Q4 2024 Better Home & Finance Holding Co Earnings Call
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Hello, Ladies and gentlemen, thank you for standing by today's call will start in three minutes.
Until then you will hear music hold thank you.
Yeah.
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Speaker Change: Hello, and welcome to the better home in Finance holding company fourth quarter full year 'twenty 'twenty four results call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the Speakers' remarks, there will be a question and answer session and if you would like to ask a question. During this time. Please press star one on your telephone keypad.
Speaker Change: I'd now like to turn the conference over to Hanna Coleslaw, Vice President of corporate Finance and Investor Relations you may begin.
Speaker Change: Welcome to better home in finance, holding company's fourth quarter and full year 2024 earnings Conference call. My name is <unk> and I'm, the Vice President of corporate Finance and Investor Relations at better joining me on today's call are Michele Guard founder and Chief Executive Officer of better Kevin Ryan Chief Financial.
Speaker Change: Officer of butter, and Ryan Grant co founder and president of retail lending at Neal Hallmark.
Speaker Change: In addition to this conference call. Please direct your attention to our fourth quarter and full year earnings release, which is available on our Investor Relations website also available on our website is an investor presentation.
Speaker Change: 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.
Speaker Change: <unk> 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.
Speaker Change: 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.
Speaker Change: These non-GAAP financial measures are reconciled to GAAP financial measures in today's earnings release, and Investor presentation, both of which are available on the Investor Relations section of <unk> website, and when filed in our annual report on Form 10-K filed with the SEC.
Speaker Change: More information as of and for the period ended December 31, 2024 will be provided upon filing our annual report on Form 10-K, with the SEC I will now turn the call over to Vishal.
Vishal: And welcome to our fourth quarter and full year 2024 earnings call. We appreciate everyone joining us today and for your continued support as we drive towards our mission to make homeownership better faster and easier for our customers by building a technology platform that revolutionized the homeownership experience, we continue to make good progress towards our vision.
Vishal: And in which every customer can seamlessly buy sell or refinance it sure and improve their home digitally online instantly.
Vishal: I'd like to start by highlighting some of our key achievements. We went into 2024 with the goal of leaning into growth and AI to drive increased volume and revenue balanced with ongoing efficiency improvements diversification of our distribution channels and corporate cost reductions.
Vishal: We executed against these objectives growing full year funded loan volume by 19% year over year revenue by 50% year over year, and reducing our adjusted EBITDA losses by 26% year over year.
Vishal: We made some big bets in tinman, AI and launched a distributed retail channel through neo powered by better both of which are showing early positive momentum.
Vishal: Even in a market that remained challenged with historically low housing affordability and persistently high mortgage rates, we made progress in 2024 against the roadmap we set out at the start of the year.
Vishal: For the full year 2024, we did $3 6 billion in funded loan volume of $108 million of revenue and had an adjusted EBITDA loss of $121 million.
Vishal: In the fourth quarter funded loan volume was $936 million a year over year increase of 77% driven by growth across all three main product categories purchase refinance and second lien loans.
Vishal: On a sequential quarter over quarter basis funded loan volume was down approximately 10% given normal seasonal slowness in the fourth quarter purchase market Q.
Vishal: Q4 revenue was $25 million compared to $18 million in the fourth quarter of last year and $29 million in the quarter prior.
Vishal: We continue executing on strategies to increase conversion through additional products and services as well as improved sales efficiency to drive higher customer pull through.
Vishal: Through 2024, we continue to increase revenue per loan through pricing and marketing channel optimization, resulting in year over year gain on sale margin improvement from 195% in 2023 to $2 one 7% in 2024.
Vishal: As we look forward to 2025 and beyond our strategic priorities remain largely consistent with those we've discussed with you on prior earnings calls.
Vishal: Our first priority is continuing to thoughtfully lean into growth against which we showed progress through 2024.
Vishal: In the fourth quarter year over year funded loan volume growth was driven by increases across all three of our main.
Vishal: Product categories with home equity products, and refinance loans being the largest growth drivers year over year purchase loan volume increased 25% and refinance loan volume increased 611% from what was a seasonally and historically low quarter at the end of 2023, our year over year, HELOC and home equity loan.
Vishal: <unk> increased 416% in the fourth quarter of 2024.
Vishal: Transunion recently reported that the overall number of HELOC and he loan originations increased 10% in the third quarter, whereas better grew origination volume in the third quarter by 619%.
Vishal: So if HELOC market trends remained stable or even improved in Q4, we believe that our current triple digit growth is continuing to outpace the industry in the fourth quarter as our superior offering drive gains in market share.
Vishal: On a sequential basis versus Q3, Q4, refinance volume increased 34% home equity loan volume increased 3% and purchase loan volume decreased 10% due primarily to seasonally slower home buying in the fourth quarter of the year.
Vishal: While the mortgage market saw improvement in Q4 compared to the same period in 2023 30 year fixed rate mortgage rates remained in the high sixes to low 7% range, putting continued strain on mortgage demand, we expect near term rates to remain elevated driving continued demand for our home equity products are.
Vishal: Our second priority is continuing to reduce expenses and improve operational efficiency with the goal of reaching profitability in the medium term.
Vishal: In the fourth quarter total expenses remained approximately flat versus Q3. However included in these was approximately $17 million of nonrecurring restructuring expenses attributed primarily to the wind down of our UK businesses as well as approximately $4 million associated with the termination of certain leases.
Vishal: Excluding these one time expenses total expenses decreased approximately 24% quarter over quarter due to expense management initiatives across all major expense line items, we reduced adjusted EBITDA losses by approximately $11 million or 28% in Q4 compared to Q3, even with lower revenues due to a seasonally slower quarter.
Vishal: Specifically, we decreased our loan origination expenses by 28% decreased our compensation related expense by 21% and decreased marketing and advertising by 27%.
Vishal: Per ton only 10% decline in volume demonstrating the impact of the AI and automation initiatives that drove operating leverage within the business.
Vishal: Utilizing Tim and capability, we have been able to automate time and labor intensive components of the mortgage process and reduce our cost to originate by over 35% of the industry average. We believe our continued investments in technology and AI will significantly drive down costs further, resulting in improved operating efficiency and superior customer experience.
Vishal: Continuing our discussions from the past few quarters around our investments in AI, we are seeing benefits from further expanding Betsy the first AI voice space loan assistance for the U S mortgage industry, which leverages large language model to take a customer through preapproval and now rate quote and rate lock autonomously.
Vishal: That seems program to verbally communicate with consumers to answer mortgage application inquiries and to collect and verify outstanding application data similar functions traditionally performed by sales staff with the goal of enabling faster service times enhanced software capabilities improve customer engagement and greater sales efficiency.
Vishal: In terms of tangible numbers Betsy went from approximately 5000 customer interactions in June of 2024 to completing over 115000 consumer interaction in February of 2025, a growth rate of over 20 ex all while we kept increasing the range of functions that Betsy performance.
Vishal: Last quarter, we shared with you in early clip of Betsy interacting with the customer I'll call. We're excited to now show you a demonstration of Betsy taking a customer all the way through mortgage rate lock, which would traditionally have involved separate conversations with up to three sales team members and multiple phases of manual data entry through 10 Med technology. This can now be completed 100.
Vishal: Percent autonomously through AI 24, seven that we meet the customer anywhere and anytime they want.
Vishal: Hi, This is Betsy from better mortgage on a recorded line, whom do I have the pleasure of speaking with today Hi. This is Corey.
Speaker Change: Great to meet you are you looking to buy a new home refinance get cash from your homes equity where can I help with something else I was wondering if you could tell me what the HELOC interest rate is today.
