Sign in

You're signed outSign in or to get full access.

BH

Better Home & Finance Holding Co (BETR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue rose 46% year-over-year to ~$32.6M, while GAAP net loss was ~$50.6M; funded loan volume was $868M (+31% y/y, -7% q/q), with D2C at 71% and purchase loans at 67% of volume .
  • Management highlighted AI-driven efficiency as a key driver: higher gain-on-sale margins, pricing discipline, and loan loss reserve tailwinds lifted revenue despite lower volume; adjusted EBITDA loss was ~$40.4M .
  • Guidance: funded loan volume expected to increase in Q2 vs Q1; NEO Powered by Better pacing to >$450M originations in Q2; 2025 funded loan volume and adjusted EBITDA loss expected to improve vs 2024 .
  • Balance sheet catalyst: retired ~$530M of convertible notes, creating ~$200M positive pre-tax equity value and reducing debt overhang; core expenses expected down in Q2 .
  • Strategic expansion: first bank partner licensed Tinman AI software (per funded loan SaaS model), and rapid progress with NEO Powered by Better (115 loan officers across 53 branches; $163M Q1 volume) .

What Went Well and What Went Wrong

What Went Well

  • Revenue up ~30% q/q despite seasonal volume decline, driven by NEO onboarding at higher gain-on-sale margins, pricing, and loan loss reserve tailwinds (“revenue was up approximately 30%”) .
  • AI execution: Betsy handled ~127,000 consumer interactions in March; AI underwriting targeted to reach ~75% of locks, improving conversion and labor efficiency .
  • Tinman AI platform scaling: first bank partner signed to power full mortgage stack; per-funded-loan SaaS fees of ~$1,500, with rapid 3–60 day deployment times .

What Went Wrong

  • Adjusted EBITDA loss widened vs Q4 2024 ($40.4M in Q1 vs $28.0M in Q4), reflecting continued investment and early-stage scaling of new channels .
  • Seasonal macro headwinds weighed on volumes (Q1 typically slow), and the Ally wind-down remains a ~$1B annual headwind to funded loan volume .
  • Non-core U.K. asset exits continue; while Birmingham Bank origination growth is strong (£72.4M in Q1 vs £28M in Q4), non-core disposals only begin to benefit adjusted EBITDA losses in H2 2025 .

Financial Results

Core financials (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$29.0 $25.0 $32.6 (Total net revenues)
GAAP Net Loss ($USD Millions)$(54.1) $(59.0) $(50.6)
Adjusted EBITDA ($USD Millions)$(38.7) $(28.0) $(40.4)
Funded Loan Volume ($USD Millions)$1,035 $936 $868

Notes:

  • EPS not disclosed in company materials; management and press release focus on revenue, net loss, and adjusted EBITDA -.

Q1 2025 segment and channel breakdown

MetricQ1 2025
Purchase Loan Volume ($USD Millions)$578 (67% of total)
HELOC & Second Lien Volume ($USD Millions)$157 (18% of total)
Refinance Loan Volume ($USD Millions)$133 (15% of total)
D2C Loan Volume ($USD Millions)$614 (71% of total)
Tinman AI Platform + B2B (% of total)29%
Total Loans (#)~3,000

Selected KPIs

KPIQ3 2024Q4 2024Q1 2025
D2C Volume Share (%)75% 81% 71%
Purchase Share (%)71% 62% 67%
Betsy Interactions (monthly)——127,000 (March)
NEO Loan Officers / Branches—~110 LOs / 53 branches (start Jan’25) ~115 LOs / 53 branches
NEO Funded Volume ($USD Millions)—$95 (in production as of Jan–Mar commentary) $163 (Q1 production)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Funded Loan VolumeQ1 2025Down ~10–15% q/q vs Q4 2024 Actual: down ~7% q/q (to $868M) Beat prior guide (smaller decline)
Funded Loan VolumeQ2 2025N/AUp vs Q1 2025 New positive
NEO OriginationsQ2 2025N/A>$450M expected New positive
Core Expenses (incl. comp & benefits)Q2 2025N/ADown vs Q1 2025 New reduction
Funded Loan Volume (FY)FY 2025Low-to-mid double-digit growth y/y (communicated in Mar) Increase over 2024 (qualitative reaffirmation) Maintained
Adjusted EBITDA LossFY 2025Improvement vs FY 2024 Further improvements vs 2024 Maintained
U.K. Bank OriginationsFY 2025More than double y/y More than double; non-core exits to benefit H2 2025 Maintained/updated timing

