Better Home & Finance - Earnings Call - Q4 2024

Transcript

Operator (participant)

Hello, and welcome to the Better Home & Finance Holding Company fourth quarter and full year 2024 results call. All lines have been placed on mute to prevent any background noise. After the speaker's 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. I would now like to turn the conference over to Hana Khosla, Vice President of Corporate Finance and Investor Relations. You may begin.

Hana Khosla (VP of Corporate Finance and Investor Relations)

Welcome to Better Home & Finance Holding Company's fourth quarter and full year 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; Kevin Ryan, Chief Financial Officer of Better; and Ryan Grant, Co-Founder and President of Retail Lending at Neo Home Loans. 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. 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.

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-GAAP financial measures, which we believe are relevant in assessing the company's financial performance. These non-GAAP financial measures should not be considered replacements for and should be read together with our GAAP results. 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 Better's website and when filed in our annual report on Form 10-K filed with the SEC.

More information as of and for the period ended December 31st, 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 Garg (Founder and CEO)

Thank you, Hana, 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 revolutionizes the homeownership experience. We continue to make good progress towards our vision in which every customer can seamlessly buy, sell, refinance, insure, and improve their home digitally, online, instantly. 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.

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. We made some big bets in Tin Man AI and launched a distributed retail channel through Neo powered by Better, both of which are showing early positive momentum. 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. For the full year 2024, we did $3.6 billion in funded loan volume, $108 million of revenue, and had an Adjusted EBITDA loss of $121 million. 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.

On a sequential quarter-over-quarter basis, funded loan volume was down approximately 10%, given normal seasonal slowness in the fourth quarter purchase market. Q4 revenue was $25 million, compared to $18 million in the fourth quarter of last year and $29 million in the quarter prior. 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. 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 1.95% in 2023 to 2.17% in 2024. As we look forward to 2025 and beyond, our strategic priorities remain largely consistent with those we have discussed with you on prior earnings calls. Our first priority is continuing to thoughtfully lean into growth, against which we showed progress through 2024.

In the fourth quarter, year-over-year funded loan volume growth was driven by increases across all three of our main 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 volume increased 416% in the fourth quarter of 2024. TransUnion recently reported that the overall number of HELOC and HELOAN originations increased 10% in the third quarter, whereas Better grew origination volume in the third quarter by 619%. If HELOC market trends remain 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 drives gains in market share.

On a sequential basis versus Q3, Q4 refinance volume increased 34%, home equity loan volume increased 3%, and purchase loan volume decreased 10% primarily due to seasonally slower home buying in the fourth quarter of the year. While the mortgage market saw improvements in Q4 compared to the same period in 2023, 30-year fixed-rate mortgage rates remained in the high 6s 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. Our second priority is continuing to reduce expenses and improve operational efficiency, with the goal of reaching profitability in the medium term. In the fourth quarter, total expenses remained approximately flat versus Q3.

However, included in these was approximately $17 million of non-recurring restructuring expenses attributed primarily to the wind-down of our U.K. businesses, as well as approximately $4 million associated with the termination of certain leases. 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. Specifically, we decreased our loan origination expenses by 28%, decreased our compensation-related expense by 21%, and decreased marketing and advertising by 27%, compared to an only 10% decline in volume, demonstrating the impact of the AI and automation initiatives that drove operating leverage within the business.

Utilizing Tin Man's capabilities, 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. Continuing our discussions from the past two quarters around our investments in AI, we are seeing benefits from further expanding Betsy, the first AI voice-based loan assistant for the US mortgage industry, which leverages large language models to take a customer through pre-approval and now rate quote and rate lock autonomously.

Betsy is programmed 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 self-serve capabilities, improved customer engagement, and greater sales efficiency. In terms of tangible numbers, Betsy went from approximately 5,000 customer interactions in June of 2024 to completing over 115,000 consumer interactions in February of 2025, a growth rate of over 20x, all while we kept increasing the range of functions that Betsy performs. Last quarter, we shared with you an early clip of Betsy interacting with a customer on a call. We are 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 Tin Man technology, this can now be completed 100% autonomously through AI 24/7. Betsy meets the customer anywhere and anytime they want.

Hi, this is Betsy from Better Mortgage on a recorded line. Whom do I have the pleasure of speaking with today?

Corey Smith (Demo Customer)

Hi, this is Corey.

Great to meet you. Are you looking to buy a new home, refinance, get cash from your home's equity, or can I help with something else?

I was wondering if you could tell me what the HELOC interest rate is today.

The lowest interest rate for a home equity line of credit is currently 7%. 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 my HELOC funds to do that, or what else can I do with the money?

Yes, you can use funds from a home equity line of credit for remodeling your kitchen. A HELOC provides flexibility, allowing you to use the funds for various purposes, including home improvement. Would you like to start an application for a HELOC?

Yeah, that'd be great. Let's do it.

Wonderful. To start the application, I'll need to confirm your full name. Could you please spell out your first and last name for me?

Yeah, it's Corey, C-O-R-Y, and then the last name is Smith, S-M-I-T-H.

Thank you. To confirm, that's C-O-R-Y, S-M-I-T-H. Is that correct?

Yep, that's correct.

Great, Corey. Now, could you please provide the property address for the home equity line of credit?

Yeah, it's 67-110 Clyde Street in Forest Hills, New York 11375.

Just to confirm, that is 67-110 Clyde Street, Forest Hills, New York 11375. Is that correct?

Yep, that's correct.

Is this property your primary residence, a second home, or an investment property?

This is my primary residence.

Thank you. Could you please provide the estimated value of your property?

Yeah, it's around $500,000.

Now, could you please provide your email address? I'll spell it back to you to ensure it's correct.