Speaker Change: The lowest interest rate for our home equity line of credit is currently 7%.
Speaker Change: Would you like to start an application to find your personalized rate. It will only take a few minutes, maybe I'm remodeling my kitchen am I allowed to use <unk> to do that or what else can I do with the money.
Yes, you can use funds from our home equity line of credit for remodeling your kitchen.
Speaker Change: HELOC provides flexibility, allowing you to use the funds for various purposes, including home improvement.
Speaker Change: Do you like to start an application for a HELOC, yeah, that'd be great, let's do it.
Speaker Change: Wonderful to start the application I will need to confirm your full name.
Speaker Change: Could you. Please spell out your first and last name for me.
Corey: Yes, it's Corey.
Speaker Change: And then the last name is Smith.
Speaker Change: M H.
Cory: Thank you to confirm that C O R Y S M.
Speaker Change: Is that correct, yes, that's correct.
Corey: Great Corey.
Corey: Now could you. Please provide the property address for the home equity line of credit.
Corey: Yes, It's 67 Dash 10 quite street in <unk>, New York $113 75.
Corey: Just to confirm that is 67 110 client Street Forest Hills, New York 113 hundred 75 is that correct, yes, that's correct.
Corey: Is this property your primary residents a second home or an investment property.
Corey: This is my primary residence.
Corey: Thank you could you. Please provide the estimated value of your property.
Yes, it's around half a million dollars.
Corey: Now could you. Please provide your email address I'll spell it back to you to ensure its correct.
Smith: It is C. S M I T H 175 at Gmail Dot com.
Smith: Thank you to confirm that's C. S M. I T. H 175 at Gmail Dot Com is that correct, yes, that's perfect.
Smith: Would you like to use the phone number you are calling from to continue the application.
Smith: Yes, that'd be perfect.
Smith: Do you authorize better mortgage to verify your credit with a soft Paul and consent to receive electronic loan documents from us.
Smith: Sure.
Smith: Thank you.
Speaker Change: To complete your soft credit pool, only the last four digits of your social security number rest assured we take your privacy and security very seriously we funded over $100 billion in loans and protecting our borrowers personal information is our top priority you can see the numbers out loud or enter them on your keypad.
Smith: Just let me know when you're done.
Smith: Excellent.
Smith: 6666.
Smith: Thank you Corey.
Smith: Now, let's discuss your income.
Smith: Do you have income from employment self employment or any other sources.
Smith: Yeah, So I have a W. Two job, where I make about 100000 a year.
Smith: <unk> for Uber part time, and make maybe $25000 a year.
Smith: Thank you for sharing that.
Speaker Change: Have you received any other sources of income such as bonuses alimony or rental income.
Smith: Nope that's it.
Smith: Thank you for providing your income information would.
Speaker Change: Would you like to add a co borrower to your application.
Smith: No. Thank you.
Smith: Do you currently have any mortgages on the property.
Smith: Yes, I do actually.
Smith: I see a mortgage with P&C mortgage is this loan related to 67% to 110 client Street.
Smith: Yes. It is.
Smith: Is the mortgage with PNC mortgage the primary mortgage on 67% to 110 client Street.
Smith: Yes. It is.
Smith: For confirming.
Smith: Now, let's move on to the next loan I see a $35000 home equity line of credit with Dow Chemical credit Union.
Smith: Is this loan related to 67 110 client Street.
Smith: Yes, it is actually.
Smith: Congratulations it looks like you've been approved would you like to lock your rate.
Smith: Yeah, that'd be great, let's do it.
Speaker Change: Excellent first can you let me know how much cash you would like to receive from your home equity line of credit.
Speaker Change: I think we need about $90000.
Speaker Change: Great, let's find the perfect right for you.
Speaker Change: You are approved for a home equity line of credit with a seven 5% interest rate.
Speaker Change: This loan comes with $924 in fees. However, if you use your home equity line of credit to pay off your current home equity line of credit with Dow Chemical there is an option for a 7% interest rate and this only comes with $234 in fees how would you like to proceed.
Speaker Change: <unk>.
Speaker Change: I would like to pay off my Dow chemical and get the lower interest rates.
Speaker Change: Terrific I've submitted your right to be locked at 7% would you like me to transfer you to your loan consultant.
Speaker Change: No that's okay.
Speaker Change: No problem.
Speaker Change: <unk> check your email for important documents related to your home equity line of credit.
Speaker Change: Thank you for trusting better mortgage with your home Finance you can reach me $24. Seven if you have any further questions I'm always here to help.
Speaker Change: Awesome. Thank you very much for your help I appreciate it.
Speaker Change: Youre very welcome Cory I'm glad I could assist you have a wonderful day.
Speaker Change: You too bye bye.
Speaker Change: I want to highlight for you what is differentiated about Betsy from other AI bots that you might have seen across financial services. This is not just an essay queue bot or an appointment scheduler, which we have seen other mortgage companies utilize.
Speaker Change: Those typically perform a single function and interact with users only over chat versus what's the reason for these limitations for other mortgage companies is that they are only connected to a single software system out of the 7% to eight systems typically used by most mortgage comps. Additionally.
Speaker Change: Additionally, most of these legacy software systems and origination and servicing are built on 19 eighties architecture greatly limiting the functionality of Aig's Betsy.
Speaker Change: <unk> is built on Tin man, which is an end to end point of sale system CRM system pricing engine eligibility engine loan origination system insurance engine appraisal management platform QC system and clothing platform all in one <unk>.
Speaker Change: Everything that the customer or our loan teams do is captured in this platform and every fact about the customer or the property is stored in a centralized facts graph.
Speaker Change: This enables <unk> to very efficiently have full context, and going back and forth across any part of the mortgage process with the consumer like a human with most other mortgage companies, where they to implement a full stack AI agent with experienced massive latency pending information back and forth between the AI agent and the multiple systems involved.
Speaker Change: Latency that would be so slowed that a typical consumer with just two now because of the tinman end to end platform Betsy can handhold customers from initial inquiry through rate lock all the way to fund in a single interface.
Speaker Change: In other application of AI, we have been scaling is using our 10 million AI assistant performing the function has traditionally done by an underwriter in particular qualification of income assets and credit to prepare and underwriting decisions as you might remember by automating significant elements of the document collection data extraction and underwriting calculation, we have been able to grow our one day mortgage.
Speaker Change: Not to be over 70% of our mortgage volume with an average time from locked the commitment letter of eight hours a revolution in mortgage lending when getting a commitment letter can take up to 45 days and the most recent quarter. We began leveraging AI review to bring the process down to under a minute in certain cases. This is pretty astounding, we're going from one day mortgage to lessen.
Speaker Change: One minute mortgage using AI. Our goal is to grow AI underwriting review to over 75% of our locked by the end of 2025 dramatically decreasing our fulfillment labor cost per loan and Debottlenecking one of the critical areas of the mortgage process.
Speaker Change: Third area in which we have made significant progress within mortgage underwriting is the intelligent routing of appraisal requirements and AI underwriting of title insurance through advances in this process, we have begun enabling instant title and appraisal for a small percentage of our locks, which we hope to continue increasing over the coming months.
Speaker Change: We believe the potential for a customer can be fully underwritten for a mortgage across credit income asset title and appraisal within minutes of going into a contract on a home is not very far away.
Speaker Change: The core message is we are pressing harder on the massive advantage that we believe we have with respect to AI agents within our command platform in light of the changes we are seeing in the regulatory climate, we have seen a substantial increase in friendliness towards AI from a regulatory perspective over the past few months.
