital and drive long term shareholder value.
We continue to reevaluate the tradeoffs between marketing spend and volumes as the market evolves, but at this time, we remain most focus on expense reduction that being said, we will not sacrifice our investments in our future. We plan to continue to invest in our proprietary technology tinman to improve the customer experience and further.
That being said, we will not sacrifice our investments in our future. We plan to continue to invest in a proprietary technology Tinman to improve the customer experience and further drive down labor costs through automation, making our platform more efficient and more scalable.
We drive down labor costs through automation, making our platform more efficient and more scalable.
This is our first earnings call as a public company I'd like to expand on how we make money.
Since this is our first earning call as a public company, I'd like to expand on how we make money. We generate revenue to the production and sale of loans and other product offerings to our platforms. We generate, essentially, all of our mortgage platform revenue by selling our loans and related mortgage servicing rights to our loan purchaser network.
We generate revenue to the production and sale of loans other product offerings store platform, we generated substantially all of our mortgage platform revenue by selling more loans and related mortgage servicing rights to a loan purchase or network recognizing revenues for each transaction, we have historically sold substantially all of our loans.
recognizing revenues for each transaction. We have historically sold to Sancti all of our loans in MSR shortly after closing, which reduces our balance sheet risk and makes us capital life. Additionally, in certain B2B relationships, we receive a fixed-speed produced from our partner, and therefore we encourage no marketing expense.
MSR shortly after closing, which reduces our balance sheet risk and maintenance capital light.
Additionally, in certainty to be relationships, we receive a fixed fee per loan produced from our partner and therefore, we incurred no marketing expenses for.
The nine months ended September 30, 2023, 96% of our total loans were eligible for purchase by the GSEs, including Fannie and Freddie Mac, providing us continued access to a deep pool of liquidity for our loans, even during periods of market stress.
For the nine months ended September 32023, 96% of our total loans eligible for purchase by the Gse's, including Fannie and Freddie Mac, providing continued access a deep pool of liquidity for our loans, even during periods of market stress.
Within our gap revenue, we mark the market the value of our loans, help for sale for any changes in the rain environment, which includes both our lock loan pipeline, as well as any funds of loans they hold on our balance.
Within our GAAP revenue, we mark to market the value of our loans held for sale for any changes in the rate environment, which includes both our lock loan pipeline as well as any fund the voluntary hold on our balance sheet.
We had your loans help with sale portfolio with the intention of offsetting rates.
We hedge our loans held for sale portfolio with the intention of offsetting rate movements and thus revenue volatility during the duration of our holding period ahead of the loans being sold to loan purchases.
and that's revenue volatility during the duration of a holding period ahead of the loans being sold to loan persons.
Additionally, from time to time we are required to repurchase loans with defects from our loan purchasers. Sometimes that's a loss that can negatively impact our balance sheet reserve and require a reserve true out, which creates a revenue loss in the P&L. That being said, one of the advantages of Tinman is producing high quality loans and therefore our critical defect rates are below what we believe the industry averaged to be and therefore help us minimize any buyback loss.
Additionally from time to time, we are required to purchase loans defect solar loan purchases.
There's a loss that can negatively impact our balance sheet reserve and require a reserve true up.
<unk> creates a revenue loss in the P&L that being said one of the advantages. The tinman is producing high quality loans and therefore are critical defect rates are below what we believe the industry average to be and therefore help us minimize any buyback losses.
We also generate revenue to a better plus marketplace of non mortgage homeownership products.
We also generate revenue to our better plus marketplace of non-mortgage homeownership products.
Better plus includes real estate agent services title and settlement services and homeowners insurance. Now to test briefly on our.
Plus includes real estate agent services title and settlement services and homeowners insurance.
Now to touch briefly on our balance sheet and capital position.
As mentioned, we closed our DSPAC transaction to finish the third quarter of 2023 with $584 million of cash until term investments. We believe our cash position provides us with liquidity to continue executing against our vision and corporate objectives.
As mentioned, we closed our <unk> transaction. The finished the third quarter of 2023 with $584 million of cash and short term investments. We believe our cash position provides us liquidity to continue executing against our vision corporate objectives, we retained strong relationships with our financing counterparties.
We retain strong relationships with our financing counterparties to manage working capital, even in a low mortgage volume environment. As of September 30th, 2023, we had three warehouse facilities for total capacity of 424 million. The capital raised in the D-STAC transactions primarily in the form of a convertible note with a five-year maturity and extremely attractive 1% annual interest rate that's either cash pay or pick at better options. In addition to the run.
These to manage working capital even in a low mortgage volume environment.
As of September 32023, we have three warehouse facilities for total capacity of $424 million the.