Yeah, it is [email protected].

Thank you. To confirm, that's [email protected]. Is that correct?

Yep, that's perfect.

Would you like to use the phone number you're calling from to continue the application?

Yeah, that would be perfect.

Do you authorize Better Mortgage to verify your credit with a soft pull and consent to receive electronic loan documents from us?

Sure.

Thank you. To complete your soft credit pull, I'll need 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 say the numbers out loud or enter them on your keypad. Just let me know when you're done.

Excellent. It's 6-6-6-6.

Thank you, Corey. Now, let's discuss your income. Do you have income from employment, self-employment, or any other sources?

Yeah, so I have a W-2 job where I make about $100,000 a year, and then I drive for Uber part-time and make maybe $25,000 a year.

Thank you for sharing that. Do you receive any other sources of income, such as bonuses, alimony, or rental income?

Nope, that's it.

Thank you for providing your income information. Would you like to add a co-borrower to your application?

No, thank you.

Do you currently have any mortgages on the property?

Yes, I do, actually.

I see a mortgage with PNC Mortgage. Is this loan related to 67-110 Clyde Street?

Yes, it is.

Is the mortgage with PNC Mortgage the primary mortgage on 67-110 Clyde Street?

Yes, it is.

Thank you for confirming. Now, let's move on to the next loan. I see a $35,000 home equity line of credit with Dow Chemical Credit Union. Is this loan related to 67-110 Clyde Street?

Yes, it is, actually.

Congratulations. It looks like you've been approved. Would you like to lock your rate?

Yeah, that'd be great. Let's do it.

Excellent. First, can you let me know how much cash you would like to receive from your home equity line of credit?

I think we need about $90,000.

Great. Let's find the perfect rate for you. I see you're approved for a home equity line of credit with a 7.5% interest rate. 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 Credit Union, there is an option for a 7% interest rate, and this only comes with $234 in fees. How would you like to proceed?

I would like to pay off my Dow Chemical and get the lower interest rate.

Terrific. I've submitted your rate to be locked at 7%. Would you like me to transfer you to your loan consultant?

No, that's okay.

No problem. Please check your email for important documents related to your home equity line of credit. Thank you for trusting Better Mortgage with your home finance. You can reach me 24/7 if you have any further questions. I'm always here to help.

Awesome. Thank you very much for your help. I appreciate it.

You're very welcome, Corey. I'm glad I could assist you. Have a wonderful day.

You too. Bye-bye.

Vishal Garg (Founder and CEO)

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 FAQ bot or an appointment scheduler, which we have seen other mortgage companies utilize. Those bots typically perform a single function and interact with users only over chat versus voice. The reason for these limitations for other mortgage companies is that they are only connected to a single software system out of the seven to eight systems typically used by most mortgage companies. Additionally, most of these legacy software systems in origination and servicing are built on 1980s architecture, greatly limiting the functionality of AI tools. Betsy 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 closing platform, all in one.

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. This enables an LLM to very efficiently have full context and go back and forth across any part of the mortgage process with the consumer, like a human would. Most other mortgage companies, were they to implement a full-stack AI agent, would experience massive latency pinging information back and forth between the AI agent and the multiple systems involved, latency that would be so slow that a typical consumer would just tune out. Because of Tin Man's end-to-end platform, Betsy can handle customers from initial inquiry through rate lock all the way to fund in a single interface.

Another application of AI we have been scaling is using our Tin Man AI to assist in performing the functions traditionally done by an underwriter, in particular, qualification of income, assets, and credit to prepare an underwriting decision. 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 product to be over 70% of our mortgage volume. With an average time from lock to commitment letter of eight hours, a revolution in mortgage lending when getting a commitment letter can take up to 45 days. In 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 are going from one-day mortgage to less than one-minute mortgage using AI.

Our goal is to grow AI underwriting review to over 75% of our locks by the end of 2025, dramatically decreasing our fulfillment labor cost per loan and debottlenecking one of the critical areas of the mortgage process. A 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. We believe the potential for a customer to be fully underwritten for a mortgage across credit, income, assets, title, and appraisal within minutes of going into a contract on a home is not very far away.

The core message is we are pressing harder on the massive advantage that we believe we have with respect to AI agents within our Tin Man 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. The gloves are off for us with respect to AI. This past month, we implemented Betsy as the primary customer interaction point in one state for refinance loans, with the human loan officer being on standby as a guardrail. We believe that Betsy has the potential to reduce sales cost per loan by $2,000 per fund and operations cost by $1,400 per fund, which would represent us getting to a fraction of the industry's spending, and we are just getting started.

Finishing with our third priority of diversifying our distribution channel through growing our B2B 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. First off, I want to start off by updating you on our partnership with Ally Bank. Better and Ally 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 offerings. Around the end of 2024, Ally made the strategic decision to exit the mortgage business altogether, and as a result, we began winding down our Ally volume in the fourth quarter. We expect Ally to be fully exited by the end of Q2 of this year.

Alongside winter seasonality, this wind down contributes to volume being lower in the fourth quarter compared to the third quarter of 2024. Moving on to the growth updates, last quarter, we announced the launch of Neo Home Loans powered by Better, and I'm excited to report that we are making great early progress towards our goal of diversifying Better's distribution and leveraging Tin Man to power local loan officers by removing friction from their fulfillment process and expanding their capacity to help more customers. Neo Powered by Better will also leverage Better's AI technology and digital lead funnel to supercharge Neo's loan officer teams who have demonstrated track records in customer service excellence and strong reputations within the communities they serve.