Speaker Change: <unk> are off for us with respect to AI. This past month, we implemented Betsy as the primary customer interaction points in one state for refinance loans with the human loan officer be on standby as a guardrail. We believed that Betsy has the potential to reduce sales cost per loan by $2000 per fund and <unk>.
Speaker Change: Operations cost by $4500 per fund, which would represent us getting to a fraction of the industry is spending and we are just getting started.
Speaker Change: Finishing with our third priority of diversifying our distribution channel through growing our <unk> business. We continue to see demand for our technology platform from new partners with strong brands, who are looking to offer mortgages to their customers in a cost effective way or improve the fulfillment efficiency of their existing mortgage business.
Speaker Change: First off I want to start off by updating you on our partnership with ally Bank.
Speaker Change: And I have been engaged in a mortgage partnership for over five years and we are proud of what the two companies built together to revolutionize white label mortgage technology offer.
Speaker Change: Around the end of 2020 for ally made a strategic decision to exit the mortgage business altogether and as a result, we began winding down our ili volume in the fourth quarter we.
Speaker Change: We expect to highlight to be fully exited by the end of Q2 of this year.
Speaker Change: Alongside winter seasonality that wind down contributes to volume being lower in the fourth quarter compared to the third quarter of 2024.
Speaker Change: Moving on to the growth update last quarter, we announced the launch of Neo home loan powered by better and I am excited to report that we are making great early progress towards our goal of diversifying better distribution and leveraging tinman to power local loan officers by removing friction from their fulfillment process and expanding their capacity to help more customers need.
Speaker Change: Neo powered by better will also leverage <unk> AI technology, and digital lead funnel to Supercharge <unk> loan officer teams, who have demonstrated track records and customer service excellence and strong reputations within the communities they serve.
Speaker Change: Betsy individually branded for each retail loan officer at Neal as well as lead routing of early stage purchase customers from better DTC channels. We can be more effectively served by our loan officer in their neighborhood is expected to dramatically improve efficiency and drive conversion gains across both DTC and our retail distribution channel.
Speaker Change: Since beginning production in January 2025, we have on boarded approximately 110 neo loan officers across 53 branches to date Neil powered by better has served approximately 220 families equating to $95 million in funded loan book.
Speaker Change: On Neal home loans, we are seeing an average gain of sale margin of approximately 365 basis points compared to our better dot com gain on sale margin of 217 basis points in 2024.
Speaker Change: With Neal I am excited about the unique opportunity to unlock key parts of the market that has historically been challenging for online originators without established local footprint to serve.
Specifically in the purchase mortgage segment and for certain loan types like FHA, VA downpayment assistance programs and buy down programs.
Speaker Change: Joining me today is Ryan <unk> co founder and President of retail lending at Neal home loans, who would like to share why he is excited about the opportunity. We have ahead of us with neo powered by better.
Ryan Grant: Thank you Joel our team here in your home loans is incredibly excited to now be powered by better. This partnership is more than just the collaboration is a fundamental shift in the mortgage industry.
Ryan Grant: We believe that together, we are creating the most valuable mortgage platform not just for our clients and our business partners, but for every mortgage professional in America.
Ryan Grant: New home loans was founded on a simple but powerful idea. Thank you.
Ryan Grant: The expectations of what a mortgage company should be for decades. The mortgage industry is focused on selling debt, leaving many professionals questioning the real value they provide and.
Ryan Grant: And we set out to do more to guide clients well before they purchase a home and continuing to proactively support them for decades, after helping them build long term wealth.
Ryan Grant: However, we faced significant challenges from an entrenched industry.
Ryan Grant: Outdated technologies made processes and efficient scalability was costly unlimited, we struggled to get our message in front of enough clients and for local mortgage professionals to the industry lacks financial transparency, which created a misalignment of priorities.
Ryan Grant: These were all major barriers for the partnership of Neo powered by better is solving them all.
Ryan Grant: That's why we're so proud of this opportunity as it positions us to truly transform the industry.
Ryan Grant: You see for years as mortgage professionals, we found success, despite technology not because of it.
Ryan Grant: And when we visited Betters headquarters we saw tinman.
Ryan Grant: And we were stunned.
Ryan Grant: Better has built technology that matches human level performance across a range of mortgage tasks something that no one in our industry had seen before.
Ryan Grant: And with this AI powered infrastructure Neocon now combine the best of both worlds the speed efficiency and automation that clients want with.
Ryan Grant: With the advice strategy and long term commitment from our local mortgage adviser that they need and deserve.
Ryan Grant: This is an absolute game changer.
Speaker Change: Now our strategy at Neocon by better is built on three key beliefs.
Speaker Change: First we will drastically reduce loan costs and increase the scalability of our teammates which is a major problem for most of the mortgage industry.
Speaker Change: With 10 men and Betsy our teams can efficiently serve more families with more value and at a much lower cost.
Speaker Change: Allows us to compete with discount lenders without sacrificing value.
Speaker Change: Our second key beliefs is that we can help subsidize the local mortgage professional with lead generation, but it's become much harder in the past few years.
Speaker Change: The market has shifted making it harder for mortgage advisers to find clients that need help.
Speaker Change: And when we learned that roughly 30000 people per month are in acquiring with better about purchasing a home.
Speaker Change: New that our team of highly trained advisors to convert more of these curious prospects into actual homeowners.
Speaker Change: Now we're going to begin scaling lead routing in April with a short term goal of 10% conversion, which is roughly a 500% increase over the current levels better experiences and it's D to C channel.
Speaker Change: We're also excited to be able to connect these homebuyers with the best real estate agents across the country and to be able to help more of their clients as well.
Speaker Change: And between the increase lead conversion and working with more of the best agents in our local markets. We expect that the cost of acquiring a client can be drastically reduced.
Speaker Change: Now our third key beliefs is that by creating the industry's first truly transparent partnership lending model, we can empower local mortgage professionals to help the confidence knowledge and financial understanding to operate at much higher levels and.
Speaker Change: And by doing this Neal tower by better is creating a natural alignment of interests between each team member in the organization as opposed to missile line priorities the mortgage professionals about to deal with for decades prior.
Speaker Change: And lastly, we are excited to be able to share more about new home loans powered by better with local mortgage professionals across the country.
Speaker Change: We expect that when they see and start to understand this combination of technology efficiency scalability and growth through lead generation and referral partnerships.
Speaker Change: But the best and brightest will want to partner with us in our efforts to completely change and improve the mortgage industry.
Speaker Change: In 2024, our neo team funded approximately 2 billion in mortgage volume while remaining profitable now.
Speaker Change: Now powered by better we're positioned to scale, even faster drive greater profitability and deliver even more impact.
Speaker Change: The other we're redefining mortgage lending and this is just the beginning.
Speaker Change: Thank you and with that I'll turn it back over to usual.
Speaker Change: Thank you Ryan we are so pumped to have the neo team on our platform and as our partners as we disrupt the mortgage industry together looking now towards 2025 and beyond the medium term opportunity is very exciting we remain focused on enhancing our go to market with growth being our Northstar alongside continued expense management and channel diversification.
Speaker Change: We will continue to invest in tinman AI to improve the customer experience and further drive down labor cost, making our platform more efficient and scalable driving the business to profitability in the medium term 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 discussed in 2024, even through a continued challenging market environment, we made great progress towards our goals of driving increased volume and revenue balanced with ongoing expense management and improved efficiency.
Kevin Ryan: In the fourth quarter of 2024, we generated funded loan volume of $936 million.