The capital raised in the lease back transactions, primarily in the form of a convertible note with a five year maturity and extremely attractive 1% annual interest rate, that's either cash pay or pick at betters options and.
In addition to the runway of the capital raised.
It also provides us with a way to generate incremental revenue stream from a best in the capital and low risk asset.
It also provides us with a way to generate incremental revenue stream from investing the capital in low risk assets, mainly the silver lining of high interest rates is that we can now generate meaningful returns on these low risk assets as we wait for the market to turn.
Meaning the silver lining of high interest rates is that we can now generate meaningful returns on these low risk assets as we wait for the market to turn. Turning to our outlook for the fourth quarter
Turning to our outlook for the fourth quarter of 2023.
The first two weeks of November have clearly felt better than October given the recent rally in interest rates and improvements at better that being said, we obviously still see continued softness in the housing market record low affordability and historical slowness in the fourth quarter a seasonal period. Therefore, we expect our funded loan volume.
The first two weeks of November have clearly felt better than October , given the recent rally in interest rates and improvements at better.
That being said, we obviously still see continued softness in the housing market, record low affordability, and historical slowness in the fourth quarter, a seasonal period. Therefore, we expect our funded loan volume of approximately $500 million, which we down from the third quarter.
<unk> of approximately $500 million, which.
Which was down from the third quarter.
Accordingly, given the operating environment and the lower volumes, we expect to continue with disciplined cost management.
Accordingly, given the operating environment and the lower volumes, we expect to continue with discipline costs now.
As a result, we expect our total expenses to be down in the fourth quarter versus the third quarter, and therefore our fourth quarter, adjusted EBITDA should improve versus the third quarter. That being said, we continue to expect the adjusted EBITDA loss for the quarter.
As a result, we expect our total expenses to be down in the fourth quarter versus the third quarter and therefore.
First quarter, adjusted EBITDA should improve versus the third quarter that being said, we continue to expect an adjusted EBITDA loss for the quarter.
Thank you for your time and I'll turn it back to the operator for Q and A.
Thank you for your time and I'll now turn it back to the operator for Q&A.
Thank you at this time, we will open the line for your questions.
Thank you. At this time, we will open the line for your questions.
A reminder, if you would like to ask a question, please press star one.
I would like a question please press star one.
Your first question comes from John Blackledge with PD Cowen. Please go ahead.
Your first question comes from John Blackledge with TD Cowan. Please go ahead.
Oh, great. Thank you. What do you see as the opportunity set in the B2B mortgage as a service space and kind of what's the value prop of the product and and what are the benefits to the to the bank partnership? Thank you.
Great. Thank you.
What do you see as the opportunity set in the B to B mortgages as a service space and kind of what's the value prop of the product and what are the benefits to the bank partners. Thank you.
Thanks so much. That's a great question. You know, starting off with the opportunity, banks and financial services companies have strong brand recognition and deep customer relationships with the customers that they've cultivated over the long haul. And it's critical for banks and, you know, their whole customer experience to have this operate. If not, they could potentially lose their customers to a competitor when it comes time for most households to go and enter into their largest financial transaction, which is where they expect their bank to show up.
Thanks, So much that's a great question, starting off with the opportunity banks and financial services companies have strong brand recognition and deep customer relationships with the customers that they've cultivated over the long haul and it's critical for banks.
There are whole customer experience to have this offering if not they could potentially beat their customers to a competitor when it comes time or most households to go and enter into their largest financial transaction, which is where they expect their bank to show up.
And post the financial crisis banks and financial services companies have extremely high costs to originate mortgages given their legacy technology infrastructure and their high fixed costs of regulatory and compliance requirements.
And post the financial crisis banks and financial services companies have extremely high cluster originate mortgages, given their legacy technology infrastructure and their high fixed cost of regulatory and compliance requirements.
Partnering with better and giving them access to 10 men and mortgage of the services back in the infrastructure is allowing them to do what they did pre financial crisis with companies like pH. Where they were able to outsource the bulk of the process of originating a mortgage and funding a mortgage out to third party companies.
Partnering with better and giving them access to the tinman and mortgages are services backend infrastructure.
Is allowing them to do what they did pre financial crisis with companies like PHH.
They were able to outsource the bulk of the process of originating a mortgage and funding our mortgage out to third party company.
It allows them to maintain their branded customer awareness our platform can be fully customized to their customer experience like we do with the ally powered by better platform. It allows them to have a substantially lower origination cost.
Uh, it allows them to maintain their brand and customer awareness. Our platform can be fully customized to their customer experience like we do with the allies powered by better platform. It allows them to have a substantially lower origination cost per loan, higher efficiency, lower fixed costs, and much more of a variable model so they can scale up when times are good and scale down when times are bad.
Per loan higher efficiency, lower fixed cost and much more of a variable model.