Betsy, individually branded for each retail loan officer at Neo, as well as lead routing of early-stage purchase customers from Better's D2C channel who can be more effectively served by a loan officer in their neighborhood, is expected to dramatically improve efficiency and drive conversion gains across both D2C and our retail distribution channel. Since beginning production in January 2025, we have onboarded approximately 110 Neo loan officers across 53 branches. To date, Neo Powered by Better has served approximately 220 families, equating to $95 million in funded loan volume. On Neo Home Loans, we are seeing an average gain on sale margin of approximately 365 basis points compared to our Better.com gain on sale margin of 217 basis points in 2024.

With Neo, I am excited about the unique opportunity to unlock key parts of the market that have historically been challenging for online originators without established local footprints to serve, specifically in the purchase mortgage segment and for certain loan types like FHA, VA, down payment assistance programs, and buy-down programs. Joining me today is Ryan Grant, Co-Founder and President of Retail Lending at Neo 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 (Co-founder and President of Retail Lending)

Thank you, Vishal. Our team here at Neo Home Loans is incredibly excited to now be powered by Better. This partnership is more than just a collaboration. It is a fundamental shift in the mortgage industry. 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. Neo Home Loans was founded on a simple but powerful idea: changing the expectations of what a mortgage company should be. For decades, the mortgage industry has focused on selling debt, leaving many professionals questioning the real value they provide. 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. However, we face significant challenges from an entrenched industry.

Outdated technology made processes inefficient, scalability was costly and limited, we struggled to get our message in front of enough clients, and for local mortgage professionals, the industry lacked financial transparency, which created a misalignment of priorities. These were all major barriers, but the partnership of Neo Powered by Better is solving them all. That is why we are so proud of this opportunity, as it positions us to truly transform the industry. You see, for years as mortgage professionals, we found success despite technology, not because of it. When we visited Better's headquarters, we saw Tin Man and met Betsy, and we were stunned. 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.

With this AI-powered infrastructure, Neo can now combine the best of both worlds: the speed, efficiency, and automation that clients want, with the advice, strategy, and long-term commitment from a local mortgage advisor that they need and deserve. This is an absolute game changer. Now, our strategy at Neo Powered by Better is built on three key beliefs. First, we will drastically reduce loan costs and increase the scalability of our teammates, which is a major problem for most in the mortgage industry. With Tin Man and Betsy, our teams can efficiently serve more families with more value and at a much lower cost. This allows us to compete with discount lenders without sacrificing value. Our second key belief is that we can help subsidize the local mortgage professional with lead generation that has become much harder in the past few years.

The market has shifted, making it harder for mortgage advisors to find clients that need help. When we learned that roughly 30,000 people per month are inquiring with Better about purchasing a home, we knew that our team of highly trained advisors could convert more of these curious prospects into actual homeowners. We are 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 level Better experiences in its D2C channel. We are 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. Between the increased 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.

Now, our third key belief is that by creating the industry's first truly transparent partnership lending model, we can empower local mortgage professionals to have the confidence, knowledge, and financial understanding to operate at much higher levels. By doing this, Neo Powered by Better is creating a natural alignment of interests between each team member in the organization, as opposed to misaligned priorities that mortgage professionals have had to deal with for decades prior. Lastly, we are excited to be able to share more about Neo Home Loans powered by Better with local mortgage professionals across the country. We expect that when they see and start to understand this combination of technology, efficiency, scalability, and growth through lead generation and referral partnerships, the best and brightest will want to partner with us in our efforts to completely change and improve the mortgage industry.

In 2024, our Neo team funded approximately $2 billion in mortgage volume while remaining profitable. Now, powered by Better, we're positioned to scale even faster, drive greater profitability, and deliver even more impact. Together, we're redefining mortgage lending, and this is just the beginning. Thank you. With that, I'll turn it back over to you, Vishal.

Vishal Garg (Founder and CEO)

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 North Star, alongside continued expense management and channel diversification. We will continue to invest in Tin Man AI to improve the customer experience and further drive down labor costs, 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 the quarterly performance and our financial strategy. Kevin.

Kevin Ryan (CFO)

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. In the fourth quarter of 2024, we generated funded loan volume of $936 million, revenue of $25 million, and an Adjusted EBITDA loss of $28 million. Total GAAP net loss was approximately $59 million. Our fourth quarter funded loan volume was 81% generated through our D2C channel and 19% generated through our B2B partner channel. With 62% purchase, 18% home equity loans, and the remainder by dollar volume was refinance. In addition, we are experiencing early success with our U.K. bank, the Bank of Birmingham, which scaled loan originations over tenfold from December 2023 to December 2024 as we have implemented our technology in the U.K.

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. Turning now to our outlook for full year 2025, we remain focused on managing towards profitability in the midterm, and we expect to drive growth through efficiency from Tin Man AI, distribution channel diversification, and optimized marketing, while balancing these growth expenses with further corporate cost reductions.

For the first quarter of 2025, we expect funded loan volume to be down approximately 10-15% compared to the fourth quarter of 2024, given continued seasonal slowness and the wind down of our Ally businesses, which is a reminder made up 29% of our full year 2024 volume and 19% of our Q4 2024 volume, and we expect to be only low double digits percent of Q1 volume before fully winding down at some point in the second quarter. 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 was the first full month of Neo on our platform.

As another data point here to put our trends in the context of the industry, the Fannie Mae February housing forecast is overall Q1 market volumes declining 24% quarter-over-quarter, demonstrating Better's outperformance of the market as a whole in Q1. For the full year 2025, we expect funded loan volume growth in the low to mid double digits % growth year-over-year, driven by tailwinds from growth initiatives, including Neo Powered by Better, offset by continued macro headwinds and the loss of the Ally business, a roughly $900 million headwind. 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 tailwinds.