Kevin Ryan: Revenue of $25 million and an adjusted EBITDA loss of $28 million total GAAP net loss was approximately $59 million.
Kevin Ryan: Our fourth quarter funded loan volume was 81% generated through our DTC channel and 19% generated through our <unk> partner channel and was 62% purchase 18% home equity loans and the remainder by dollar volume was refinanced.
Kevin Ryan: In addition, we are experiencing early success with our UK Bank the bank in Birmingham.
Kevin Ryan: With scaled loan originations over 10 fold from December 2023 to December 2024, as we have implemented our technology in the U K.
Kevin Ryan: We expect to more than double U K bank originations again in 2025, as we deploy AI with the goal of building the leading AI driven specialist mortgage bank in the United Kingdom.
Kevin Ryan: Turning now to our outlook for full year 2025.
Kevin Ryan: We remain focused on managing towards profitability in the midterm.
Kevin Ryan: And we expect to drive growth through efficiency from Tinman, AI distribution channel diversification and optimized marketing.
Kevin Ryan: While balancing these growth expenses with further corporate cost reductions.
Kevin Ryan: For the first quarter of 2025, we expect funded loan volume to be down approximately 10% to 15% compared to the fourth quarter of 2024, given continued seasonal slowness and the wind down of our Allied businesses, which as a reminder, made up 29% of our full year 2024.
Kevin Ryan: Volume and 19% of our Q4 2020 for volume and we expect to be only low double digit percent of Q1 volume for fully winding down at some point in the second quarter.
Kevin Ryan: We are particularly excited that the neo funded loan volume is pacing ahead of plan and we expect to do over $90 million of Neo originations in March alone. After February it was the first full month of neo on our platform.
Kevin Ryan: As another data point here to put our trends in the context of the industry. The Fannie Mae February housing forecast as overall Q1 market volumes declining 24% quarter over quarter, demonstrating better is outperformance of the market as a whole in Q1.
Kevin Ryan: For the full year 2025, we expect funded loan volume growth in the low to mid double digits percent growth year over year drew.
Kevin Ryan: Driven by tailwind from growth initiatives, including Neo powered by better offset by continued macro headwinds and the loss of the allied business, a roughly $900 million headwind.
Kevin Ryan: We expect this growth to come particularly in the second and third quarter of the year at which point, we expect neo to be more fully ramped and to benefit from improved seasonal tailwind. We also expect a further decrease our adjusted EBITDA losses in 2025 as compared to 2024 due to a combination of efficiency gains as.
Kevin Ryan: As well as continued corporate cost reductions.
Kevin Ryan: Lastly, we are undergoing efforts to exit our noncore U K assets, while continuing to focus on growing the bank. We expect the exiting of three smaller noncore U K businesses historic being a benefit to our adjusted EBITDA losses in the second half of 2025 as a result of their disposition.
Kevin Ryan: That I will now turn it back to the operator for Q&A.
Kevin Ryan: Thank you if you would like to ask a question. Please press star one on your telephone keypad people would like to withdraw your question simply press Star One again please.
Kevin Ryan: Please ensure you are not on speaker phone and that your phone is not on mute when called upon thank you.
Kevin Ryan: One moment. Please for your first question.
Speaker Change: Your first question comes from the line of Eric Hagen with <unk>. Your line is open.
Eric Hagen: Hi, Thanks, Good morning, good to hear from you guys.
Speaker Change: Playback was actually pretty interesting.
Speaker Change: Does the underwriting and the AI technology adjust for.
Speaker Change: The high cost the limited availability of property insurance like on the test like adjust for that in any way and Stephen see that maybe creating an opportunity because there is.
Speaker Change: What's coming online.
Speaker Change: Ways to fulfill that.
Speaker Change: More.
Speaker Change: More efficiently thanks.
Speaker Change: That is a really great question I mean, what you saw there was was not like a form fill our router engine.
Speaker Change: Over 15 different data forks, and API calls that went through.
Speaker Change: 45 investors to filter down to five HELOC investors and running all the permutations across credit DTI and LTV cash out amount and actually insurance quotes closing cost across 3600 counties in the U S. We havent assurance engine built in where we deliver instant homeowners insurance.
Speaker Change: To consumers, while they're going through a refinance of our HELOC process.
Speaker Change: Or a cash out refi process. So we're talking about things that used to take.
Speaker Change: A lot of people to do so like again, if we think that like <unk>.
Speaker Change: Going to be able to get the 10 year Treasury down right back in 2019, we went from $85 million in revenue to $850 million plus in revenue in 2020 over $250 million of EBITDA, but the machine was about 50% automated right now Betsy can do basically all of the function.
Speaker Change: <unk> that those refi salespeople were doing back in 2020.
Speaker Change: At zero near zero marginal cost that means we don't have to hire 3000 salespeople right. We don't have to hire 5000 processors and underwriters and we don't have to hire a thousand insurance agents that we used to have so I think there is just extraordinary scale that we've now built into the product.
Speaker Change: And that's either accommodating all of that.
Speaker Change: And where we are.
Speaker Change: We're really really looking well positioned in a way that we haven't been in many years.
Speaker Change: For anything changing in the macro environment, including what you've outlined homeowners insurance rates going up.
Speaker Change: Really good stuff interesting.
Speaker Change: If the trend for profitability keeps moving in the right direction. How do you maybe think that will drive the amount of risk you take.
Speaker Change: And how do you benchmark kind of like the amount of risk you are taking.
Speaker Change: Period.
Speaker Change: And even how you might price for things.
Speaker Change: On the front end.
Speaker Change: That's a really good question I think what gets lost in the dialogue about us versus many of the other fintech as we are operating a pure marketplace business.
Speaker Change: We do not hold loans on balance sheet that have not already been committed to be sold to others.
Speaker Change: 45, institutional investors on our platform.
Speaker Change: That are buying our loans our HELOC.
Speaker Change: Everyday and so fundamentally we don't make alone.
Speaker Change: Yes, we've got buyer lined up when youre locking that loan with us we already know where its going and thats. How tinman is fulfilling the set of underwriting criteria for that particular investor to deliver to that loan to that particular investor. So I think the path to profitability. We're talking about is not one built on taking.
Speaker Change: Any more marginal units of risk.
Speaker Change: Path to profitability is really built around like.
Speaker Change: We lost like basically $9 million a month last quarter right with what we're doing to shutdown. The UK businesses, that's like a $1 million a months.
Speaker Change: What we're doing too.
Speaker Change: Improve the profitability of the bank, we think that gets us another $1 million a month I think with AI.
Speaker Change: Driving down operations cost I think we can scale up and save another $3 5 million a month, we've got a whole bunch of compliance legal costs from the <unk> back.
Speaker Change: Very aggressive CFPB or all of that sort of stuff I think we can scale that down 1 million a month, we got a bunch of legacy contracts that we still have from 'twenty, one 'twenty two right, which we just finally got out of the office space that we had in New York that was like 45000 square feet and downgrade.
Speaker Change: By 80%.
Speaker Change: Moving to a cheaper space.
Speaker Change: I think thats, another 2 million a month and then.
Speaker Change: You should add some volume growth add some improvement in margin add some profit from the neo channel and Youre getting to breakeven and so we see a path to breakeven again built on efficiency.
Speaker Change: Built on exiting a bunch of the legacy cost that we have from the 'twenty, one 'twenty two days and.
Speaker Change: And legacy exiting the legacy businesses that we have and improving margins that you'd see us continuously doing and again without taking any more risk.
Speaker Change: From a credit standpoint, yes, Eric.
It's Kevin what Michelle said.