So they can scale up when times are good or scale down when times are bad loan quality underwriting at a much lower critical defects of delinquency than average and the ability to offer multiple mortgage real estate and insurance products. All in one seamless flow across 50 states without needing to maintain the licensing and compliance infrastructure themselves to be able to do that.
have low quality underwriting and much lower critical defects and delinquencies than average, and the ability to offer multiple mortgage real estate and insurance products all in one seamless flow across 50 states without needing to maintain the licensing and compliance infrastructure themselves to be able to do that.
And so for.
For better, the mortgage of the service offer provides huge opportunity leverage our core technology to power existing leading household brands in the financial services space, reducing our need to spend on customer acquisition costs and marketing.
We're better the mortgage or the service offer provides a huge opportunity to leverage our core technology to power existing leading household brands in the financial services space, reducing our need to spend on customer acquisition costs and marketing.
We're super excited to have announced Infosys as a new mortgage as a service partner last week. Infosys is financial services. Clients can now use the Tin Man platform to power an integrated end to end digital mortgage experience. And, you know, with respect to where we are going, we have a fairly strong pipeline in our in a number of conversations for 2024 for our mortgage as a service offer.
We're super excited to have announced Infosys as our new mortgages a service partner last week Infosys is financial services clients can now use the tinman platform to power an integrated end to end digital mortgage experience.
And you know what.
With respect to where we're going.
Have a fairly strong pipeline and are in a number of conversations.
For 2024, or our mortgage as a service offerings, yes, John its Kevin I would quickly add it shall just said our pipeline feels better than it ever has and I think a part of that is in a lower volume industry right now the economics of doing it yourself without a partner at the banks are not as compelling as they.
Yeah, John and Kevin, I quickly add it's shall just federal pipeline feels better than it ever has. And I think a part of that is in a lower volume industry right now, the economics of doing it yourself without a partner at the banks are not as compelling as they were when everybody was making money back in 2021 and mortgage. And so it's actually, uh, it may be counterintuitive. It's actually a tailwind for a pipeline.
When everybody was making money back in 2021 and mortgage and so it's actually.
It may be counterintuitive, it's actually a tailwind for our pipeline.
Thank you.
Next question comes from Ryan Tomasello with KBW. Please go ahead.
Next slide.
And it comes from Ryan Thomas Allo with caveat Leo Please go ahead.
Okay.
Hi, everyone. Thanks for taking my questions. This morning.
I guess I wanted to ask about the strategy around mortgage servicing.
I guess I wanted to ask about the strategy around mortgage servicing. What's driven the decision to not retain servicing historically, and is that something you might revisit going forward? Thanks.
What's driven the decision to not retain servicing historically and was that something you might revisit going forward. Thanks.
Sure. Thanks for the question, Ryan. It's Kevin. Look, we understand the customer retention and ecosystem platform benefits of retaining MSR. We think about it all the time. The shall myself or board or senior leadership team talking about this all the time and given the capital we recently rate, we have the ability to retain the MSR.
Sure. Thanks for the question, Brian It's Kevin.
Look we understand the customer retention and ecosystem platform benefits of retaining MSR, we think about it all the time.
Sal myself, our board our senior leadership team talking about this all the time and given the capital. We recently raised we have the ability to retain the msr's.
And we think about it. And, you know, in the past, it wasn't as obvious that we should or bluntly even could. I mean, for two reasons. From 2019 to 2021, the company was selling so quickly, 400% year-over-year volume growth that our working capital needs were more than doubling in short periods of time. Haircuts and warehouse.
And we think about it and in the past it wasn't as obvious that we should or or won't be even could I mean for two reasons in 2019 to 2021. The company was growing so quickly 400% year over year volume growth that our working capital needs were more than doubling in short periods of time here.
Cuts in warehouse margin call reserves et cetera, and so we value the free cash flow generation selling the MSR in the co issue market, taking the cash and then filing a rate back into the technology and into the origination business.
margin, call reserves, etc. And so we value the free cash flow generation selling the MSR in the co-wishing market, taking the cash in and then filing it right back into the technology.
Then, you know, the market turned dramatically as I think we all know super well and beginning in 2022, it was not clear or expected us about two and a half years that how long it would take or whether it would ever get done. And so, for similar reasons, we value.
Then the market turned dramatically as I think we all know super well and the beginning of 2022. It was not clear our spec took us about two and a half years that how long it would take or whether it would ever get done. So for similar reasons, we value the cash generation of selling servicing release today. The market is more stable, albeit on a very.
cash generation selling service and release. Today, the market's more stable, albeit on a very low base, or cash decision relative to our volume.