We also expect to further decrease our Adjusted EBITDA losses in 2025 as compared to 2024 due to a combination of efficiency gains as well as continued corporate cost reductions. Lastly, we are undergoing efforts to exit our non-core U.K. assets while continuing to focus on growing the bank. We expect the exiting of three smaller non-core U.K. businesses to start being a benefit to our Adjusted EBITDA losses in the second half of 2025 as a result of their disposition. With that, I'll now turn it back to the operator for Q&A.

Operator (participant)

Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure you are not on speakerphone and that your phone is not on mute when called upon. Thank you. One moment, please, for your first question. Your first question comes from the line of Eric Hagen with BTIG. Your line is open.

Eric Hagen (Managing Director and Mortgage and Specialty Finance Analyst)

Hey, thanks. Good morning. Good to hear from you guys. The AI playback was actually pretty interesting. How does the underwriting and the AI technology adjust for the high cost, the limited availability of property insurance? Can the tech adjust for that in any way? Do you even see that maybe creating an opportunity because there's folks coming into you online and just ways to fulfill that loan more efficiently? Thanks.

Vishal Garg (Founder and CEO)

I mean, that is a really great question. I mean, what you saw there was not like a form filler router engine. There are over 15 different data forks and API calls that went through. Forty-five investors filtered down to five HELOC investors and running all the permutations across credit, DTI, LTV, cash-out amount, and actually insurance quotes, closing costs across 3,600 counties in the U.S. We have an insurance engine built in where we deliver instant homeowners insurance to consumers while they're going through a refinance or a HELOC process or a cash-out refund process. We are talking about things that used to take a lot of people to do. Again, if we think that Scott Bessent's 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 functions that those refi and salespeople were doing back in 2020 at zero, near zero marginal cost. That means we don't have to hire 3,000 salespeople, right? We don't have to hire 5,000 processors and underwriters. We don't have to hire 1,000 insurance agents that we used to have. I think there's just extraordinary scale that we've now built into the product, and Betsy is accommodating all of that. We're really, really looking well-positioned in a way that we haven't been in many years for anything changing in the macro environment, including what you outlined, homeowners insurance rates going up.

Eric Hagen (Managing Director and Mortgage and Specialty Finance Analyst)

Really good stuff. Interesting. 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? How do you benchmark kind of like the amount of risk you're taking in a certain period? Even how you might price for things on the front end?

Vishal Garg (Founder and CEO)

That's a really good question. I think what gets lost in the dialogue about us versus many of the other fintechs is we are operating a pure marketplace business. We do not hold loans on balance sheet that have not already been committed to be sold to others. We have 45 institutional investors on our platform that are buying our loans, our HELOCs every day. Fundamentally, we don't make a loan unless we've got buyer lined up. When you're locking that loan with us, we already know where it's going. That's how Tin Man is fulfilling the set of underwriting criteria for that particular investor to deliver that loan to that particular investor. I think the path to profitability we're talking about is not one built on taking any more marginal units of risk.

The path to profitability is really built around, like, look, we lost basically $9 million a month last quarter, right? With what we're doing to shut down the U.K. businesses, that's like $1 million a month. What we're doing to improve the profitability at the bank, we think that that gets us another $1 million a month. I think with AI driving down operations costs, 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 DSPAC, the very aggressive CFPB era, 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 2021, 2022, right?

Which we just finally got out of the office space that we had in New York that was like 45,000 sq ft and downgraded that by 80% and moved to a cheaper space. I think that's another $2 million a month. You add some volume growth, add some improvement in margin, add some profit from the Neo channel, and you're getting to break even. We see a path to break even, again, built on efficiency, built on exiting a bunch of the legacy costs that we have from the 2021, 2022 days, and exiting the legacy businesses that we have and improving margins that you see us continuously doing. Again, without taking any more risk from a credit standpoint.

Kevin Ryan (CFO)

Yeah. I mean, Eric, I'll add it Kevin, Vishal said. I think 100% of the loans we did in the quarter were pre-committed to investors at the time of origination. If it's not 100%, it's 99%, right? So we don't take really any risk. The way we think about risk is should we lean into marketing this month versus next month depending on market conditions, right? That is a very tactical in-the-moment decision. 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 U.K. assets that was non-cash one time. When you strip that out, we got expenses down about $11 million to $12 million in a quarter or $4 million a month.

We are, and in all major categories, I think, as Vishal said in the prepared remarks, we were down. Corporate expenses were down a bunch. Marketing was down a bit. We definitely took a lot of expenses out in Q4 and are continuing to do so in Q1.

Eric Hagen (Managing Director and Mortgage and Specialty Finance Analyst)

Really good stuff here, guys. We appreciate you. Thank you.

Kevin Ryan (CFO)

Thanks, Eric.

Operator (participant)

The next question comes from Jake Kooyman with Oppenheimer. Your line is open.

Jake Kooyman (Equity Research Associate)

Hi. Thank you very much for taking the question. This is Jake Kooyman on for Rayna Kumar. Can you walk through the saving opportunities from Tin Man's application of AI as well as how that contributes? Thank you very much.

Vishal Garg (Founder and CEO)

Totally. I think the savings are when we think about your traditional loan officer and loan officer assistants, right? The bulk of their time, particularly in the D2C channel, is spent servicing customers that are coming in via the online channel, chasing after those customers in the purchase market, chasing after the realtor who those customers are using. There is a ton of effort on outbound calls. There is a ton of effort chasing inbound calls that you missed because you were on the phone with someone else. You can staff up. You can have a 10,000-person call center to capture all these calls, and you make all these outbound calls like other mortgage companies do, doing 400 outbound dials a day. It is really inefficient and really grinds down the labor force. We have Betsy doing all inbound calls in the nights and evenings.