Speaker Change: I think 100% of the loans, we did in the quarter were pre committed to investors at that time of origination of it's not 100% is 99% right. So we don't take.
Speaker Change: Any ras the only the way we think about risk should we lean in our marketing this month versus next month, depending on market conditions, but that is a very.
Speaker Change: Tactical and enrollment decision and then on the expenses. If you look just Q3 to Q4, we took out $11 million of expenses core expenses. The expenses look roughly the same because we took a $16 million charge on the disposition of the UK assets that was noncash one.
Speaker Change: But when you strip that out we got expenses down about 11 to 12 million Bucks in the quarter or 4 million Bucks a month. So we are and then all major categories I think as Vishal said in the prepared remarks, we were down corporate expenses were down a bunch of.
Speaker Change: Marketing was down a bit so.
Speaker Change: We definitely took a lot of expenses out in Q4 and are continuing to do so in Q1.
Speaker Change: Really good stuff here guys. We appreciate you. Thank you.
Eric Hagen: Thanks, Eric.
Speaker Change: The next question comes from Jake Cleveland with Oppenheimer. Your line is open.
Speaker Change: Hi, Thank you very much for taking the questions as Jay claim in on Fort Reena Kumar.
Speaker Change: You walk through the saving opportunities from 10 minutes application of AI as well as how that contributes thank you very much.
Speaker Change: Totally so I think the savings are when we think about.
Speaker Change: Your traditional loan officer and loan officer assistance right. The bulk of their time, particularly in the DTC channel is spent servicing customers that are coming in via the online channel.
Speaker Change: Chasing after those customers in the purchase market chasing after the realtor, who those customers are using.
Speaker Change: And so there's a ton of effort on outbound calls and then theres a ton of effort chasing inbound calls that you missed because you were on the phone with someone else. Now again you can staff up you can have a 10000 person call center to capture all these calls and you make all these outbound calls like other mortgage companies do doing $400.
Speaker Change: The other day.
Speaker Change: Really inefficient and really grinds down the labor force.
Betsy: We have Betsy.
Betsy: All inbound calls.
Betsy: In the Nisin evening, So we don't we don't Miss a single haul.
Betsy: We used to like mid 40% of calls that would come in because people would not be available to meet their loan officer, because they were calling at nine pm.
Betsy: In the evening after they put their kids to bed and Theyre looking at what they're doing for the home buying.
Betsy: That coming weekend or the close on the weekend when they are about to go into contract on their home and they want to make sure that the rate quotes is still good and they wanted to refine the purchase amount now we had these tools online, but betsy really dramatically reduces the cost but also most importantly improves the customer experience.
Betsy: Because it's always on and we have and so I think that's been a game changer and I think that there is the ability to take up $2000 per funded loan.
Betsy: And sales costs once Betsy gets fully implemented in the sales funnel right. So.
Betsy: We're doing almost like 1000 loans.
Betsy: Ah months, right and we're trying to scale that up.
Betsy: With neo it's more than that so we're getting there right.
Betsy: I'm serious savings per month that we're able to generate as we implement this not just for ourselves, but for our BTB partners on the automation side. We are pressing ahead. If you look in the earnings supplement you will see the percentage of locked loans that are AI underwritten and that has increased.
Betsy: 40% the loans that are AI underwritten, we're saving $1400 per loan rate potentially and.
Betsy: And again, so you add those two things up we're talking about production cost is already more than 35% cheaper than the rest of the industry and now youre talking about for the full AI driven loans, you are talking about $3500 per loan and savings on top of that.
Betsy: That's all going to go to margin because we already have.
Betsy: Some of.
Betsy: The lowest gain on sale and therefore, the lowest price to the consumer out there.
And and so all those enhancements will effectively dropped to the bottom line.
Betsy: I hope that provide some context.
Speaker Change: Yes, thank you very much.
Bose George: The next question comes from Bose George of <unk>. Your line is open.
Bose George: Hey, good morning, everyone. This is actually Alex bond on for Bose I appreciate you taking our questions.
Bose George: Just to start with US now almost at the end of the first quarter, just wondering if you'd be able to give us an update on our gain on sale margins are trending quarter to date compared to <unk>.
Bose George: The decline in rates over the course of the quarter and then also as you mentioned in the prepared remarks, the gain on sale margin on neo loans has been stronger.
Bose George: And then the 2020 for company wide margin and then you mentioned that there's potential maybe even improve this further as well as efficiencies improve is this primarily from AI and other tech related or would this be from primarily from AI and other tech related improvements or are there other components.
Bose George: That could be improved efficiency was as well any additional color there would be great. Thanks.
Kevin Ryan: Okay Kevin.
Kevin Ryan: I'll start and I'll unpack that there's a couple I think sub questions in there and vishal probably want to jump in so.
Kevin Ryan: Gain on sale in Q1 is trending higher.
Kevin Ryan: I think we put in our release 90 million in loans already in Q1, we really just they just onboard and in February we crossed 100 million.
This morning. So we are over 100 liar loans and they are running much higher 150 basis points higher on average gain on sale than a direct to consumer business now that that is something we knew going in expected. We would have been disappointed if they werent running higher gain on sale just given there.
Kevin Ryan: On the ground business their expertise et cetera, so our aggregate gain on sales should trend higher as neo is a bigger part of our production right I mean, practically we're replacing a $1 billion a year of ally volume with call. It $2 billion of Neil Let's just say this year and that will be at much higher gain on <unk>.
Kevin Ryan: Then what we would have reported on our ally so.
Speaker Change: And then on the DTC business I'll start I'm sure Vishal will want to jump in yeah, Betsy and the AI allow us to gradually increase our gain on sale and then direct to consumer business right. We were.
Speaker Change: Sub 2%, we're now north of 2%, we're not at the three and a half that an iOS app in the businesses and built that way right. It's an online business and as Michelle said, we had some of the lowest rates out there, but through our improvements and better customer experience through the.
Speaker Change: We've been able to gradually increasing on sale.
Speaker Change: And the rate drop we've had.
Speaker Change: We're kind of roughly around six and three quarters now on rate right is definitely helped a bit as well.
Speaker Change: I'll tell you what what's contributing to the margin increase.
Speaker Change: <unk>.
Speaker Change: Online.
Speaker Change: Tumor submitting effectively a lead when they're online they're shopping around they're going to IR site to have a tab opened with somebody else's site there might be on one of the comparison shopping engines and typically consumers would submit a lead and it would take us more than five minutes to get back to them right to call them to try to reach them by which point. They may have gone somewhere else. So the efficacy of our marketing was.
Speaker Change: With lower but also theyre shopping around we've taken about five minutes and brought it down to 800 milliseconds.
Speaker Change: Betsy.
Speaker Change: Across the board.
Speaker Change: That's an improvement of 400 acts and speed.
Speaker Change: And so now we're catching the customer faster than anybody else, we're catching that customer before they have a chance.
Speaker Change: Go somewhere else shop around we're able to tell them about our closing guarantee we're able to tell them about the better price guarantee we're able to answer the questions. We're able to convert them from a lead to a application we're able to approve them. We're able to do all these things that before just with a human staffed call center.
Speaker Change: <unk> kind of nearly impossible and so then you end up competing much more on rate than you do on speed and surface.
Speaker Change: And I think that Thats again.
Speaker Change: Enabled us to continue to get better margin, while still maintaining our value proposition for the consumer.
Speaker Change: Great that all makes sense I appreciate you taking the questions.
Speaker Change: Your next question comes from Reggie Smith of Jpmorgan. Your line is open.