Low base, our cash position relative to our volume.
is extremely high, right? If you think about where we got in Q4, we have more cash on hand than what we expect our total volume to be in Q4. So we have all the capital flexibility to reexamine the decision. We haven't pulled the trigger yet.
Is extremely high right. If you think about where regarding Q4, we had more cash on hand, and what we expect our total volume to be in Q4. So we have all the capital flexibility to reexamine their decision, we havent pulled the trigger yet two reasons people paying up for MSR is right now.
Two reasons people paying up for MSRs right now, they're valuing their capture greatly and so we have to convince ourselves that we'll recapture at least at those rates.
<unk> recapture greatly and so we have to convince ourselves that will recapture lease at those rates and.
And we think about it and we work on it, but that's important. I mean, people are bidding them up and paying nicely for the MSR. And then really our investment dollars, our cap backs, our mind shares really have been focused on improving our technology. Now building out mortgage of service, one day mortgage, as we, you know, Michelle talked about in the prepared remarks, so that's really been where we are. So, and then, you know, last point in 2021, we had,
And we think about it and we work on it but that's important I mean people are bidding them up nicely for the MSR and then really our investment dollars or capex or mindshare has really been focused on improving our technology now building out mortgage service one day mortgage as we Michelle talked about in prepared remarks. So that's really been where we are so and then last point.
Through 2021, we had no msr's.
No recapture strategy. We got the 2% market share in refinance.
No recapture strategy, we got the 2% market share in refinance.
And that was based off, you know, we believe really good rates for the customer and a great digital experience and now the refi is a much more efficient process for the customer and more of an experienced space process and great space process. And so the long term winner refi should be the company with speed, certainty, easy digital experience and price.
And that was based off we believe really good rates to the customer and a great digital experience and obviously refis are much more efficient process for the customer and more of an experience based process a great based process and so the long term winner in refi should be the company with speed.
Certainty easy digital spearing, some price and particularly with one day mortgage which we did not have in 2021 during the refi boom, which really fits quite nicely for refi probably better than purchase we've rolled it out in purchase market. That's when he was ready we feel like we should be able to really excel at ri.
And particularly with one day mortgage, which we did not have in 2021 during the refi boom, which really fits quite nicely for refi probably better than purchase. We rolled it out and purchase market. That's when it was ready. We feel like we should be able to.
really excel at ReFi with or without their capture opportunity. We also have millions of customers in our database, people that have come to the site that we just didn't have in 2019 because the company was so young. So we feel well set up for ReFi, but to your question, we do think about it and we'll continue to evaluate it and we'll keep sharing our thoughts along the way.
With or without the recapture opportunity. We also have we also have millions of customers in our database people that have come to the site and we just didn't have in 2019. The companies. So yes. So we feel well set up for refi, but to your question. We do think about and will continue to evaluate it and we'll we'll keep sharing our thoughts along the way.
Thanks for taking the question.
Your next question comes from Spenser <unk> with Susquehanna. Please go ahead.
Your next question comes from Spencer Anson with Susquehanna, please go ahead.
Great. Thank you can you just talk more about your purchase strategy.
Great, thank you. Can you just talk more about your purchase strategy? What are the strategies you're using to grow the purchase business through the cycle? Thank you.
Are the strategies you're.
You are using to grow the purchase business through the cycle. Thank you.
Totally.
Yeah.
When we think about our purchase strategy, we've proven that our refi product works, we reach over 2% market share in our Pea and our volume today is Matt type purchases by the small base that we're seeking to grow it on a value absolute basis.
You know, when we think about our purchase strategy, we've proven that our product works. We reach over 2% market share and our P and our volume today is met purchase. It's on a small base that we're seeking to grow it on a value absolute.
The two key components of our purchase strategy are, you know, one, tried and tested, partnering with agents to make some promoters of a better mortgage product. The real estate agent has, is ultimately focused on what is going to help them close the transaction and our one day mortgage product is something that's been well received by agents and then to improving the purchase customer experience to continue technology automation.
The two key components of our purchase strategy.
Our.
One tried and tested partnering with agents to make them promote or is it a better mortgage product the real estate agent has.
Is ultimately focused on what is going to help them close the transaction and our one day mortgage product is something that's been well received by agents.
And then two improving the purchase customer experience through continued technology automation when a customer chooses to go with better for their mortgage versus their incumbents.
When a customer chooses to go with better for their mortgage versus their incumbent or their local lender, they've got to have certain keys that better is going to be able to close and that to one day mortgage helps provide them that certainty that they're going to be able to close so fast that they don't need to have to consider the local lender options out there when they're choosing to, you know, post it. Uploading their.
Or are there local lender they've got to have certainty that better is going to be able to close and that Q1 day mortgage helps to provide them that certainty that theyre going to be able to close so fast.
That they don't need to have to consider the local lender options out there when they're choosing.
