Q1 2024 Better Home & Finance Holding Co Earnings Call

Ladies and gentlemen, thank you for standing by today's conference call will begin momentarily until that time your lines will again be placed on music hold thank you for your patience.

Operator: Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience. Thank you for standing by. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the Better Home and Finance Holding Company First Quarter 2024 results. All lines have been placed on mute to prevent any background noise.

[music].

Pam: Thank you for standing by my name is Pam and I will be conference operator today at this time I would like to welcome everyone to the bed at home and finance holding company first quarter 'twenty 'twenty four results all lines have been placed on mute to prevent any background noise. After the speakers' through.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Hannah Kossler, the Vice President of Corporate Finance and Investor Relations at Better. You may begin.

Speaker Change: There will be a question and answer session.

Pam: I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Pam: If you would like to withdraw your question Press Star one again.

Pam: Thank you.

Pam: I would now like to turn the conference over to Hana Khosla, The Vice President of corporate Finance and Investor Relations. That's better you may begin.

Hana Khosla: Welcome to better home in finance holding company's first quarter 'twenty 'twenty four earnings conference call. My name is Hanukkah and I am the vice President of corporate Finance and Investor Relations at better.

Hana Khosla: Welcome to Better Home & Finance Holding Company's First Quarter 2024 Earnings Conference Call. My name is Hana Khosla, and I am the Vice President of Corporate Finance and Investor Relations at Better. Joining me on today's call are Vishal Garg, Founder and Chief Executive Officer of Better, and Kevin Ryan, Chief Financial Officer of Better.

Hana Khosla: Joining me on today's call are Vishal guard, founder and Chief Executive Officer of better and Kevin Ryan Chief Financial Officer of better.

Hana Khosla: Certain statements we make today may constitute forward-looking statements within the meaning of federal securities laws that are based on current expectations and assumptions. However, these expectations and assumptions are subject to risks, uncertainties, and other factors, as discussed further in our SEC filings, that could cause our actual results to differ materially from our historical results. We assume no responsibility to update forward-looking statements other than as required by law. During today's discussion, management will discuss certain non-gap financial measures, which we believe are relevant in assessing the company's financial performance.

Hana Khosla: Certain statements we make today may constitute forward looking statements within the meaning of federal securities laws that are based on current expectations and assumptions.

Hana Khosla: These expectations and assumptions are subject to risks uncertainties and other factors as discussed further in our SEC filings that could cause our actual results to differ materially from our historical results we have.

Speaker Change: Assume no responsibility to update forward looking statements other than as required by law.

Management: During today's discussion management will discuss certain non-GAAP financial measures, which we believe are relevant in assessing the company's financial performance.

Speaker Change: These 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, which is available on the Investor Relations section of better website, and when filed and our quarterly report on.

Hana Khosla: These non-gap financial measures should not be considered replacements for and should be read together with our gap results. These non-gap financial measures are reconciled to gap financial measures in today's earnings release, which is available on the investor relations section of Better's website and when filed in our quarterly report on form 10 Q, filed with the. I will now turn the call over to Vishal.

Speaker Change: <unk> Form 10-Q filed with the SEC.

Speaker Change: I will now turn the call over to Vishal.

Vishal Garg: Thank you, Hanna, and welcome to our first quarter 2024 earnings call. We appreciate everyone joining us today.

Vishal Guard: Thank you Anna and welcome to our first quarter 2024 earnings call. We appreciate everyone. Joining us today I'd like to start by highlighting some of our key achievements during the quarter as noted in our last earnings call growth as our main focus having emerged from a very challenging macro environment over the last couple of years.

Vishal Garg: I'd like to start by highlighting some of our key achievements during the quarter. As noted in our last earnings call, growth is our main focus, having emerged from a very challenging macro environment over the last couple of years, where the focus was on scaling back and significantly reducing expenses. I'm pleased to say that we are growing again while continuing to maximize our operating efficiency. This April, we more than doubled our monthly origination volume compared to our low point in November 2023.

Speaker Change: Whereas our focus was on scaling back and significantly reducing expenses.

Speaker Change: Safe to say that we are growing again, while continuing to maximize our operating efficiency.

Anna: This April we more than doubled our monthly origination volume compared to our low point in November 2020.

Vishal Garg: In the first quarter, we leaned into certain growth expenses to drive increased market share, balanced with continued efficiency improvements and disciplined cost management to target reaching profitability in the medium term. In short, we delivered on growth in the first quarter, while many other companies in the mortgage space were flat or down sequentially. Compared with the fourth quarter of 2023, funded loan volume rose by 25%, and revenues rose by 26% in the first quarter of 2024.

Speaker Change: In the first quarter, we lean into certain growth expenses to drive increased market share balanced with continued efficiency improvement and disciplined cost management to target reaching profitability in the medium term.

Anna: We've delivered on growth in the first quarter, while many other companies in the mortgage space were flat or down sequentially.

Anna: Compared with the fourth quarter of 2023 funded loan volume rose by 25% and revenues rose by 26% in the first quarter of 2024.

Vishal Garg: While still being a low cost provider, we have been testing strategies to improve revenue per loan. This, combined with additional income generated from prudently invested cash and investments, helps contribute to our revenue. Further, the growth in the first quarter of 2024 was combined with continued strict management of expenses, with total expenses increasing 7% compared to a revenue increase of 26% sequentially versus Q4 2023. This also represented a 30% reduction in total expenses year over year and an even larger reduction compared to when we began downsizing in 2021.

Speaker Change: While still being a low cost provider, we have been testing strategies to improve revenue per loan. This combined with additional income generated from prudently invested cash in investments helped contribute to our revenue growth.

Speaker Change: Further the growth in the first quarter of 2024 was combined with continued strict management of expenses with total expenses, increasing 7% compared to a revenue increase of 26% sequentially versus Q4 2023.