Reggie Smith: Hey, good morning, Thanks for taking the question.
Speaker Change: It's really encouraging.
Speaker Change: The disclosures you gave around the potential savings from I guess a lot of your cost initiatives. My question Im not sure. If you guys have broken it out or even thinking about.
Speaker Change: The business this way, but is there a way to to.
Speaker Change: To contextualize.
Speaker Change: Contribution margin profit.
Speaker Change: Her loan or load economics that way I know you guys cited some savings potentials.
Speaker Change: In the press release, so I'm curious how you guys think about how we should think about like loan economics at the at the loan level, so like revenue per loan expenses.
Is there a way to attribute whether it's marketing overhead to the.
Speaker Change: The loan origination process and I have a follow up thank you.
Speaker Change: Yes.
Speaker Change: This is Kevin I'll make a few comments obviously on the GAAP financials, you don't see that.
Speaker Change: We run the business on a contribution margin basis and the contribution margin in the mortgage business has been improving meaningfully in the last couple of months.
Speaker Change: And I think we can get we can go we'll take away to break it out for next quarter.
Speaker Change: In a way that youll be able to kind of track it back to the GAAP financials and something we talk about all the time.
Speaker Change: But I will tell you through the savings and the improvement in gain on sale the cost savings via the AI.
Speaker Change: The contribution margin continues to get better on.
Speaker Change: On our production and continues to be into Q1 that is something we are maniacally maniacally focused on rate because well, we're cutting corporate costs faster than we're cutting.
Speaker Change: Costs in the mortgage business, we also need to lower costs in our mortgage business in order.
Speaker Change: To really drive contribution profit that we can then use to cover what is youre always going to have some fixed overhead.
Speaker Change: So if we think about that all the time, yes.
Speaker Change: <unk> 2024 was a lot of changes we moved from.
Speaker Change: A salary based loan officer and processor model to a incentive based low base high incentive model, we started recruiting experienced loan officers to teach those loan officers Tim in.
Speaker Change: The ones that didn't understand or couldnt be productive on tin man, we have to let them go. So we had some charges.
Speaker Change: So 2024 and then.
Speaker Change: And then we didn't know at the end of the year and so we have some onboarding expenses related to that and then lastly, like we were hoping for the rate cuts actually in September to actually bring rates down and that did it so that made a bunch of our marketing spend neck.
Speaker Change: Negative.
Speaker Change: We're buying leads and the consumer is thinking that getting that six 5% range by the time, they get to lock theyre getting a 7% quarter right that consumers not in the money anymore or that consumer is not able to isn't going to proceed going forward is going to wait. So we had a lot of challenges in 'twenty four we made a lot a lot of progress, but what we decided by the end.
Speaker Change: 24 was like we're going to focus maniacally on any growth that's going to come with positive contribution margin and we're going to continue to expand the positive contribution margin, even if that means.
Speaker Change: Forecasting a slightly slower growth rate now I think we can achieve fast growth and improved contribution margin and that's really possible not in a human centric business model, but an AI centric business model and I think that's really what we're leaning very very hard into.
Speaker Change: So hopefully that can give you some context for the future and of course, we will take it under advice that like we need to get out to make your job easier that.
Speaker Change: To breakout contribution margin next quarter.
Speaker Change: I didn't know if I had missed that or or what like I said I don't have a model for you guys and so that was just something that was looking for so I wasn't sure if I could sneak two more questions and then really quickly.
Speaker Change: What I loved the demo that you guys showed.
Speaker Change: Or presented during the call was curious.
Speaker Change: How it's resonating with consumers in my inclination is that gonna be totally opposite of it probably.
Speaker Change: For younger people is probably a more natural way of doing things I was curious any feedback you've gotten or insight you've got in terms of.
Speaker Change: Our younger folks using the automated system better than older people.
Speaker Change: And how often people opt out and say representative or something like that and then my last question you talked about I guess improving alone and one day I was curious how quickly you guys can fund alone that's something that I've come to appreciate in the last month I am trying to sell my condo of Brooklyn itself.
Speaker Change: People that have been able to close quickly makes a difference I was curious if you had any.
Speaker Change: Any advantage there as well thank you.
Speaker Change: Yes, no. That's a great question. So we're seeing adoption of Betsy in general be quite high.
Speaker Change: About 18% of consumers ask be transferred to a human.
Speaker Change: Loan officer.
Speaker Change: As part of the process right. So they encounter at day.
Speaker Change: I realize that it's an AI and they want to move.
Speaker Change: On to a human.
Speaker Change: So, yes, we're going to work to get that down and we've got to work to get the voices.
Speaker Change: More humanistic.
Speaker Change: We got to do a lot of work.
Speaker Change: On continuing to add the functionality.
Speaker Change: So I would tell you. It's early days like we launched the first version of Betsy and none of whom only a few months ago. So.
Speaker Change: You can sort of see what we're increasing functionality increasing <unk>.
Speaker Change: Realism, and it's going to improve.
Speaker Change: The uptake has been greatest.
Speaker Change: Between.
Speaker Change: The ages of.
Speaker Change: <unk>.
Speaker Change: 20 to 35, and then absolutely surprisingly 55 and up right because.
Speaker Change: They're okay with something that goes a little slower.
Speaker Change: In terms of talking and it's talking clearly.
Speaker Change: And so we've seen some good stats around that again early days, we'll see how that all shapes up but.
Speaker Change: Definitely young people love. The fact, you can talk to at any time, you can text, where that if you have a loan officer you can go to any time. So we're just really leaning into that.
Speaker Change: And then.
Speaker Change: The last question with respect to closing times.
Speaker Change: I think in New York, where we're able to close a loan on average let me just actually get the stats, but much faster than the competition.
Speaker Change: And.
Speaker Change: Give me a second I'm, just going to pull it up for you.
Speaker Change: <unk>.
Speaker Change: Our New York, where we're doing the industry average for closings is 46 days and we're doing 32 days now of course, there's a lot of latency there with like people have to figure out how to move and all that sort of stuff, but whereabouts.
Speaker Change: 40% better than the competition.
Speaker Change: In New York State specifically.
Speaker Change: No that's good.
Speaker Change: I Didnt appreciate and so I went through the process and myself. So I'm glad to hear that's a really important selling point for.
Speaker Change: For buyers and I'll tell you like personally I hate AI, but it's something that I've got to get used to in terms of the automation I am one of those 18 for centers, there's always representative as soon as I hear and automated.
Speaker Change: But yes it is.
Speaker Change: It'll be interesting to watch that evolve over time, congratulations on a quarter and good luck guys.
Speaker Change: Hey, Rajeev you found a buyer in Brooklyn has been telling them to go to better dot com will pre approve them a couple of minutes.
Speaker Change: Will do.
Speaker Change: [laughter].
Speaker Change: The next question comes from Michael Kaye with Wells Fargo. Your line is open.
Michael Kaye: Hi, Good morning, if I look at the Q4 adjusted net income and adjusted EBITDA. There was no improvement in year over year profitability, despite volumes being up 76% year over year.
Speaker Change: Can you just walk through why the higher year over year volumes and cost initiatives.
Speaker Change: Over the last year has been translating into better profitability, maybe just walk us through some of the dynamics and if I'm missing anything.
Speaker Change: Youre doing.
Speaker Change: Youre doing year over year is what youre doing.
Speaker Change: Yes.
Speaker Change: $38 million loss adjusted net loss for Q4.
Speaker Change: Yes sure.
Speaker Change: Ted.
Speaker Change: Yeah, as Vishal said marketing expense, we took marketing expense.
Speaker Change: <unk>.