<unk>.
Post the uploading their purchase contract.
So.
So, how are we going to grow our penetration within the.
How are we going to grow our penetration within the agent agents are critical influencers in the purchase transaction, if they don't believe that better or other online lenders are able to.
Agents are critical influencers in the purchase transaction. If they don't believe that better or other online lenders are able to close alone on time or will close alone on the terms that we're specified, they lose trust in those lenders on a transaction and you lose the ability to kind of get referral volume back from that.
Clothes alone on time or will close alone are the terms that were specified they lose trust in both lenders under transaction then you lose the ability to kind of get referral volume back from them. What we've been doing to build trust with our agents is actually helping those agents winning more business. So when a consumer.
What we've been doing to build trust with our agents is actually helping those agents win more business.
So, when a consumer comes in and, you know, a ton of consumers come in every month to better.com seeking to get pre approved who do not have a real estate agent.
It comes in.
A ton of consumers come in every month to better dot com seeking to get preapproved, who do not have a real estate agent.
Um, attached and they haven't picked out their real estate agents. They're just trying to figure out how much house they can afford. What we're doing is helping those agents, uh, those customers connect with local real estate agents. And build a network of local real estate agents that can service promoters of the better offering.
Attached they haven't picked out the real estate agents, there just trying to figure out how much house. They can afford what we're doing is helping those agents those customers connect with local real estate agents and build a network of local real estate agents that can serve as promoters.
Better offerings, we now have built a direct network with local real estate agents that we have over 500 partnered local real estate agents on board again to our network, who are experts on the better platform and on the better value proposition.
We now have built a direct network with local real estate agents that we have over 500 partner local real estate agents on board to join to our network who are experts on the better platform and on the better value proposition.
We're also in the early stages of piloting a program where we're enabling agents to become loan officers and grow their revenue base. That program is in its early stages, but we feel that that will be another way for us to integrate real estate agents directly core into Tinman and turn them from detractors or into promoters of the better plan.
We're also in the early stages of piloting a program, where we're enabling agents to become loan officers and grow their revenue base that program is in its early stages, but we feel that that will be another way for us to integrate real estate agents directly core entertainment and turn them from detractors or.
<unk>.
Into promoters of the better platform.
On the purchase loans.
On the purchase loan on conversion right now they require increased customer service and manual labor to compare to refinance loans and ultimately that creates more friction in the transaction.
On conversion right now they require increased customer service and manual labor compared to refinance loans and ultimately that creates more friction in the transaction.
for our customers. We're leveraging technology to make that.
For our customers, we're leveraging technology to make that gap smaller and smaller and our continued investment in demand driving one day mortgage.
gap smaller and smaller and our continued investment in 10 man and driving one day mortgage will help us
<unk> will help us be able to offer a one day commitment letter to more and more customers and the more and more we're able to do that and the more we're able to eventually get the word out about that we think that that's in the very early stages, we think that that's going to be a game changer on changing the conversion rate.
Be able to offer a one day commitment letter to more and more customers and the more and more we're able to do that. And the more we're able to eventually get the word out about that we think that that's in the very early stages. We think that that's going to be a game changer on changing the conversion rate of our of our purchase.
Our of our purchase transaction.
So, as you remember, we said, we have, well, we're 18,500 applications a month and we're funding less than a thousand loans a month. So, narrowing that gap from.
We said we have over 18500 applications a month and we're funding less than 1000 most of the month.
So narrowing that gap from.
application to fund and improving that conversion rate is going to be something that we think is very similar to the early days of online commerce when return rates were high and conversion rates were low. We think that we can eventually get those conversion rates up to be 3x, 5x better than wherever they are today and that will substantially change the economics of our
Application to fund and improving that conversion rate is going to be something that.
We think it's very similar to the early days of online Commerce Wan return rates were high and conversion rates were low we think that we can eventually get those conversion rates up to be three X five better than wherever they are today and that will substantially change the economics of our purchase business.
Great, that was helpful. And just one more for me, could you just expand on your tech and how it's differentiated from other market offerings? I know you touched on some of this, but anything else you can expand on there?
Great. That's helpful and just one more for me if could you just expand on your tech and how it's differentiated from other market offerings. I know you touched on some of it but anything else you can expand on there.
Yeah, so the big difference between attainment.
Yeah, so the big difference between 10 man is they're really two core differences. The first is 10 man is fully integrated all the way end to end once.
Is there really two core differences the first 10 minutes fully integrated all the way end to end one system.
Whereas most of the technology in the industry, they're relying on a point-of-sale system, you know, that may be like a blend or a Roostify or, you know, a software offering from LMA. Then they're taking that data and transferring it into a loan-origination system, right, which might be Encompass or PowerPro. And then from there, they're integrating in a pricing engine, then they're integrating in a rules engine, then they're integrating in an underwriting,
As most of the technology in the industry. They are relying on our point of sale system.