Speaker Change: Also represented a 30% reduction in total expenses year over year, and an even larger reduction compared to when we began downsizing in 2021.

Vishal Garg: As discussed on our Q4 2023 earnings call, I'd like to remind everyone of our strategic priorities for 2024. Our first priority is thoughtfully leaning into growth, against which we showed early progress this quarter, increasing our funded volume and revenue since Q4 last year. Our second priority is improving operational efficiency, which we also demonstrated in the first quarter. While we lean into certain growth expenses to produce higher volumes, we grew our revenue faster than our expenses, demonstrating operating leverage quarter over quarter sequentially.

Speaker Change: As discussed on our Q4 2023 earnings call I'd like to remind everyone of our strategic priorities for 2024.

Speaker Change: Our first priority is thoughtfully leaning into growth against which we showed early progress this quarter, increasing our funded loan volume and revenue since Q4 last year.

Speaker Change: Our second priority is improving operational efficiency, which we also demonstrated in the first quarter, while we lean in to certain growth expenses to produce higher volumes. We grew our revenue faster than our expenses demonstrating operating leverage quarter over quarter sequentially.

Vishal Garg: Our third priority is growing our B2B channel, enabling us to further leverage our industry-leading technology. We remain excited about the ongoing conversations we are having with potential partners. Now, to provide an update on each priority from the first quarter.

Speaker Change: Our third priority is growing our BW channels, enabling us to further leverage our industry, leading technology. We remain excited about the ongoing conversations we are having with potential partners.

Speaker Change: Now to provide an update on each priority from the first quarter.

Vishal Garg: Starting with our first priority of leaning into growth, as I mentioned, over the past two years, we have been intensely focused on significantly reducing expenses and maximizing operating efficiency in a highly challenging macro environment. We are now seeing an opportunity to thoughtfully lean into growth to make sure we are well-positioned when consumer demand returns in order to capture increased market share across our three main mortgage products, purchase, refinance, and home equity lines of credit. Looking at volume growth for each product compared sequentially with the fourth quarter of 2023, purchase loan volume increased 12%. Refinance loan volume increased 232%, and HELOC loan volume increased by 54%.

Speaker Change: Starting with our first priority of leaning into growth as I mentioned over the past two years, we have been intensely focused on significantly reducing expenses and maximizing operating efficiency during the highly challenging macro environment. We are now seeing an opportunity to thoughtfully lean into growth to make sure. We are well positioned when consumer demand returns in order to capture increased market share.

Speaker Change: Across our three main mortgage products purchase refinance and home equity lines of credit.

Speaker Change: Looking at volume growth for each product compared sequentially with the fourth quarter of 2023 purchase loan volume increased 12% refinanced loan volume increased 232% and HELOC loan volume increased by 54%.

Vishal Garg: In purchase, we are seeing strong early results of the benefit of having experienced loan officers nurturing homebuyers through their journey. In refinance, we are leaning into cash-out refinance to improve sales and operational excellence, as well as consumer education around the suite of products available, and helping them weigh their options against their financing goals. In our second lien product, we are seeing strong momentum given home values have appreciated while rates for primary mortgages have remained high, and customers are looking to access their home equity without resetting their first lien mortgage.

Speaker Change: And purchase we are seeing strong early results of the benefit of having experienced loan officers nurturing homebuyer through their journey.

Speaker Change: Refi, we are leaning into cash out refi through improved sales and operational excellence as well as consumer education around the suite of products available.

Speaker Change: And helping them weather options against their financing goals.

Speaker Change: And our second lien product, we are seeing strong momentum given home values have appreciated while rates for primary mortgages have remained high and customers are looking to access their own equity without resetting their first lien mortgage.

Vishal Garg: We're pleased with the strong reception to our one-day HELOC product and the still early launch of the Better Home Equity Loan, which is the latest addition to our suite of digital products. This product enables qualified homeowners to access up to 90% of their home equity as cash at a fixed interest rate in 30 states today. Eligible customers can borrow against primary, secondary, and investment properties with 10, 15, 20, or 30-year loan terms available.

Speaker Change: We've been pleased with the strong reception to our one day HELOC product and it's still early launch of the better home equity loans, which is the latest addition to our suite of digital products.

Speaker Change: This product enables qualified homeowners to access up to 90% of their home equity as cash at a fixed interest rate and 30 states today.

Speaker Change: Customers can borrow against primary secondary and investment properties with 10, 15, 20 or 30 year loan terms available.

Vishal Garg: Throughout BetterTid3, we have been the low-cost provider to consumers, but we are seeing opportunities to increase our revenue per loan while still remaining highly cost competitive. In the first quarter, we saw pricing improvements, with the gain on sale margin increasing to 2.37% in the first quarter of 2024 compared to 2.03% for the full year of 2023. Drivers of this margin improvement include increased pricing while still remaining the low-cost provider, efforts to limit the use of sales concessions, and a focus on driving consumer retention through improved service versus discounting, as well as continued efforts to optimize for the best execution across our network of loan purchasers, including the GSA. We are also continuously evaluating a loan repurchase reserve and saw revenue benefits through realizing recoveries in the first quarter of 2024. Moving to our second priority of operational efficiency and reducing loan production expenses.

Speaker Change: Throughout <unk> history, we have been the low cost provider to consumers, but we are seeing opportunities to increase our revenue per loan while still remaining highly cost competitive in.

Speaker Change: In the first quarter, we saw pricing improvements with gain on sale margin increasing to $2 three 7% in the first quarter of 2024 compared to two 3% for the full year of 2023.

Speaker Change: Drivers of this margin improvement included increased pricing, while still remaining the low cost provider efforts to limit the use of sales conversion and a focus on driving consumer retention to improve service versus discounting as well as continued efforts to optimize for the best execution across our network of loan purchasers, including the Gse's.