Speaker Change: And that was.
Speaker Change: The biggest difference and we actually hire more people.
Speaker Change: As well into.
Speaker Change: As Vishal mentioned before we hired more people into what we expect it to be a declining rate environment in the second half of the.
Speaker Change: The second half of 2024, which bluntly didn't really pan out and we've pulled back a bit on that and so that's some of that noise you're seeing in their Q4 of 2003 was a low point on volume. It was also a low point on staffing within the mortgage business. The mortgage factory. So all of the other corporate.
Speaker Change: Costs and everything have come down dramatically since Q4, 2003 marketing expense was higher Q4 'twenty four.
Speaker Change: <unk> was like sales and obsolete bar.
Speaker Change: As were getting is were getting Betsy going that will continue to come down on a unit basis, which I think was part of <unk> question, which we're going to try to breakout yes, we were.
Speaker Change: We were overstaffed in Q4.
Speaker Change: After implementing Betsy we have.
Speaker Change: We've been able to reduce staffing by about 250 people in.
Speaker Change: In the mortgage factory.
Speaker Change: Wow Okay.
Speaker Change: Shifting gears and what's your level of optimism on spring home purchase season rates were around six and three quarters.
Speaker Change: More home inventory now available probably some pent up demand from buyers. Those you know those affordability headwinds so let's talk about how you're thinking about.
Speaker Change: For home purchases.
Speaker Change: We're seeing the volume of pre approvals per marketing spend continue to improve dramatically.
Speaker Change: And I think that that's a good leading indicator right of how many people are running out and just going shopping.
Speaker Change: We'll see how many of those people actually are able to find a house, but so far it looks like the level of pre approvals.
Speaker Change: Per dollar of marketing spend continues to improve pretty dramatically.
Speaker Change: So we're optimistic for what happens.
Speaker Change: And look like again.
Speaker Change: From Washington is about deregulation and by getting the 10 year down and so you put your odds on whether they can make that happen.
Speaker Change: If you believe that that can happen I think we might be in for a positive surprise this spring and summer home buying season.
Speaker Change: Okay. Thank you.
Speaker Change: The next question comes from Jamie Friedman with Susquehanna. Your line is open.
Jamie Friedman: Interesting presentation and demonstration I'm really quite helpful. Most of my questions were answered I was just wondering about the macro in terms of how you're characterizing the supply and demand dynamic at the end market.
Speaker Change: Where do you think we are in that continuum and.
Speaker Change: And what are you anticipating if anything for the year ahead.
Speaker Change: I think what we always say it at better now is that we have.
Speaker Change: Unfortunately, not been able to predict the macro environment for the past three years, we are optimist as hard as any technologists will tell you you have to be an optimist otherwise how are you going to believe.
Speaker Change: We do think that.
Speaker Change: The supply demand imbalance in housing is going to get rectified in the next year or two.
Speaker Change: I think.
Speaker Change: There is obviously an impact of tariffs, but that means that the homes that are out there available for sale today or a relative bargain. If the tariffs do actually continue in that raw material cost of building a home goes up substantially so I think old houses are going to sell more.
Speaker Change: Seeing demand for the HELOC products really explode because people need to fix up the houses like the boomer houses need to be modernized to be able to sell to the millennial buyers and so we're seeing a ton of demand for home renovation on the HELOC product.
Speaker Change: Before people look to sell their house or if they stay in the same place.
Speaker Change: Grew our HELOC those 400% last year fastest growing HELOC lender in the market.
Speaker Change: And we think we can grow it again pretty dramatically this year.
Speaker Change: And we've gone from basically nothing to being one of the leading HELOC lenders in the country.
Speaker Change: So.
Speaker Change: We're trying to build a balanced portfolio of loan types. So that we can thrive in any macro environment out there.
Speaker Change: Yes, I think.
Speaker Change: Sure.
Speaker Change: As Michelle said, it's been really hard to predict the macro and if you listen to our earnings calls this season, but we're in at the tail end of the word uncertainty comes up 20 times the call Thats, just kind of the macro we live in right now.
Speaker Change: Every company does.
Speaker Change: In our industry in particular Thats important we get it.
Speaker Change: But we definitely think we are way ahead of the trend and the inevitability around technology disrupting the legacy mortgage process in the U S is probably.
Speaker Change: Maybe taking a little bit longer than we thought but the trend continues and we think we are definitely right on that trend.
Speaker Change: Play out over time.
Speaker Change: Regardless of where rates and starts data was pretty good in February for the MTO say consumer confidence is down so what does that mean to spring season, we get all of that and try to factor that in and that does impact our market decisions on a daily basis, but it doesn't really impact our tech roadmap at all we know what we have to build.
Speaker Change: Yes, I'll add that we're sitting on over $2 million pre approvals.
Speaker Change: Over the past couple of years that we've issued where the people have not found a house.
Speaker Change: So we don't know when the dam breaks, but when the dam breaks we're going to be well positioned.
Speaker Change: The number of people that come to bear dot com and get preapproved per month.
Speaker Change: Is percentage points of market share.
Speaker Change: In terms of the number of people that are shopping for a home and the number that actually convert like.
As basis points of market share.
Speaker Change: So.
Speaker Change: Lot of that has been availability homes.
And so we are really hoping that if the tide turns on rates or home affordability or availability.
Speaker Change: We are in a position to meet that demand in the same way that we met the demand in refi in 2020, but without the staffing costs that we incurred in 2020.
Speaker Change: So.
Speaker Change: I think that's why you continue to see us lean so hard into the AI.
Speaker Change: Perfect. Thank you so much I'll jump back in the queue.
Well Gerdemann: The next question comes from well Gerdemann with West Coast Research, Sorry, Northcoast Research. Your line is open hey, guys.
Gerdemann: Good morning, So I wanted to ask.
Well Gerdemann: How long do you think it will take to get.
Well Gerdemann: Neil back to its former run rate volume added tinman gets ramped up and you mentioned Betsy driving cost efficiencies going forward when.
Well Gerdemann: When do you see the majority of those are their cost of goods cost efficiencies fully realized and then I have just one more quick question.
Well Gerdemann: Sure.
Well Gerdemann: I think we're looking for neo to get back to their original volume in the next couple of months.
Well Gerdemann: Q3 will be back to where they were and then Q4, hopefully be better than where they were and.
Well Gerdemann: I will tell you like we announced neo.
Well Gerdemann: We were at some industry conferences demo ing Betsy and the number of loan officers with large retail books that reach out to me on Linkedin to say Hey can you joined the number of people that reach out to Ryan and Chris and Danny what are the principles that neo.
Well Gerdemann: It is pretty long so we're just making sure that we can fully broaden out the product sets that are in tinman, we're making sure that we can fully serve all of these are.
Loan officers, we're helping them go from driving a Ford Taurus and the existing.
Well Gerdemann: Infrastructure in mortgage lending that they're on to driving a Ferrari and we just need to make sure. They can do it and then they are off to the races. So.
Well Gerdemann: Neil is going to be back to its original loan volume in a couple of months and then we're going to grow that dramatically from there and then.
Speaker Change: The other part about Betsy.
Well Gerdemann: We're going to keep you updated.
Well Gerdemann: On the percentage of consumers and the percentage of <unk>.
Well Gerdemann: Consumers that are interacting with Betsy and therefore dramatically reducing costs from <unk>.
Well Gerdemann: Sales.
Well Gerdemann: And then we will keep you updated on the percentage of loans that are being underwritten by tinman and you can compute just the cost savings from that and then.