That may be like a blended or a rooster five.
Or.
Operating from Ellie Mae then they are taking that data and transferring it to a loan origination system, right, which might be encompassed or a power pro and then from there.
Integrating in a pricing engine tender integrating in a rules engine, then they're integrating and underwriting.
So software then they're integrating in closing software and then right there at the end of integrating in the funding software and the warehouse line.
Software then there is no gating in at closing software and then right there at the end of integrating into funding software and the warehouse.
And software all of that means data is moving consistent with system. The average loan officer has to learn seven different system in order to fulfill alone all the way through.
All of that means data is moving from system to system. The average loan officer has to learn seven different systems in order to fulfill a loan all the way through.
And what we've done is slowly but surely over the past seven years, built all of that functionality into one integrated system, 10 man, that is the only one of its kind in the.
And what we've done is slowly but surely over the past seven years built all of that functionality into one integrated system tinman that is the only one of its kind in the industry.
This means that we're able to, one, move alone across the assembly line much, much, much faster. Two, we're able to do it with the most important components, which is the system tells
This means that we're able to one move alone across the assembly line much much much faster.
Two we're able to do it with the most important component, which is this system <unk>.
The loan officers and the processes and the underwriter, what it means and what to do next versus them having to figure it out for themselves.
the loan officers, and the processors, and the underwriters, what it needs next, and what to do next, versus them having to figure it out for themselves.
This was core to our competitive advantage and building up scale to 2% market share when the refi boom took place last time. There was no other way that we would have been able to hire and grow as rapidly as we did without that.
This wasn't a core to our competitive advantage and building up scale up to 2% market share when the refi boom took place last time, there was no other way that we would've been able to hire and grow as rapidly as we did without that.
What this allows us to do over time is gives us great scalability both the ability to scale up as we did in 2019 to 2021 and then the ability to scale down, which is what we've done over the past two years.
What this allows us to do over time.
It gives us great scalability, both the ability to scale up as we did in 2019 to 2021, and then the ability to scale down which is what we've done over the past two years.
And lastly, the advantage that we get out of all of this is that the system compiled into one clean data file over 10000 data points that are the home app and the property graph and the consumer financial Brian.
And lastly, the advantage that we get out of all of this is that the system compiles into one clean data file over 10,000 data points that are the home and the property graph and the consumers financial graph and we're able to tune.
And we're able to to to do that through our.
to do that through our and drop that into all of our partners labs, especially our B to B mortgage and service partners who can then use that very rich data file to then provide other products and services to our customers.
And drop that into all of our partners labs.
Especially our <unk> mortgages service partners, who can then use that very rich data files to then provide other products and services to our customers.
But the deliverables that our technology delivers are one day comorgasher.
But just the deliverable that our technology delivers our one day to mortgage.
Taking a customer from a lock loans to a commitment letter in an average of eight hours. Since we launched the program in Q1 of 2023 lower rates 26 basis points cheaper on average than the average for.
Taking a customer from a lock loan to a commitment letter and an average of eight hours since we launched the program into one of 2020.
lower rates, 26 basis points cheaper on average than the average for a fixed 30-year fixed rate standing conforming mortgage. Fulfillment efficiency at almost three times the industry average with our US fulfillment employees closing 9.6 loans a month compared to the industry average of 3.3 and also enabling us to launch new products like our new HELOC offering and is now which is we launched in Q1 is now doing lower 45 blocks a week. So we're able to take
30 year fixed rate Fannie conforming mortgage fulfillment efficiency at almost three times the industry average with our U S fulfillment employees, posting nine six loans amount compared to the industry.
Three three and.
Also enabling us to launch new products like our new HELOC offering and is now which we launched in Q1 is now doing over 45 Bucks a week.
So we're able to take.
A.
Multiple approach to delivering for our consumers through this integrated platform and it creates benefits. It makes us cheaper faster and easier to use. Then we believe any other system out there and we hope that over time that will manifest itself in market share games.
Multifold approach to delivering for our consumers through this integrated platform.
And it creates benefit it makes us cheaper faster and easier to use than we believe any other system out there and we hope that over time that will manifest itself in market share gains.
Great. Thank you that's all for me.
Your next question comes from Jeff Cantwell with Seaport Research. Please go ahead.
Your next question comes from Jeff Cantwell with Seaport Research. Please go ahead.
Okay. Thanks, very much I wanted to ask you since you cut cost significantly if the market does turn back up how are you positioned there.
Hey, thanks very much. I wanted to ask you, since you cut cost significantly, if the market does turn back up, how are you positioned or prepared to scale back up quickly?