Earnings Call Themes & Trends

TopicQ3 2024 (Prev)Q4 2024 (Prev)Q1 2025 (Current)Trend
AI/Technology (Tinman, Betsy)Launched Betsy; AI efficiency narrative Demonstrated Betsy rate-lock autonomy; cost targets; AI underwriting scaling -Betsy at 127k interactions; AI underwriting targeting 75% of locks; faster response improving margins -Strengthening execution and scope
Distribution Diversification (NEO retail)Announced NEO Powered by Better strategy -NEO onboarding underway; early margin uplift vs D2C ~115 LOs onboarded; $163M Q1; guide >$450M Q2 Ramp accelerating
Bank SaaS (Tinman AI software licensing)Not highlightedPipeline forming with servicers/fintechs/banks First bank partner signed; ~$1,500 per funded loan SaaS economics; rapid deployment New revenue stream emerging
Macro/Seasonality/RatesRates >7%; cautious stance -Q1 guide down 10–15% q/q; macro uncertainty emphasized Q1 down 7% q/q; Q2 expected up despite volatility Seasonality easing, cautious optimism
Capital Structure—Debt burden and de-SPAC cleanup in focus Retired ~$530M convert; ~$200M equity value creation; $155M PIK due 2028 Balance sheet de-risking
U.K. Operations—AI-driven U.K. bank growth; exit non-core U.K. Birmingham Bank growth; H2 EBITDA benefit from disposals Execution underway

Management Commentary

  • CEO on AI scaling: “Deliberate and strategic efforts to scale AI across the enterprise… expanding Betsy into processing and underwriting workflows… diversifying distribution channels… powering banks by licensing Tinman software” .
  • CFO on revenue drivers: “Revenue was up approximately 30%… due to volume from NEO… higher gain on sale margins, our continued push towards increased pricing, and a tailwind from the loan loss reserve” .
  • CEO on bank SaaS economics: “We are earning about $1,500 per funded loan in software fees and platform fees,” with 0 integration cost and rapid deployment .
  • CFO on debt retirement: “Retirement of approximately $530 million of convertible notes, creating approximately $200 million of positive pretax equity value… reduce the debt overhang” .

Q&A Highlights

  • NEO ramp and loan officer productivity: LOs see impact within ~30 days; goal to scale productivity to ~10 loans/month; target to double NEO production in Q2 and triple/quadruple channel longer term -.
  • Unit economics and cost per loan: Company aims for ~$1,500 total production cost per loan ($500 sales labor, $500 ops labor, $500 vendor costs), >6x cheaper than industry; non-comp origination costs safely below ~$1,000/loan and going lower .
  • Balance sheet leverage: Comfortable with ~$155M PIK debt maturing end-2028; business model remains capital-light with servicing released, recycling LHFS quickly .
  • Bank/fintech pipeline: First bank live; $4M+ revenue annualized initially, potentially $10–12M with wholesale; broader pipeline across servicers, fintech lead-gen, community banks .
  • Product breadth via Tinman: Built functionality for complex borrower profiles and non-QM products; AI underwriting auto-matches consumers to full product set, improving conversion and unit economics .

Estimates Context

  • We queried S&P Global/Capital IQ for Wall Street consensus (EPS, revenue, EBITDA) for Q1 2025 and forward periods; consensus estimates were unavailable for BETR at the time of this analysis. As a result, comparisons to Street estimates cannot be made and should be treated as not available (N/A) via S&P Global data.
  • Given management’s Q2 up-volume outlook and NEO ramp, sell-side models, where they exist, may need to adjust revenue trajectory and margin assumptions to reflect higher gain-on-sale margins in retail and AI-driven opex leverage .

Key Takeaways for Investors

  • AI execution is translating to economics: faster speed-to-lead, rising gain-on-sale dynamics, and falling per-loan costs should improve contribution margins, even as volumes rebuild post-seasonality .
  • Channel mix is shifting positively: NEO retail ramp (> $450M expected in Q2) and bank SaaS provide diversified revenue streams with higher margins and lower CAC risk .
  • De-risked capital structure: convertible retirement (~$530M) and ~$200M pre-tax equity value creation reduce the debt overhang and should enhance partner confidence and strategic optionality .
  • Near-term setup: Q2 funded loan volume expected to increase versus Q1, with core expenses down—watch for sequential revenue growth and adjusted EBITDA loss improvement as AI and Tinman scale .
  • Medium-term thesis: AI-led mortgage manufacturing at ~$1,500/loan target, broad product coverage (including non-QM), and bank SaaS per-funded-loan pricing model position BETR to capture share across cycles .
  • U.K. optionality: Birmingham Bank origination growth and disposal of non-core U.K. assets should support adjusted EBITDA improvement in H2 2025 .
  • Catalysts: NEO Q2 performance, additional bank/fintech partner signings, demonstration of sustained margin expansion and opex leverage, and evidence of AI underwriting penetration towards 75% of locks .