Speaker Change: We are also continuously evaluating our loan repurchase reserve and saw revenue benefits through realizing recoveries in the first quarter of 2024.

Speaker Change: Moving to our second priority of operational efficiency and a variable I think loan production expenses.

Vishal Garg: As mentioned last quarter, we've adopted a new operating model and compensation structure for our sales team, with lower bases and higher commissions to better align costs with volumes and drive conversion options. And also enable us to recruit seasoned loan officers and empower them via our tech platform in a way we were never able to do before. We continue to showcase that we can hire experienced loan officers to prepare for purchase. We have seen positive early results of this shift on loan officer productivity, with our loan officers closing significantly more loans per month on average than a peer set of large independent consumer direct lenders based on a third-party benchmarking study that are participating. From this study, we learned that in 2023, veterans loan officers closed an average of 17.7 purchase loans per month, while the Pearson average was in the mid-single digits.

Speaker Change: As mentioned last quarter, we've adopted a new operating model and compensation structure for our sales teams with lower basis, and higher commissions to better align costs with volumes and drive conversion outcomes.

Speaker Change: And also enable us to recruit seasoned loan officer empower them via our tech platform in a way we were never able to do before.

Speaker Change: We continue to showcase that we can hire experienced loan officers to prepare for purchase season. We are seeing positive early result of this shift on loan officer productivity with our loan officers closing significantly more loans per month on average than our peer set of large independent consumer direct lenders based on a third party benchmarking study better participated in.

Speaker Change: From this study we learned that in 2023 betters loan officers closed an average 17 seven purchase loans per month, while the peer set average was in the mid single digits.

Vishal Garg: We believe the future lies in Uberizing the loan officer, giving them leads generated by better on our proprietary tech platform and customer interface, and having them be more productive. Additionally, we have continued leading into marketing efforts, as discussed on our fourth quarter call. Our marketing and advertising expenses increased 27% from 3.6 million in Q4 2023 to 4.6 million in Q1 2024, and we expect these to further increase as the year goes on.

Uber: We believe the future lies in Uber rising the loan officer, giving them leads generated by better on our proprietary tech platform and customer interface.

null: And having them be more productive.

Speaker Change: Additionally, we have continued leaning into marketing efforts as discussed on our fourth quarter call, our marketing and advertising expenses increased 27% from $3 6 million in Q4 2023 to $4 6 million in Q1 2024, and we expect these to further increase as the year goes on.

Vishal Garg: These customer acquisition initiatives are highly programmatic and done in a controlled manner, predominantly through digital marketing on existing and new channels. We can immediately evaluate return on acquisition spend and modulate it up or down based on performance.

Speaker Change: These customer acquisition initiatives are highly programmatic and done in a controlled manner predominantly through digital marketing on existing and new channels. We can immediately evaluate return on acquisition spend and modulate up or down based on performance. We are still early in our expansion into a handful of new marketing channels, but are seeing positive early results that we expect to scale as the year.

Vishal Garg: We're still early in our expansion into a handful of new marketing channels but are seeing positive early results that we expect to scale as the year progresses. We are also excited to announce a leadership update for our mortgage business. Chad Smith joined us last week as President and Chief Operating Officer of Better Mortgage Corporate. Chad brings a wealth of experience to Better and has a proven track record of building sales and operations teams into high-growth mortgage industry-leading platforms. He joins us with over 25 years of mortgage experience under his belt, working with companies like Caliber Home Loans, Discover, Loan Depot, and LendingTree. Most recently, Chad served as CEO of Mission Home Loans.

Speaker Change: We're also.

Chad: We're excited to announce the leadership update for our mortgage business had Smith joined US last week as President and Chief operating Officer, a better mortgage Corporation, Chad brings a wealth of experience to better and has a proven track record of building sales and operations teams into high growth mortgage industry, leading platform. He joins us with over 25 years of mortgage experience under his belt working with companies like <unk>.

Chad Smith: Oliver home loans discover loan depot and Lendingtree. Most recently served as CEO of emission hormones with chad's valuable experience and deep expertise I feel confident he will help drive our growth and contribute meaningfully to the success of better Chad will be responsible for helping us set our long term strategy and scale, our marketing sales and operations teams as well as hub.

Vishal Garg: With Chad's valuable experience and deep expertise, I feel confident he will help drive our growth and contribute meaningfully to the success of Better. Chad will be responsible for helping us set our long-term strategy and scale our marketing, sales, and operations teams, as well as help drive performance and accountability for delivering results that align with our strategic vision. Finishing with our third priority of growing our B2B Mortgage-as-a-Service distribution channel, we continue to see demand for our technology and origination capabilities from new partners with strong brands who are looking to offer mortgages to their customers in a cost-efficient way.

Chad: Drive performance and accountability for delivering results that align with our strategic vision.

Chad: Finishing up with our third priority of growing our BW mortgages, a service distribution channel, we continue to see demand for our technology and origination capabilities from new partners with strong brands, who are looking to offer mortgages to their customers in a cost efficient way. We believe the conversations we're having as part of our continued pipeline demonstrating a strong product market fit for our <unk> offerings and <unk>.

Vishal Garg: We believe the conversations we are having as part of our continued pipeline demonstrate a strong product market fit for our B2B offerings and demand for our technology. Looking beyond 2024, the medium-term opportunity for better remains very exciting. We are focused on, first, enhancing our go-to-market, with growth being our North Star, and second, continuing to invest in automation through the cycle. In terms of go-to-market, we expect our experienced loan officers to drive improved customer conversion in a cost-efficient manner, specifically converting website visitors to funded customers, particularly on the purchase side.

Speaker Change: And for our technology.