Prepared to scale back up quickly.
Um, so that's a really great question. We think about that all the time.
So that's a really great question, we think about that all the time.
Ultimately, when we scaled in 2019 to 2021, we were a private company. We made the conscious decision, let us be our own venture capitalist and seize the moment and we took the business which in 2019 was 50% purchase 50% refinance and took it to basically 90% plus refinance because there was money on the table to be gained from refinances.
Ultimately when we scaled in 2019 to 2021 that we were a private company. We made the conscious decision, let us be our own venture capitalists and seize the moment and we took the business, which in 2019 was 50% purchased 50% refinanced and took it to basically 90% plus refinance because there was money on the table.
To be gained from refinances.
Well, we believe what we just there was very manual tinman was only half built at that time.
When we believe what we did there was very manual. TinMan was only half built at that time. And what we had components that were legacy systems and we had components that were our own system and scaling took a lot of effort and it took a lot of people. We believe we're much, much more productive now than we were before. And TinMan is one unified system from click to funding for our customers, for all of our customers.
And what we had components that were legacy systems, and we have components that were of our own system and scaling took a lot of effort and it took a lot of people. We believe we're much much more productive now than we were before and similarly as one unified system from click.
Funding for.
For our customers for all of our customers today.
And so we believe we would be able to scale far more rapidly this time than even what we did last time. I can't give you factors or orders of magnitude because we haven't been able to do it yet, but we think it's going to be massive operational efficiency as we scale here.
And so we believe we would be able to scale far more rapidly this time than even what we did last time I can't give you factored are orders of magnitude because we haven't been able to do it yet, but we think it's going to be massive operational efficiency as we scale here.
Now, last time we had, you know, nearly zero customer lift prior to 2019 and 2015, 2017, 2018, we've done less than $5 billion of mortgages, right? We've not done $100 billion of mortgages and we have millions of customers in our database. And what we're able, going to be able to do is reach out and market to those customers a one-day refinance product.
Last time, we had.
The euro customer list prior to 2019 in 2015 2017 2018, we've done less than 5 billion of mortgages right. We've not done a 100 billion of mortgages that we have millions of customers in our database and what we're able to going to be able to do is reach out and market to those customers a one game refinance product.
And that is something that the rest of the industry simply does not have and so if you want to get your new rate tomorrow, you're going to come to better. And we think that from both an operational perspective and a marketing perspective, we're going to be able to offer something that the industry has never seen before when time to scale up.
And that is something that the rest of the industry simply does not have.
And so if you want to get your new risk Tomorrow, you are going to come to better dotcom and we think that from both an operational perspective, and a marketing perspective, we're going to be able to offer something that the industry has never seen before when it takes some time to scale up again.
You know, Jeff, one of the things we'd add is we burned down the expense base really low, as you said, or mentioned, and you get to a place where you start to fix out your costs.
Jeff One other thing we had is we burn down the expense base really low as you said.
I mentioned.
And you get to a place where you start to fix out your costs Tim.
Tinman is so much better than it was going into the last cycle as Michelle just mentioned that we think will be able to grow volume and revenue materially faster than expenses on the way back up and so we're set up very well with operating leverage because you've gotten to a place where our market share is so small that you want to keep your 50%.
Tin Man is so much better than it was going into the last cycle, as Vishal just mentioned, that we think we'll be able to grow volume and revenue maturely faster than expenses on the way back up. And so we're set up very well with operating leverage because you've gotten to a place where our market share is so small, but you want to keep your 50-state licenses, your capabilities, your engineers investing in tech,
Licenses your capabilities your engineers investing in tech and so you really only need one of those on the way back up you don't need to hire they're on the way back up and so yes, there'll be some more expenses on the way back up and it will grow much slower than the revenue in Boswell.
And so you really only need one of those on the way back up. You don't need to hire there on the way back up. And so, yes, there'll be some more expenses on the way back up. It'll grow much slower than the revenue involved as well.
Okay, great. Thanks for all the color.
Yeah.
Your final question comes from Michael Kay with Wells Fargo. Please go ahead.
Your final question comes from Michael Kaye with Wells Fargo. Please go ahead.
Hi, thanks for taking my question. How much of an increase in industry origination is industry origination bonds. Do you think you need to see to get the mortgage platform back to profitability. The next year's MBA forecast is about 1.9 trillion get there. I know you probably can't get guidance, but is any way to dimensionalize it.
Hi, Thanks for taking my question.
How much of an increase in NIM is clear what you mean.
Industry origination bonds can you think you need to see to.
To get the mortgage platform back to profitability.
Next year's MBA forecast of about 1.9 trillion get there I know you probably can't give guidance, but is there any way to dimensionalize. It.