We do not miss a single call. We used to miss 40% of calls that would come in because people would not be available to meet their loan officer because they were calling at 9:00 P.M. in the evening after they put their kids to bed, and they are looking at what they are doing for the home buying that coming weekend. Or they are calling us on the weekend when they are about to go into contract on their home, and they want to make sure that the rate quotes are still good, and they want 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 because it is always on. We have—and I think that has been a game changer.

I think there's an ability to take up $2,000 per funded loan in sales costs once Betsy gets fully implemented in the sales funnel, right? We're doing almost 1,000 loans a month, right? We're trying to scale that up. With Neo, it's more than that. We're getting there, right? That's some serious savings per month that we're able to generate as we implement this, not just for ourselves, but for our B2B 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. That's increased to about 40%. The loans that are AI underwritten, we're saving $1,400 per loan, right? Potentially. Again, you add those two things up.

We're talking about a production cost that's already more than 35% cheaper than the rest of the industry. Now you're talking about for the full AI-driven loans, you're talking about $3,500 per loan in savings on top of that. That's all going to go to margin because we already have some of the lowest gain on sale and therefore the lowest price to the consumer out there. All those AI enhancements will effectively drop to the bottom line. I hope that provides some context.

Jake Kooyman (Equity Research Associate)

Yes. Thank you very much.

Operator (participant)

The next question comes from Bose George of KBW. Your line is open.

Alex Bond (Senior Research Analyst)

Hey, good morning, everyone. This is actually Alex Bond on for Bose. Appreciate you taking our questions. 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 how gain on sale margins are trending quarter to date compared to 4Q in light of the decline in rates over the course of the quarter. Also, as you mentioned in the prepared remarks, the gain on sale margin on Neo loans has been stronger to date than the 2024 company-wide margin. You mentioned that there's potential to maybe improve this further as efficiencies improve. Is this primarily from AI and other tech related, or would this be primarily from AI and other tech related improvements, or are there other components that could be improved efficiency-wise as well?

Any additional color there would be great. Thanks.

Kevin Ryan (CFO)

Okay. Kevin, 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. On gain on sale in Q1, it is trending higher. I think we put in a release $90 million in Neo loans already in Q1. They just onboarded in February. We crossed $100 million this morning. We are over $100 million loans, and they are running much higher, 150 basis points higher on average gain on sale than a direct-to-consumer business. That is something we knew going in, expected. We would have been disappointed if they weren't running higher gain on sale just given their boots on the ground business, their expertise, etc. 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 billion dollars a year of Ally volume with, we call it $2 billion in Neo, let's just say, this year. That will be a much higher gain on sale than what we would have reported on our Ally. On the D2C business, I'll start. I'm sure Vishal will want to jump in. Yeah, Betsy and the AI allow us to—we've gradually increased our gain on sale in the direct-to-consumer business, right? We were sub 2%. We're now north of 2%. We're not at the 3.5% that Neo's at, but the business isn't built that way, right? It's an online business. As Vishal said, we have some of the lowest rates out there. Through our improvements and better customer experience through the AI, we've been able to gradually increase gain on sale.

The rate drop we've had, we're kind of roughly around 6.75% now on rate, right? Has definitely helped a bit as well.

Vishal Garg (Founder and CEO)

Yeah. I'll tell you what's contributing to the margin increase. Online, a consumer is submitting effectively a lead. When they're online, they're shopping around. They're going to our site. They have a tab open with somebody else's site. They might be on one of the comparison shopping engines. 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. The efficacy of our marketing was lower, but also they're shopping around. We've taken that five minutes and brought it down to 800 milliseconds with Betsy across the board. That's an improvement of 400x in speed. Now we're catching the customer faster than anybody else.

We're catching that customer before they have a chance to 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 their questions. We're able to convert them from a lead to an application. We're able to approve them. We're able to do all these things that before, just with a human-staffed call center, was kind of nearly impossible. You end up competing much more on rate than you do on speed and service. I think that that's, again, it enabled us to continue to get better margin while still maintaining our value proposition for the consumer.

Alex Bond (Senior Research Analyst)

Great. That all makes sense. Appreciate you taking the questions.

Operator (participant)

Your next question comes from Reggie Smith of JPMorgan. Your line is open.

Reggie Smith (Executive Director of Equity Research)

Hey, good morning. Thanks for taking the question. Really encouraging the disclosures you gave around the potential savings from, I guess, a lot of your cost initiatives. My question, and I'm not sure if you guys have broken it out or even thinking about the business this way, but is there a way to contextualize contribution profit per loan or loan economics that way? I know you guys cited some savings potentials in the press release, but I'm curious how you guys think about and how we should think about loan economics at the loan level. So revenue per loan, expenses, is there a way to attribute whether it's marketing or overhead to the loan origination process? I have a follow-up. Thank you.

Kevin Ryan (CFO)

Yeah. It says, Kevin, I'll make a few comments. Obviously, in the GAAP financials, you don't see that. We run the business on a contribution margin basis, and the contribution margin in the mortgage business has been improving meaningfully the last couple of months. I think we can go—we'll take a way to break it out for next quarter in a way that you'll be able to kind of track it back to the GAAP financials. It's something we talk about all the time. I will tell you, through these savings and the improvement in gain on sale, the cost savings via the AI, the contribution margin continues to get better on our production, and it continues to be into Q1. That's something we are maniacally focused on, right?

Because while we're cutting corporate costs faster than we're cutting costs in the mortgage business, we also need to lower costs in the mortgage business in order to really drive contribution profit that we can then use to cover what is good. You're always going to have some fixed overhead. We think about that all the time.