Speaker Change: Looking beyond 2020 for the medium term opportunity for better remains very exciting we are focused on first enhancing our go to market with growth being our Northstar and second continuing to invest in automation through the cycle in terms of go to market. We expect our experienced loan officers to drive improved customer conversion in a cost efficient manner.

Speaker Change: Specifically converting website visitors to funded customers, particularly on the purchase side, we expect to manage cost to a highly variable sales compensation model and continued automation that drives down non customer facing costs. Further we expect the expansion underway across our D to C acquisition channels. In addition to the VW partnership pipeline to expand the breadth of customers we have.

Vishal Garg: We expect to manage costs through a highly variable sales compensation model and continued automation that drives down non-customer-facing costs. Additionally, we expect the expansion underway across our D2C acquisition channels, in addition to the B2B partnership pipeline, to expand the breadth of customers we are reaching. We continue to invest in TinMan, our proprietary technology platform, to improve the customer experience and further drive down labor costs, making our platform more efficient and scalable and enabling us to provide our customers with lower rates, higher approval, and certainty earlier in the mortgage process.

Speaker Change: We continue to invest in Tillman, our proprietary technology platform to improve the customer experience and further drive down labor costs.

Tillman: Our platform more efficient and scalable and enabling us to provide our customers with lower rates higher approvals and certainty earlier in the mortgage process 10, manpower's, our highly differentiated competitive advantage and drives our better faster and cheaper customer experience.

Vishal Garg: Tin Man powers our highly differentiated competitive advantage and drives our better, faster, and cheaper customer experience. In summary, we have a large and attractive market opportunity, a track record of knowing how to scale for growth when the macro environment permits and how to reduce expenses when it doesn't, a business model that is balance sheet and credit risk light, a competitive advantage powered by our technology and industry-leading products, a medium-term plan for growth and profitability, and a healthy cash flow.

Speaker Change: In summary, we have a large and attractive market opportunity our track record of knowing how to scale for growth, where the macro environment permits and how to reduce expenses when it doesn't and a business model that is balance sheet and credit risk like a competitive advantage powered by our technology and industry, leading products, our medium term plan for growth and profitability and a healthy cash position.

Vishal Garg: We are excited to be leaning back into growth in the first quarter of 2024 and excited about the market green shoots we are seeing thus far in Q2. With that, let me now turn it over to Kevin Ryan, our Chief Financial Officer, who will discuss the quarterly performance and our financial strategy. Kevin? Thanks.

Speaker Change: We are excited to be leaning back into growth in the first quarter of 2024 and excited about the market Green shoots we are seeing thus far in Q2 with that let me now turn it over to Kevin Ryan Our Chief Financial Officer, who will discuss our quarterly performance and our financial strategy Kevin.

Kevin Ryan: Thank you, Vishal. As mentioned, we are excited to report that Better is growing again while continuing to be laser-focused on maximizing operating efficiency. While we expect improvement in the mortgage market in the medium term, this will likely take some time. To that end, we will continue to thoughtfully lean into certain growth expenses to drive increased revenue and market share, which will be balanced by continued cost discipline to target reaching profitability in the medium term.

Kevin Ryan: Thank you Vishal as mentioned we are excited to report that better is growing again, while continuing to be laser focused on maximizing operating efficiency, while we expect improvement in the mortgage market in the medium term this will likely take some time.

Kevin Ryan: To that end, we will continue to thoughtfully lean in a certain growth expenses to drive increased revenue and market share, which will be balanced by continued cost discipline to target reaching profitability in the medium term.

Kevin Ryan: I'll turn now to the financial results of the first quarter. This quarter, we made a number of changes to the presentation of our Statement of Operations, as well as reclassifications to the previously reported P&L, to align with the new presentation.

Kevin Ryan: I'll turn now to the financial results of the first quarter. This quarter, we made a number of changes to the presentation of our statement of operations as well as Reclassifications to the previously reported P&L to align with the new presentation with these changes we seek to provide increased transparency to the nature.

Kevin Ryan: With these changes, we seek to provide increased transparency to the nature of revenue and costs and better align our P&L presentation to the public. We reclassified our revenue reporting to line up with key components of our revenue, gain on loans net, net interest income, and other revenue. We also include loan repurchase reserve activity in gain on loans and net interest income generated by a large amount of invested cash in net interest income, both components of revenue.

Speaker Change: <unk> of revenue and costs and better align our P&L presentation to peer public companies, we reclassified our revenue reporting alignment with key components of our revenue.

Speaker Change: Gain on loans net net interest income and other revenue.

Speaker Change: We also includes on repurchase reserves activity in gain on loans and net interest income generated by a large amount of invested cash in net interest income both components of revenue.

Kevin Ryan: We also reclassified our cost line items to align with the key components of expenses. Specifically, loan origination expenses, compensation and benefits, marketing and advertising, technology, general administration, and appreciation and amortization. During the first quarter of 2024, we generated funded loan volume of $661 million, which was above the high end of our prior guidance of approximately $600 to $650 million. We generated revenue of approximately $22 million and an adjusted EBITDA loss of approximately $31 million.

Speaker Change: We also reclassified our cost line items to align with the key components of expenses.

Speaker Change: Typically loan origination expenses compensation and benefits.

Kevin Ryan: Marketing and advertising technology general administrative and depreciation and amortization.

Kevin Ryan: During the first quarter of 2024, we generated funded loan volume of $661 million. This was above the high end of our prior guidance of approximately $600 million to $650 million.

Speaker Change: We generated revenue of approximately $22 million and an adjusted EBITDA loss of approximately $31 million.