Yeah, it's a great question, Michael. And we're going to try to do an investor analyst, say, in early 24. And we're going to try to give you an exact number to that question. But let me just mention it out a little bit because it's something we think about. I actually think it's a very, very good question. So, so a few things. The first one is, as I said, in a prepared tomorrow.
Yes, it's a great question Michael.
And I think we're going to try to do an investor analyst day in early 'twenty four and I think we're going to try to give you an exact number to that question, but let me just dimension it out a little bit because it's something we think about I actually think it's very very good question. So so a few things. The first one is as I said in your prepared remarks.
The important thing we had to do was close the SPAC transaction. We took in $565 million of cash, you know, obviously, pretty expensive, but $565 million of gross cash to do the deal. That gives us a very long, long way, years and years, you know, four or five years of runway. And we've taken out over a billion dollars of expenses. And so, so then we sit here and say the most, and so look, we were under no illusion that taking a digital mortgage company public with 8% mortgage.
The important thing we had to do was close the <unk> transaction, we took in $565 million of cash, obviously pretty expenses by 5% and $65 million of gross cash to do the deal that gives us a very long runway years in years four five years of runway.
And we've taken out over $1 billion of expenses and so so then we sit there and say that most of them and so look we're under no illusion that taking a digital mortgage company public with 8% mortgage rates.
was going to be, you know, a hit day one in the capital markets, but we were also under no illusion that we were able to raise that kind of capital that took the minimalist pollution in any other form given the operating environment. So we plowed ahead and that's what we focused on in 2022 and 2023, cutting expenses and raising money. That was really all our focus. Now we've done both of those things, but we still have a very difficult operating environment. For the reasons we shall land through on the
It's going to be a hit day, one in the capital markets, but we are also under no illusion that we were able to raise that kind of capital, which has de minimis pollutions in any other form given the operating environment. So we plowed ahead and that's what we focused on in 2022, and 2023 cutting expenses and raising money that was.
Really all our focus now.
And both of those things, while we still have a very difficult operating environment.
For the reasons Michelle went through on the way up.
We're going to have tremendous operating leverage so I would like to think back in 2022, we lost a lot of money did 11 billion of volume. If we were to do a $11 billion of volume.
We're going to have tremendous operating leverage so things like think back in 2022 we lost a lot of money to the 11 billion of volume if we were to do a 11 billion of volume.
Today, we're not going to do 11 billion volume, right? If you just take what we've done to three quarters plus our guide, you're going to bump around that 3 billion of volume for 2023, if you got anywhere near 11 billion of volume, we felt very good.
We're not going to do 11 billion volume I think if you just take what we've done in three quarters, plus our guide you're going to bump around that $3 billion of volume for 2023, and you got anywhere near 11 billion of volume we felt very good.
about, you know, about our prospects break even.
<unk>.
About our prospects breakeven.
And, you know, actually putting up an EBITDA market. So we're going to try to like exactly answer that question going forward, but we've got a long runway and it doesn't take much in the market.
And actually putting up in EBITDA margin. So we're going to try to like exactly answer that question going forward, but we've got a long runway and it doesn't take much in the market.
To your point, and we look at the NBA and Fannie forecast all the time for us to see a scenario where we're quickly, quickly break even and well inside of our runway if you look at the deck, we put up, right? We're not going through the deck, but we show you that if we just take 1% of the incremental refi market share that the NBA and Fannie forecast.
To your point, we look at the MBA Fannie forecast all the time.
For us.
See a scenario, where we're quickly quickly breakeven in well inside of our runway. If you look at the deck, we put up right, we're not going through the deck.
We show you that if we just take 1% of the incremental refi market share.
The MBA Fannie forecast over the next two years that drives over $100 million of revenue and that's just 1% on the incremental that's about 1% in aggregate and Michele and I. Both said we used to be at 2%. So it's not going to take a lot of a turn in the market.
Over the next two years that drives over a hundred million dollars of revenue and that's just 1% on the incremental that's not 1% in aggregate and show my both say we used to be a 2% so it's not going to take a lot of a turn in the market for us to get to that place.
For us to get to that place.
But at 8% interest rates, it's really hard for us to do it right now, but so we're going to keep taking out costs. But, but, you know, we're not that far away is probably the way I'd say it.
But an 8% interest rates, it's really hard for us to do it right now, but so we're going to keep taking out costs, but but we're not that far away.
Probably the way I'd say it.
Okay. Thank you so much.
Ladies and gentlemen. This concludes today's conference call. Thank you for joining US you may now disconnect.
Ladies and gentlemen, this concludes today's conference call. Thank you for joining us. You may now disconnect.
Yeah.
Okay.
Yeah.
Yeah.
[music].
Yeah.
Yeah.