Well Gerdemann: The remaining loans still are subject to the old cost structure, but we'll keep you guys updated on that but.
Well Gerdemann: The cost savings are pretty significant and they are starting to show theyre going to show this quarter, they're going to show next quarter, they're going to start in the third quarter. As I said, we think by the end of 2025, 75% of loans are going to be underwritten by tinman AI.
Well Gerdemann: And with respect to Betsy we've got one state that's all Betsy.
Well Gerdemann: So you take that and then we got to get the 50 states that are all Betsy.
Speaker Change: Okay, Great and then my last question, what do you see as the expansion opportunities within the broader distribution.
Neil: Our retail channel like Neil.
Neil: I think it's massive.
Neil: I think a number of people that we have reaching out to us to scale.
Neil: Look like on direct to consumer we're fighting against some pretty sophisticated box.
Neil: We're fighting against rocket, we're fighting against one depot, we're fighting against.
Neil: A number of people that have invested in technology in the retail channel, we're fighting against effectively loan officer staffing platforms that have benefited or mortgage broker platforms that have benefited from the lack of any <unk>.
Neil: The logical sophistication within that that universe.
Neil: And I think there is a pretty heavy tax that these platforms charge to the incumbent loan officer and I think we can free them from that I would say the closest example to that is what has happened in the <unk> space right versus hanging your head.
Neil: At an old wire house.
Neil: And getting a percentage a small percentage of revenue you could go to the RIAA platforms that are tech savvy.
Neil: Private labeled and give you basically everything.
Neil: And keep a larger percentage of your profits I think thats the disruption thats going to happen in retail and I think we're going to lead that disruption.
Speaker Change: That's awesome. Thank you guys for taking my question.
Speaker Change: The next question comes from Brendan Mccarthy with Sidoti and company. Your line is open.
Brendan Mccarthy: Great. Thanks, and good morning, everyone and thanks for taking my questions here I just wanted to start on the corporate cost reduction side. I think you mentioned you mentioned corporate cost reductions benefited 24, just curious as to where you see the biggest opportunity for further reductions in 2025.
Speaker Change: Sure.
Speaker Change: There's a couple areas we're going to continue.
Speaker Change: On comp and benefits now and on the GAAP line item right.
Speaker Change: Everything's blended together, whether it's corporate or sales U K everything is kind of blended together so we can.
Speaker Change: We'll do we'll break it out going forward youre going to can see continue to see benefits there.
Speaker Change: We're sitting in an office building right now it's 20% the size of the one we were sitting in on the last earnings call.
Speaker Change: We're saving $10 million.
Speaker Change: And lease expense over the next couple of years.
Speaker Change: Moving office, and so youre going to start to.
Speaker Change: Dramatically renegotiating vendor contracts suddenly got done in the second half of 2004, so you'll see a full year benefit in 'twenty five some will get done over the course of 'twenty five so youll see a full year benefit in 2006 and so.
Speaker Change: It's really on all.
Speaker Change: All areas. If you look at just even G&A right year over year was down 70%.
Speaker Change: And G&A quarter over quarter was down $2 million Q3 to Q4. So were in professional fees would be the other those are kind of the four big areas is obviously comp and Ben is the biggest area.
Speaker Change: G&A.
Speaker Change: Some of that is in technology and expand some of that is in G&A that the vendors and then obviously your most of the lease works already been done, but youre going to start to see the run rate benefits this year.
Speaker Change: Great. That's helpful. That's helpful. What opportunities do you see for additional <unk> partnerships in the market just given the strength of the growing technology stack for for your company.
Speaker Change: Yes, So I'll give you an example, three examples.
Speaker Change: We launched <unk> in October.
Speaker Change: In the past couple of months, we've gotten calls from the CEO of a top five servicer, saying I want to build a recapture business and I want it to be all AI can you private label Betsy for me and therefore private label Timberland for me and help me do that right.
Speaker Change: So we're in term sheet discussions with them we got.
Speaker Change: A top three financial services lead Gen company, right, where again, the Seo called and said I've got a board meeting in four weeks and I need it.
Speaker Change: To show them.
Speaker Change: AI needs to be implemented right and so what can we do so we said sure happy to do it we're going to be out there with their solution and it's going to be live and it's going to be proprietary to us.
Speaker Change: We've got a large community bank that wants to again do the same thing and have it built around non QM loans.
Speaker Change: And bank statement loans, and non conforming loans, which again are very hard for your traditional mortgage software to do and we're in late stage discussions with them. So.
Speaker Change: So where we're seeing the <unk> side of it explode in a way that we haven't seen since 2018 2019, when people were coming to us to like to help them build refi.
Speaker Change: Address the refi demand so.
But like we're not going.
Speaker Change: Just with the big guys, which is kind of was our strategy after ally Amex and others that were on the platform. We've now taken the technology that we built for ally and Amex and allowed us to get up and running with a <unk> partner in three weeks and that's a lot faster than what even if sales contract lifecycle is for signing up.
Speaker Change: I would like the traditional players in the industry like Ellie Mae or black Knight or others. So.
Speaker Change: We're aggressively pursuing that and youre going to see us.
Speaker Change: Hopefully announce some big things in the coming months Adam.
Speaker Change: Got it. Thank you and last question for me what do you expect the impact of losing the alloy business.
Speaker Change: How do you kind of gauge that impact and what are you doing to ultimately offset the loss.
Speaker Change: For the business as a whole.
Speaker Change: Yes, so if I just look at too.
Speaker Change: Well.
Speaker Change: Two key metrics I'll, just start with two and then <unk>.
Speaker Change: I'll expand on volume, you're just short of $1 billion.
Speaker Change: That was in last year's numbers that youre not going to see in this year's numbers there will be some ally volume in Q1.
Speaker Change: Really tails off after this quarter.
Speaker Change: Neil more than replaces that and we guided up to.
Speaker Change: Low to mid double digit digits growth in volume. This year. So we're going to grow volume despite losing a $1 billion, we're confident in that and it was a big part of it obviously.
Speaker Change: <unk>.
Speaker Change: And on EBITDA, it's really a neutral event.
Speaker Change: Net net the way we had structured the fee relationship with ally.
Speaker Change: <unk>.
Speaker Change: Worked extremely well in a very good low rate environment.
Speaker Change: Are you, having a fixed amount of people you need to put against large BTB partnership like that and is there volume came down along with the industries. They pulled back on marketing spend et cetera.
Speaker Change: Totally understand why they did it you were running basically an EBITDA neutral business and so there is no negative impact to EBITDA, because we've obviously address the expenses associated with ally as the revenues come off.
Speaker Change: Got it helpful. Thanks, everybody, yes, absolutely that's helpful. Congrats on the progress.
Speaker Change: Thank you.
Speaker Change: This concludes the question and answer session I will turn the call to Vishal Garg CEO for closing remarks.
Speaker Change: Okay.
Speaker Change: Thank you all for all your great questions and for continuing to support us as we build.
Speaker Change: <unk>, leading AI mortgage platform and in doing so help consumers get.
Speaker Change: A mortgage.
Speaker Change: Better rate have a better process, which let them have a better house and a better school district, with a better commute and a better backyard and where we started on this journey eight years ago.
Speaker Change: The past three years have been really difficult for us, but we're playing offense and playing offense hard again and.
Speaker Change: We're looking forward to driving the business.
Speaker Change: And being able to share more positive news with you in the quarters ahead.
Thank you so much and thank you for believing in us.
Speaker Change: This concludes today's conference call. Thank you for joining you may now disconnect.
Speaker Change: Okay.
Speaker Change:
Speaker Change: Sure.