Kevin Ryan: Our first quarter funded loan volume was 54% generated through our direct-to-consumer channel and 46% generated through our business-to-business partner channel. It was 80% purchase loans, 12% refinance, and the remainder was HELOC by dollar volume. Now I'll touch briefly on our balance sheet and capital position. We ended the first quarter of 2024 with $509 million of cash, restricted cash, and short-term investments. We believe that our caste position is well in excess of other originators on our side.

Speaker Change: Our first quarter funded loan volume was 54% generated through our direct to consumer channel and 46% generated two or business to business partner channel.

Speaker Change: It was 80% purchase loans, 12% refinance and the remainder was HELOC by dollar volume.

Speaker Change: Now I'll touch briefly on our balance sheet and capital positioning.

Speaker Change: We ended the first quarter of 2024 with $509 million of cash restricted cash and short term investments, we believe that our cash position is well in excess of other originators of our size. Therefore, we are well capitalized for growth as our cash position provides us with the liquidity to <unk>.

Kevin Ryan: Therefore, we are well capitalized for growth as our cash position provides us with the liquidity to continue executing against our vision and corporate objectives. In addition, we retain strong relationships with our financing counterparties to manage mortgage working capital, even in this lower volume environment. As of March 31st, 2024, we had three warehouse facilities for a total capacity of $425 million. I'll turn now to our full year 2024 outlook. We are in growth mode.

Speaker Change: <unk> executing against our vision and corporate objectives.

Speaker Change: In addition, we retained strong relationships with our financing counterparties to manage mortgage working capital even in this lower volume environment as of March 31, 2024, we had three warehouse facilities for total capacity of $425 million.

Speaker Change: I'll turn now to our full year 2020 for outlook.

Speaker Change: We are in growth mode. We continue to expect funded loan volume to increase in 2024, compared with 2023 as we prudently increased customer acquisition spend in the highest returning channels and increase origination capacity to limited hiring and production goals.

Kevin Ryan: We continue to expect funded loan volume to increase in 2024 compared with 2023 as we prudently increase customer acquisition spend in the highest-returning channels and increase origination capacity to meet limited hiring and production goals. For the second quarter of 2024, we expect to generate a funded loan volume of above $800 million. A quarter over quarter increase of more than 20% versus the first quarter of 2024 and more than 50% versus Q4 of 2023.

Speaker Change: For the second quarter of 2024, we expect to generate a funded loan volume of above $800 million.

Speaker Change: Quarter over quarter increase of more than 20% versus the first quarter of 2024 and more than 15% versus Q4 of 2023.

Speaker Change: As we grow and our volume increases we have not forgotten and cost management.

Kevin Ryan: As we grow and our volume increases, we have not forgotten cost management. We will continue to reduce our corporate overhead, our vendor costs, and other costs we'll reduce due to further automation. Accordingly, we expect operating leverage in the business during 2024. As a result of increased growth expenses offset by continued expense reductions, we expect total expenses to be approximately flat in 2024 compared to 2023, with revenue higher. Lastly, we expect customer conversion to improve with continued investment in Tin Man, increasingly variable sales compensation plans, improved purchase product offerings, and investments in real estate agent relations. Thank you for your interest in Better, and I'll now turn it back to the operator for Q&A.

Speaker Change: We will continue to reduce our corporate overhead or vendor costs and other costs were reduced due to further automation.

Speaker Change: Accordingly, we expect operating leverage in the business during 2024.

Speaker Change: As a result of increased growth expenses offset by continued expense reductions. We expect total expenses to be approximately flat in 2024 compared to 2023 with revenue higher.

Speaker Change: Lastly, we expect customer conversion to improve with continued investment in tinder in <unk>.

Speaker Change: Increasingly variable sales compensation plans improved purchase product offerings and investments in real estate agent relationships.

Speaker Change: Thank you for your interest in better and I will now turn it back to the operator for Q&A.

Operator: And the question and answer session. If you have dialed in and would you like to ask a question. Please press star one on your telephone keypad.

Operator: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Ryan Tomasello with KBW. Please go ahead.

Operator: Mr. Han and joined the queue. If he would like to withdraw your question simply press Star one again.

Operator: You are called upon to ask a question and you are listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Operator: Again press star one to join the team and your first question comes from the line of Ryan Tomasello with <unk> W. Please go ahead.

Ryan Tomasello: Good morning, everyone. Thanks for taking the questions.

Ryan Tomasello: Good morning, everyone. Thanks for taking the question. You touched on it in your prepared remarks, but I was hoping you could provide additional color on the traction you're seeing in expanding the B2B channel, how the pipeline there is looking, and generally how conversations are moving around potential new relationships. Sure.

Ryan Tomasello: You touched on it in your prepared remarks, but I was hoping you can provide additional color on the traction you're seeing in expanding the beta E channel.

Ryan Tomasello: Our pipeline there is looking and generally how conversations are moving around potential new relationships.

Kevin Ryan: Sure. Hey, good morning Ryan, it's Kevin. I'm not sure if Rishal will jump in as well.

Ryan Tomasello: Sure Hey, good morning, Ryan It's Kevin.

Vishal Guard: Sure Vishal will jump in as well look at.

Kevin Ryan: I think, look, our dialogue is as good as it's ever been in this channel, and I think there's a few components to that. I think we feel like we're at, or hopefully just came through, the low point of the cycle. So I think our primary targets on B2B are banks. A lot of banks have pulled back on mortgages.

Vishal: Dialogue is as good as it's ever been in this channel and I think there's a few components to that I think we feel.

Vishal: Feel like where we're at or hopefully just came through the low point of the cycle. So I think our primary target some BTB of banks a lot of banks have pulled back in mortgage that's been tough to make money for them, but it's a core offering for their consumers any anybody's in consumer banking also offer mortgages.