Vishal Garg (Founder and CEO)

Yeah. Reggie, 2024 was a lot of changes. We moved from a salary-based loan officer and processor model to an incentive-based, low-base, high-incentive model. We started recruiting experienced loan officers. We had to teach those loan officers Tin Man. The ones that didn't understand or couldn't be productive on Tin Man, we had to let them go. We had some charges. 2024, and then.

Kevin Ryan (CFO)

We did Neo at the end of the year.

Vishal Garg (Founder and CEO)

Yeah. We did Neo at the end of the year. We had some onboarding expenses related to that. Lastly, we were hoping for the rate cut in September to actually bring rates down, and that did not. That made a bunch of our marketing spend negative because we're buying leads, and the consumer's thinking they're getting a 6.5% rate. By the time they get to lock, they're getting a 7.25% rate, right? That consumer's not in the money anymore, or that consumer is not able to—isn't going to proceed going forward. He's going to wait. We had a lot of challenges in 2024. We made a lot, a lot of progress.

What we decided by the end of 2024 was we are going to focus maniacally on any growth that is going to come with positive contribution margin, and we are going to continue to expand the positive contribution margin, even if that means forecasting a slightly slower growth rate. I think we can achieve fast growth and improved contribution margin, and that is really possible, not in a human-centric business model, but an AI-centric business model. I think that is really what we are leaning very, very hard into. Hopefully, that can give you some context for the future. Of course, we will take it under advice that we need to get out to make your job easier to break out contribution margin next quarter.

Reggie Smith (Executive Director of Equity Research)

I didn't know if I had missed that or what. Like I said, I don't have a model for you guys. That was just something I was looking for. I wasn't sure. If I could sneak two more questions in really quickly. One, I love the demo that you guys showed or presented during the call. I was curious how it's resonating with consumers. My inclination—and I could be totally off—is that it probably for younger people, it's probably a more natural way of doing things. I was curious any feedback you've gotten or insights you've gotten in terms of are younger folks using the automated system better than older people? How often do people opt out and say representative or something like that? My last question, you talked about, I guess, approving a loan in one day.

I was curious how quickly you guys can fund a loan. That's something that I've come to appreciate in the last month. I'm trying to sell my condo in Brooklyn. People that are able to close quickly makes a difference. I was curious if you had any advantage there as well. Thank you.

Vishal Garg (Founder and CEO)

Yeah. No, that's a great question. We're seeing adoption of Betsy in general be quite high. About 18% of consumers ask to be transferred to a human loan officer as part of the process, right? They encounter it. They realize that it's an AI, and they want to move on to a human. Yeah, we're going to work to get that down. We've got to work to get the voices more humanistic. We've got to do a lot of work on continuing to add the functionality. I would tell you it's early days. We launched the first version of Betsy not only a few months ago. You can sort of see we're increasing functionality, increasing realism, and it's going to improve. The uptake has been greatest between the ages of 20-35, and then actually surprisingly 55 and up, right?

Because they're okay with something that goes a little slower in terms of talking and is talking clearly. We've seen some good stats around that. Again, early days. We'll see how that all shapes up. Young people love the fact you can talk to it anytime. You can text with it. You have a loan officer you can go to anytime. We're just really leaning into that. The last question with respect to closing times. I think in New York, we're able to close a loan on average—let me just actually get the stats—but much faster than the competition. Give me a second. I'm just going to pull it up for you. On New York, 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 people having to figure out how to move and all that sort of stuff. We are about 40% better than the competition in New York State specifically.

Reggie Smith (Executive Director of Equity Research)

No, that's good. It's something I didn't appreciate until I went through the process myself. Glad to hear that. That's a really important selling point for buyers. I'll tell you, personally, I hate AI, but it's something I've got to get used to in terms of the automation. I'm one of those 18%ers that's always representative as soon as I hear an automated system. Yeah, it'll be interesting to watch that evolve over time. Congratulations on the quarter, and good luck, guys.

Kevin Ryan (CFO)

Hey, Reggie, if you find a buyer in Brooklyn, tell them to go to better.com. We'll pre-approve them in a couple of minutes.

Reggie Smith (Executive Director of Equity Research)

Will do.

Operator (participant)

The next question comes from Michael Kaye with Wells Fargo. Your line is open.

Michael Kaye (VP and Equity Research Analyst)

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. Can you just walk through why the higher year-over-year volumes and cost initiatives over the last year isn't translating into better profitability? Maybe just walk us through some of the dynamics and if I'm missing anything.

Kevin Ryan (CFO)

You're doing year-over-year, is what you're doing?

Michael Kaye (VP and Equity Research Analyst)

Yes. It was a $38 million loss, Adjusted Net Loss in Q4 versus about $38 million last year.

Kevin Ryan (CFO)

Yeah. As Vishal said, we took marketing expense up, and that was the biggest difference. We actually hired more people as well into, as Vishal mentioned before, we hired more people into what we expected to be a declining rate environment in the second half of the second half of 2024, which bluntly did not really pan out. We have pulled back a bit on that. That is some of that noise you are seeing in there. Q4 of 2023 was a low point on volume. It was also a low point on staffing within the mortgage business, the mortgage factory. All the other corporate costs and everything have come down dramatically since Q4 2023, but marketing expense was higher Q4 2024, as was sales and ops labor.

As we're getting Betsy going, that will continue to come down on a unit basis, which I think was part of Reggie's question, which we're going to try to break out.

Vishal Garg (Founder and CEO)

Yeah. I mean, we were overstaffed in Q4. After implementing Betsy, we've been able to reduce staffing by about 250 people in the mortgage factory.

Michael Kaye (VP and Equity Research Analyst)

Wow. Okay. Shifting gears. What's your level of optimism on spring home purchase season? Rates are around 6 and three quarters. More home inventory now available, probably some pent-up demand from buyers, though there's affordability headwinds. Just talk about how you're thinking about spring home purchase season.