Kevin Ryan: It's been tough to make money for them, but it's a core offering for their consumers. Anybody who's in consumer banking wants to offer a mortgage. Our dialogue is very strong. You know, we have a partnership with Emphasis. Emphasis is, you know, like a BPO provider to hundreds of banks across the United States. They've helped us get some additional introductions to people that we were not talking to already.

Vishal: So.

emphasis: And our dialogues are very strong we have a partnership with emphasis in possesses a.

emphasis: Like a BPM provider to hundreds of banks across the United States. They helped us get some additional introductions to people.

emphasis: We're not talking to already obviously when you have a pipeline of people we're talking to the you know the only.

Kevin Ryan: Obviously, we have a pipeline of people we're talking to. You know, the only thing to say about B2B, and we love the channel, we're going to grow the channel, and it's a big focus of ours, is that these things take time. People have legacy technology contracts that run two, three, four years before they would migrate over to our 10-man platform. That's a component of this. They have other strategic priorities, just given what's going on in the banking sector, for example, so that takes some time. So I think our dialogue is as high as it's ever been. Certainly, in the four years I've been here, this is the best dialogue we've ever had.

Speaker Change: The thing to say about <unk>, and we love the channel that we're going to grow the channel and it's a big focus of ours. These things take time people, who have legacy technology contracts that run 234 years before they would migrate over to our tinman platform. That's a component to this.

Kevin Ryan: They have other strategic priorities, just given what's going on in the banking sector. For example, so that takes some time. So I think our dialogue is as high as it's ever been certainly in the four years I've been here. This is the best dialog we've ever had but these things take time, they take time to win the business. They take time to set it up to integrate et cetera, and so we're very hopeful for 2025.

Kevin Ryan: But these things take time. They take time to win business. They take time to set it up, to integrate, et cetera. And so we're very hopeful for 2025, 2026, and we're going to keep pushing ahead with it.

Speaker Change: 2026.

Kevin Ryan: And we're going to keep pushing ahead on it.

Speaker Change: Great and then as a follow up here separate topic. If you could just elaborate on some of the efforts.

Kevin Ryan: Great. And then, as a follow-up here, on a separate topic, if you could just elaborate on some of the efforts you're making, on some of the efforts underway to improve conversion, any specific changes you're making throughout the funnel, and within the Tinman platform that I think you alluded to, Kevin. Any early stats there you can share around conversion, where it was, where it is, could be helpful, or generally where you think you could go over time if some of these efforts are successful? Sure.

Vishal: Some of the efforts underway to improve conversion any specific changes youre, making throughout the funnel and within the <unk> platform that I think you alluded to Kevin.

Kevin Ryan: Any early stocks there you can share around conversion, where it was where it is could be helpful or generally where you think it could go over time, if some of these.

Kevin Ryan: These efforts are successful.

Kevin Ryan: That's a great question. We've seen some dramatic improvements in conversion as we have been, particularly in the purchase product, as we've been hiring experienced loan officers and getting them up and running. You know, we're taking loan officers that were doing one to two loans a month, and they're coming on board, and within two to three months, we're able to get them to do ten loans a month. So that's, you know, a dramatic improvement in their productivity.

Kevin Ryan: Sure. Thank you.

Kevin Ryan: Sure.

Kevin Ryan: Thank you.

Kevin Ryan: It's a great question, we've seen some dramatic improvements in conversion.

Speaker Change: As we have been particularly in the purchase product as we've been hiring experienced loan officers and getting them up and running.

Speaker Change: We're taking loan officers that we're doing one to two loans are monthly they are coming on board and we're in two to three months to able to get them to do 10 loans a month. So that's a dramatic.

Kevin Ryan: Improvement in their productivity.

Kevin Ryan: One of the things that these experienced loan officers know how to do that I would, you know, admit that our unexperienced loan officers that we hired, primarily for our refinance business in the first eight years of the company, didn't know how to do was talk to the realtor and inject confidence into the product. So historically, you know, one out of five deals where Better was the pre-approval provider would be where Better ends up being the loan that gets funded.

Speaker Change: One of the things that they've experienced loan officers know how to do that I would.

Kevin Ryan: I admit that are unexperienced loan officers that we hired you primarily for our refinance business in the first eight years of the company didn't know how to do was talk to the realtor and inject confidence into the product. So it has historically.

Speaker Change: One out of five deals were better was the preapproval provider would would be the where better ends up being the loan that gets funded and so that means for every five pre approvals. We were issuing only one of them was actually turning into a loan if that person went to buy a house and so.

Kevin Ryan: And so that means, you know, for every five pre-approvals we were issuing, only one of them was actually turning into a loan if that person went to buy a house. And so the other four were getting funded by other people. And what we're seeing now is a dramatic change in that. So we think that that's going to improve our unit economics dramatically because, you know, while we acquire customers, we're now going to be able to generate revenue from those customers in a much more meaningful manner. And we look forward to sharing that data with you in greater detail as we start to make progress on the experienced loan officer hiring that we're doing.

Kevin Ryan: So the other four were getting funded by other people and what we're seeing now is a dramatic change in that so we think that that's going to improve our unit economics dramatically because.

Kevin Ryan: While we acquire customers, we're now going to be actually able to generate revenue from those customers in a much more meaningful manner and.

Kevin Ryan: And we look forward to sharing that data with you in deeper granularity.

Kevin Ryan: As we start to continue to make progress on the.

Speaker Change: The experienced loan officer hiring that we're doing.

Kevin Ryan: Great. Thanks for taking the questions.

Ryan Tomasello: Great. Thanks for taking the question.

Ryan Tomasello: Your next question comes from the line of Freshness Smith with Jpmorgan. Please go ahead.

Operator: Your next question comes from the line of Reginald Smith with J.P. Morgan. Please go ahead.

Reginald Smith: Hey, good morning, and thanks for taking the question.

Reginald Smith: Hey, good morning, and thanks for taking the question. I guess it's kind of a bigger picture question, thinking about the HELOC product. It feels like, just anecdotally, it's a product that consumers haven't really used or looked at in probably 15, almost 20 years. A question for you guys is... How aware do you think consumers are of the product, and does it require a level of education to get people on board with it now and have a follow-up?

Reginald Smith: Okay.

Speaker Change: It's kind of a more of a bigger picture question.

Reginald Smith: And about the HELOC product.

Reginald Smith: It feels like just anecdotally, it's a product that consumers haven't really used.

Reginald Smith: Looked at in probably 15, almost 20 years.

Speaker Change: A question for you guys as is.

Reginald Smith: How aware do you think consumers are of the product and does that require a level of education to get people on board with it now.

Reginald Smith: And I have a follow up thank you.

Vishal Garg: You're 100% right. We have to explain HELOC and HELONES to an entirely new generation of American homeowners, as well as re-explain it to a generation of homeowners that haven't had access to it for almost 15 years. And, as you know, there really isn't a dominant HELOC provider in the market. There's no brand associated with HELOC.

Reginald Smith: You're 100% right we have to.

Speaker Change: Explain helocs and he loans to an entirely new generation of American homeowners as.

Speaker Change: As well as re explain it to a generation of homeowners that you haven't had access to it.

Vishal Garg: For almost 15 years.

Vishal Garg: And as.

Vishal Garg: As you know there really isn't a dominant HELOC provider in the market. There is no brand associated with HELOC and so all of US are trying to do customer education and.

Vishal Garg: And so, all of us are trying to do customer education and help consumers make the right choice between credit cards and personal installment loans, which now have had almost 10 years of education on the personal installment loan side, and obviously, like, 50 years of education on the credit card side. You know, we're trying to re-educate these consumers. We think there's huge potential out there, and we believe that the game has yet to even start.

Vishal Garg: Help consumers make the right choice between credit cards, and personal installment loans, which now have had almost 10 years of education on the personal installment loan side and obviously like 50 years of education on the credit card side.

Vishal Garg: We're in the first inning of HELOCs, and we've got an industry-leading product with the One Day HELOC, where we're able to take a consumer from a click to a commitment letter on a HELOC within one day, which is, you know, unrivaled in the industry. And we believe that, as we are able to ramp up our marketing budget, explain the HELOCs to the consumers, and scale that, there's just significant growth ahead for us in that.

Speaker Change: To reeducate. These consumers we think there is huge potential out there and we believe that the game has yet to even start we're in the first inning of Helocs and we've got a industry leading product with one day HELOC, where we're able to take a consumer from a click to a commitment.

Vishal Garg: Letter on a HELOC within one day, which is unrivaled in the industry and we believe that as we are able to ramp our marketing budget explained the HELOC to the consumers scale that there's just significant growth ahead for us in that the.

Vishal Garg: The HELOC product also is very similar to the refinance product in that there isn't any realtor intermediation. And so we believe that in HELOCs, we can, long-term, achieve the same kind of market share that we used to achieve in refinance, which is, you know, around 2%. So that's, you know, and that's just to get started on the HELOC product as we ramp it up and make it more of a focus here at the company.

Vishal Garg: The HELOC product also is very similar to the refinance product in that there isn't any realtor intermediation and so we believe that in HELOC weaken long term achieved the same kind of market share that we used to achieve in refinance which as you know around 2%. So that's you know and that's just to get started.

Speaker Change: On the HELOC product as well as we ramp it up.

Speaker Change: And make it more of a focus here at the company we will as.

Kevin Ryan: Yeah, I mean, we'll get like data on web traffic and stuff, people searching for what is a HELOC, how, you know, how can it help me is really high compared to a traditional mortgage. So, as Michelle said, Reggie, we 100% agree with you.

Vishal Garg: We get data on web traffic and stuff people searching for what is a HELOC.

Kevin Ryan: How can you help me is is really high compare to a traditional mortgage so as Vishal said, Randy we are 100% agree with you and we look in are higher for longer scenario. It seems more and more likely just given economic data very few home transactions.

Kevin Ryan: And we look, in a higher for longer scenario, which seems more and more likely just given economic data, very few home transactions, high HPA, so people have a lot of equity in their homes, and given consumer debt, as you've kind of jumped through the COVID stimulus, this is a very attractive alternative, as Michelle said, to credit cards, personal loans, etc. So our gut is the industry will grow meaningfully. 12 months, meaning HELOCs, and we have a really big part to play in that, and we have a one-day offering, so we think you're the best offer. Now, that makes a lot of sense.

Michelle: Hi, HPA, so people have a lot of equity in their homes and given consumer data as you've kind of run through the Covid stimulus are this is a very attractive alternative as Michelle said to critical as personal loans et cetera. So.

Michelle: God is the industry will grow meaningfully over this next 12 months, meaning helocs.

Michelle: We have a really big part the playing out and we believe we have a <unk>.

Michelle: One day offerings. So we think we have the best offering in the marketplace.

Kevin Ryan: No that makes a lot of sense and I guess, if we could dig in a little bit deeper so thinking about today.

Reginald Smith: And I guess if we could dig in a little bit deeper. So thinking about today, how you get a HELOC customer, I would imagine that, like you said, maybe they're searching for it, and they're coming in that way. Is that the case?

Reginald Smith: You get a customer I would imagine that like you said, maybe they are searching for it and they are coming in that way is there is that the case or are you, maybe partnering or as an opportunity maybe to partner with other financial institutions that may offer.