Vishal Garg (Founder and CEO)

We're seeing the volume of pre-approvals per marketing spend continue to improve dramatically. I think that that's a good leading indicator, right, of how many people are running out and just going shopping. We'll see how many of those people actually are able to find a house. So far, it looks like the level of pre-approvals per dollar of marketing spend continues to improve pretty dramatically. We're optimistic for what happens. Look, again, the noise from Washington is about deregulation and about getting the tenure down. You put your odds on whether they can make that happen. If you believe that that can happen, I think we might be in for a positive surprise this spring and summer home buying season.

Michael Kaye (VP and Equity Research Analyst)

Okay. Thank you.

Operator (participant)

The next question comes from Jamie Friedman with Susquehanna. Your line is open.

Jamie Friedman (Senior FinTech and IT Services Research Analyst)

Hi. Interesting presentation and demonstration. 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 in the end market, where do you think we are in that continuum? What are you anticipating, if anything, for the year ahead?

Vishal Garg (Founder and CEO)

I think what we always say at Better Now is that we have, unfortunately, not been able to predict the macro environment for the past three years. We are optimists as hard as any technologist will tell you. You have to be an optimist. Otherwise, how are you going to believe? We do think that the supply-demand imbalance in housing is going to get rectified in the next year or two. I think there's obviously an impact of tariffs, but that means that the homes that are out there available for sale today are a relative bargain if the tariffs do actually continue and the raw material cost of building a home goes up substantially. I think old houses are going to sell more. We're seeing demand for the HELOC product really explode because people need to fix up the houses.

The boomer houses need to be modernized to be able to sell to the millennial buyers. We're seeing a ton of demand for home renovation on the HELOC product before people look to sell their house or if they stay in the same place. We grew our HELOC to 400% last year, fastest-growing HELOC lender in the market. We think we can grow it again pretty dramatically this year. We've gone from basically nothing to being one of the leading HELOC lenders in the country. I think we're trying to build a balanced portfolio of loan types so that we can thrive in any macro environment out there.

Kevin Ryan (CFO)

Yeah. I think that, as Vishal said, it's been really hard to predict the macro. If you listen to earnings calls this season, right, we're in the tail end. The word uncertainty comes up 20 times a call. That's just kind of the macro we live in right now. Every company does. In our industry in particular, that's important. We get it. We definitely think we are way ahead of the trend. The inevitability around technology disrupting the legacy mortgage process in the US is probably maybe taking a little bit longer than we thought. The trend continues, and we think we're definitely right on that trend. It'll play out over time. Regardless of where rates and the starts data was pretty good in February, but then people say consumer confidence is down. What does that mean for spring season?

We get all that and try to factor that in. That does impact our market decisions on a day-to-day basis, but it doesn't really impact our tech roadmap at all. We know what we have to build.

Vishal Garg (Founder and CEO)

Yeah. I'll add that we're sitting on over 2 million pre-approvals over the past couple of years that we've issued where the people have not found a house. We do not know when the dam breaks, but when the dam breaks, we're going to be well-positioned. The number of people that come to better.com and get pre-approved per month is percentage points of market share in terms of the number of people that are shopping for a home. The numbers that actually convert is basis points of market share. A lot of that has been availability homes. We are really hoping that if the tide turns on rates or home affordability or availability, 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.

I think that's why you continue to see us lean so hard into the AI.

Jamie Friedman (Senior FinTech and IT Services Research Analyst)

Perfect. Thank you so much. I'll drop back in the queue.

Operator (participant)

The next question comes from Will Brunemann with Northcoast Research. Your line is open.

Will Brunemann (Equity Research Associate)

Hey, guys. Good morning. I wanted to ask, how long do you think it will take to get Neo back to its former run rate volume as Tin Man gets ramped up? You mentioned Betsy driving cost efficiencies going forward. When do you see the majority of those further cost efficiencies fully realized? I have just one more quick question.

Vishal Garg (Founder and CEO)

Sure. I think we're looking for Neo to get back to their original volume in the next couple of months.

Will Brunemann (Equity Research Associate)

Yeah. Q3?

Vishal Garg (Founder and CEO)

Yeah.

Will Brunemann (Equity Research Associate)

Q3, it'd be back to where they were. Q4, hopefully, it'd be better than where they were?

Vishal Garg (Founder and CEO)

Yeah. I'll tell you, we announced NEO. We were at some industry conferences demoing Betsy. The number of loan officers with large retail books that reach out to me on LinkedIn to say, "Hey, can you join?" The number of people that reach out to Ryan and Chris and Danny, who are the principals at NEO, is pretty long. We are just making sure that we can fully broaden out the product sets that are in Tin Man. We are making sure that we can fully serve all of these loan officers. We are helping them go from driving a Ford Taurus in the existing infrastructure and mortgage lending that they are on to driving a Ferrari. We just need to make sure they can do it. They are off to the races.

NEO is going to be back to its original loan volume in a couple of months. We are going to grow that dramatically from there. The other part about Betsy, we are going to keep you updated on the percentage of consumers and the percentage of consumers that are interacting with Betsy and therefore dramatically reducing costs from sales. We will keep you updated on the percentage of loans that are being underwritten by Tin Man. You can compute just the cost savings from that. The remaining loans still are subject to the old cost structure. We will keep you guys updated on that. The cost savings are pretty significant. They are starting to show. They are going to show this quarter. They are going to show next quarter. They are going to show in the third quarter.

As I said, we think by the end of 2025, 75% of loans are going to be underwritten by Tin Man AI. With respect to Betsy, we've got one state that's all Betsy. You take that. Then we got to get to 50 states that are all Betsy.

Will Brunemann (Equity Research Associate)

Okay. Great. My last question, what do you see as the expansion opportunities within the broader distribution retail channel like Neo?

Vishal Garg (Founder and CEO)

I think it's massive. I think the number of people that we have reaching out to us to scale. Look, on direct-to-consumer, we're fighting against some pretty sophisticated folks. We're fighting against Rocket. We're fighting against LoanDepot. We're fighting against 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 technological sophistication within that universe. I think there's a pretty heavy tax that these platforms charge to the incumbent loan officer. I think we can free them from that. I would say the closest example to that is what has happened in the RIA space, right, versus hanging your hat at an old wirehouse and getting a small percentage of revenue.

You could go to the RIA platforms that are tech-savvy and private-labeled and give you basically everything and keep a larger percentage of your profits. I think that's the disruption that's going to happen in retail. I think we're going to lead that disruption.

Will Brunemann (Equity Research Associate)

That's awesome. Thank you, guys, for taking my questions.

Operator (participant)

The next question comes from Brendan McCarthy with Sidoti & Company. Your line is open.

Brendan McCarthy (Equity Research Analyst)

Great. Thanks. Good morning, everyone. Thanks for taking my questions here. I just wanted to start on the corporate cost reduction side. I think you mentioned corporate cost reductions, benefit of 2024. Just curious as to where you see the biggest opportunity for further reductions in 2025.

Kevin Ryan (CFO)

Sure. There are a couple of areas. We're going to continue on comp and benefits. Now, on the GAAP line item, right, everything's blended together, whether it's corporate or sales, U.K., everything's blended together. We'll break it out going forward. You're going to continue to see benefits there. We're sitting in an office building right now that's 20% the size of the one we were sitting in on the last earnings call. We're saving $10 million in lease expense over the next couple of years just by moving offices. You're going to start to—we're dramatically renegotiating vendor contracts. Some we got done in the second half of 2024. You'll see a full-year benefit in 2025. Some we'll get done over the course of 2025. You'll see a full-year benefit in 2026. It's really on all—and it's on all areas.

If you look at just even G&A, right, year-over-year was down 70%. And G&A quarter-over- quarter was down $2 million Q3 to Q4. In professional fees would be the other. Those are kind of the four big areas. There's obviously comp and ben's the biggest area. G&A, some of that is in technology expense. Some of that's in G&A, the vendors. Obviously, most of the lease work's already been done, but you're going to start to see the run rate benefits this year.

Brendan McCarthy (Equity Research Analyst)

Great. That's helpful. That's helpful. What opportunities do you see for additional B2B partnerships in the market, just given the strength of the growing technology stack for your company?

Vishal Garg (Founder and CEO)

Yeah. I'll give you three examples. We launched Betsy in October. In the past couple of months, we've gotten a call 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 Tin Man for me and help me do that?" Right? We're in term sheet discussions with them. We've got a top-three financial services lead gen company, right, where, again, the CEO called and said, "I've got a board meeting in four weeks, and I need to show them AI needs to be implemented." Right? What can we do? 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.

We've got a large community bank that wants to, again, do the same thing and have it built around non-QM loans and bank statement loans and non-conforming loans, which, again, are very hard for your traditional mortgage software to do. We're in late-stage discussions with them. We're seeing the B2B side of it explode in a way that we haven't seen since sort of 2018, 2019, when people were coming to us to help them build refi engines to address the refi demand. We're not going just with the big guys, which just 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 B2B partner in three weeks.

That is a lot faster than what even a sales contract lifecycle is for signing up with the traditional players in the industry like Ellie Mae or Black Knight or others. We are aggressively pursuing that. You are going to see us, hopefully, announce some big things in the coming months ahead.

Brendan McCarthy (Equity Research Analyst)

Got it. Thank you. Last question for me. What do you expect the impact of losing the Ally business? I guess, how do you kind of gauge that impact? What are you doing to ultimately offset that loss for the business as a whole?

Kevin Ryan (CFO)

Yeah. If I just look at two—well, two key metrics. I'll just start with two, and then let me know if you want to expand. On volume, you're just short of $1 billion. That was in last year's numbers that you're not going to see in this year's numbers. There will be some Ally volume in Q1, but it really tails off after this quarter. Neo more than replaces that. We guided up to low to mid-double digits growth in volume this year. We're going to grow volume despite losing that $1 billion. We're confident in that. Neo is a big part of it, obviously. On EBITDA, it's really a neutral event. Net-net, the way we had structured the fee relationship with Ally worked extremely well in a very good low-rate environment.

You have a fixed amount of people you need to put against a large B2B partnership like that. As their volume came down along with the industry's, they pulled back on marketing spend, etc. We totally understand why they did it. You were running basically an EBITDA-neutral business. There is no negative impact to EBITDA because we have obviously addressed the expenses associated with Ally as the revenues come off.

Brendan McCarthy (Equity Research Analyst)

That's helpful. Thanks, everybody. Yes, absolutely. That's helpful. Congrats on the progress.

Kevin Ryan (CFO)

Cool. Thank you.

Operator (participant)

This concludes the question and answer session. I'll turn the call to Vishal Garg, CEO, for closing remarks.

Vishal Garg (Founder and CEO)

Thank you all for all your great questions and for continuing to support us as we build America's leading AI mortgage platform. In doing so, help consumers get a mortgage, get a better rate, have a better process, which lets them have a better house in a better school district with a better commute and a better backyard. We started on this journey eight years ago. The past three years have been really difficult for us, but we're playing offense and playing offense hard again. We're looking forward to driving the business 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.

Operator (participant)

This concludes today's conference call. Thank you for joining. We now disconnect.