Reginald Smith: Or are you maybe partnering, or is there an opportunity maybe to partner with other financial institutions that may offer, I don't know, personal loans that are turning those people down? It seems like there's an opportunity to collaborate. And I guess I'm curious, how are you thinking about that? Am I totally off about that? Because there seems to be, I cover personal loan companies, and they're tightening up. And this product, the HELOC product, has a lower interest rate than personal loans, credit cards, et cetera. So my question is, how are you thinking about collaborating with others in the industry?

Reginald Smith: I don't know the personal loans that are turning those people down there.

Reginald Smith: It seems like Theres, a theres the opportunity to kind of collaborate and I guess I'm curious like how are you thinking about that.

Reginald Smith: Totally off on that because there seems to be kind of a personal loan companies and they're tightening up in this product and HELOC product lower interest rate than personal loans credit cards et cetera. Like so my question is how are you thinking about collaborating with others in the industry.

Vishal Garg: We're thinking about collaborating with the personal installment loan players. We're thinking of collaborating with the folks that, now that we have the one-day HELOC product, usually would have gone to the home installment loan or home improvement loan players, and we're working on collaborating with a few banks on HELOC as a service where these banks have mortgage divisions that are fairly active and have a large servicing book but don't have a HELOC product to offer to those customers. So we're out, you know, pitching that to a broad range of financial institutions.

Speaker Change: We're thinking about collaborating with the personal installment loan players Ah, we're thinking of collaborating with.

Vishal Garg: The folks that now that we have the one day HELOC product that usually would have gone to the home installment loan or a home improvement loan players and were working on collaborating with a few banks on HELOC as a service where these banks have mortgage divisions that are fairly active and have a large service.

Vishal Garg: <unk> book, but don't have a HELOC product to offer to those customers. So we are out pitching that too across the broad range of financial institutions.

Reginald Smith: Sounds like a good opportunity. Thanks for taking my question.

Vishal Garg: Thank you.

Reginald Smith: Taking the question.

Reginald Smith: Yeah.

Reginald Smith: Your next question comes from the line of Jamie Friedman with Susquehanna.

Operator: Your next question comes from the line of Jamie Freedman with Susquehanna.

Operator: Yes.

Jamie Freedman: Hi, Good morning, I, just had a kind of higher level question and some of this has been addressed with <unk> question earlier, but I was wondering if you could.

Jamie Freedman: Hi, good morning. I just had a kind of higher-level question, and some of this has been addressed with Reggie's question earlier, but I was wondering if you could share your perspective as to which product areas, in general, you're expecting will drive volume growth in 2024 and beyond.

Jamie Freedman: Share your perspective as to which product areas in general you're expecting will drive the volume growth in 2024 and beyond.

Kevin Ryan: Yeah, I mean, I'll start and then I'll jump in. Certainly HELOC. If we think about, you know, we're guiding up a bunch again, Q2 versus Q1, which is up a bunch, Q1 versus Q4. I think HELOC, cash out refi, is a big part of it, right? And the purchase market remains slow. We're going to grow there as well. We're going across the board actively 20% plus a quarter, but HELOC will be a big part of it. Yep.

Michelle: Yeah, I mean, I'll start and Michelle jump in certainly HELOC, if we think about.

Kevin Ryan: We are guiding.

Kevin Ryan: We said, we're guiding up a bunch again Q2 versus Q1, which is up a bunch Q.

Speaker Change: One versus Q4, I think HELOC cash out refi.

Speaker Change: A big part of it right I mean, the purchase market.

Speaker Change: So we're clearly going to grow there as well we're going across the board actively.

Kevin Ryan: 20% plus a quarter, but he will also be a big part of it.

Vishal Garg: Yep, I actually have very high hopes for the purchase product, particularly as we enter into home buying season and as we onboard the experienced loan officers to help address the conversion issues. We've historically had on the purchase product that plus our efforts to recruit realtors onto the better agent match program and the better do a program are likely to start paying significant dividends in the coming quarters ahead. Both in twenty four and looking into twenty five, particularly for the purchase side where I see purchase today from a growth and unit economics perspective is pretty similar to where I saw refi back in twenty, eighteen, twenty, nineteen when we were small, but growing quite rapidly our position in the refi market and this was before even cobit hit and the rates dropped rates were higher than, but we were able to make significant, meaningful market share gains leveraging the technology and so I see purchase today very similar to where we were with refine twenty, eighteen, twenty, nineteen and I think there's a lot a lot of room to grow on.

Speaker Change: I actually have very high hopes for the purchase product, particularly as we enter into home buying season.

Vishal Garg: And as.

Vishal Garg: As we onboard the experienced loan officers to help address the conversion issues. We've historically had on the purchased product.

Vishal Garg: That plus our efforts to recruit realtors onto the better agent match program and the better do a program.

Vishal Garg: Are likely to start paying significant dividends in the coming quarters ahead, both in 'twenty, four and looking into 'twenty five, particularly for the purchase side, where I see purchased today from a growth and unit economics perspective is pretty similar to where I saw refi back in 2018 2019, when we were small.

Vishal Garg: All but growing quite rapidly.

Vishal Garg: Our position in the refi market and this was before even COVID-19 hit and the rates dropped our rates were higher than but we were able to make significant meaningful market share gains.

Vishal Garg: Leveraging the technology and so I see purchase today very similar to where we were with refi in 2018, 2019, and I think there's a lot a lot of room to grow on that.

Vishal Garg: Great. Thank you for the perspective. I appreciate it. All the best.

Speaker Change: Great. Thank you for the perspective I appreciate it all the best.

Operator: There are no questions. I will now turn the conference back over to Hannah for closing remarks.

Speaker Change: Good question.

Vishal Garg: Okay.

Hannah: Okay, No closing remarks.

Speaker Change: Thank you everyone for joining us for the earnings update and we really look forward to seeing you again next quarter.

Hana Khosla: Thank you everyone for joining us for the earnings update, and we really look forward to seeing you again next quarter.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

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