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Better Home & Finance Holding Co (BETR)·Q3 2024 Earnings Summary

Executive Summary

  • Funded loan volume rose to $1.035B, up 42% year-over-year and 8% sequential, with 3,443 total loans; mix skewed 71% purchase and 16% home equity, with D2C at 75% .
  • Revenue was $29.0M versus $32.3M in Q2 (which included ~$5.5M nonrecurring lock pipeline mark-to-market) and $4.9M in Q3’23; GAAP net loss widened to $54.1M; Adjusted EBITDA loss was $38.7M .
  • Management guided Q4 funded loan volume to be approximately in-line with Q3 despite softer seasonality, while “managing towards profitability in the midterm” as growth expenses increased ~$9.5M q/q .
  • Launch of Betsy, a voice-based AI loan assistant built on Tinman, and onboarding of NEO Home Loans team to expand distributed retail channels were cited as growth catalysts; liquidity stood at ~$480M (cash, restricted cash, short-term investments, and self-funded loans) .

What Went Well and What Went Wrong

What Went Well

  • Funded loan volume grew to $1.035B (+8% q/q; +42% y/y), driven by refinance and home equity (HELOC and second liens) growth; D2C volume rose 16% q/q and 102% y/y to $776M .
  • Technology momentum: launched Betsy, an AI voice platform to improve loan team efficiency and customer experience; continued Tinman automation, targeting lower manufacturing costs and faster processing .
  • Strategic channel expansion: hired NEO Home Loans’ executive team to build a distributed retail channel, aiming to leverage Tinman to power local loan officers (“NEO Powered by Better”) .
    • “We anticipate that Betsy will also help ensure our customers can instantly receive intelligent, instant and accurate answers throughout their loan journey with Better.” — Vishal Garg, CEO .

What Went Wrong

  • Sequential revenue decline to $29.0M from $32.3M in Q2 (which benefited from ~$5.5M positive mark-to-market on lock pipeline), highlighting underlying revenue still below prior quarter’s headline figure .
  • Losses widened: GAAP net loss increased to $54.1M from $41.4M in Q2; Adjusted EBITDA loss expanded to $38.7M from $23.3M, reflecting higher growth investments and reduced nonrecurring benefits .
  • Total expenses rose by ~$9.5M q/q on marketing, loan production compensation, and origination expenses, contributing to margin pressure despite volumes and gain-on-sale margin of 2.08% .

Financial Results

P&L and Volume (YoY and Sequential)

MetricQ3 2023Q2 2024Q3 2024
Revenue ($USD Millions)$4.907 $32.262 $28.994
Net Loss ($USD Millions)($353.889) ($41.365) ($54.080)
Adjusted EBITDA ($USD Millions)($53.897) ($23.259) ($38.740)
Total Expenses ($USD Millions)$358.137 $73.424 $82.948
Interest Income ($USD Millions)$4.043 $9.397 $9.867
Funded Loan Volume ($USD Billions)$0.731 $0.962 $1.035

Notes:

  • Q2 2024 revenue recast to $32.262M in Q3 disclosure; Q2 press release previously cited ~$31.4M; Q3 release also notes ~$5.5M nonrecurring lock pipeline mark-to-market benefit in Q2 .

Gain-on-Sale Margin (Sequential)

MetricQ2 2024Q3 2024
Gain on Sale Margin (%)2.43% 2.08%

Product Mix and KPIs (Sequential trend)

MetricQ1 2024Q2 2024Q3 2024
Funded Loan Volume ($USD Millions)$661 $962 $1,035
Purchase Mix (% of Volume)80% 83% 71%
HELOC + Second Liens Mix (% of Volume)remainder 9% 16%
D2C Share (% of Volume)54% 70% 75%
Total Loans (#)1,991 2,995 3,443

Liquidity and Balance Sheet Highlights

MetricQ1 2024Q2 2024Q3 2024
Cash, Restricted Cash, Short-term Investments, and Self-Funded Loans ($USD Millions)$509 (cash, restricted cash, short-term investments) $507 (incl. self-funded loans per Q2 footnote) $480 (incl. self-funded loans per Q3 footnote)
Warehouse Capacity ($USD Millions)—$425 $425

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Funded Loan VolumeQ3 2024“Over $1 billion” (from Q2 release) $1.035B actual Achieved (met prior guidance)
Funded Loan VolumeQ4 2024n/aApproximately in-line with Q3 Maintained (sequentially flat volume expectation)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2024)Trend
AI/Technology initiativesQ2: Early AI investments within Tinman; AIR automated initial underwriting on 12% of files in Q2; targeting productivity and conversion . Q1: Strategic investments in Tinman to improve fulfillment efficiency .Launch of Betsy (voice-based AI assistant) to scale sales calling, improve customer interactions, and drive efficiency; management showcased Betsy and emphasized AI as a growth driver .Accelerating adoption and scope
Distribution channelsQ1: D2C focus; B2B pilots starting; commission-based comp model ramp . Q2: Piloting B2B programs (e.g., home improvement partner) .Onboarding NEO Home Loans executive team to build distributed retail; plan to power local loan officers via Tinman; aim to unlock purchase segment beyond D2C .Expanding footprint
Macro and ratesQ1/Q2: Persistent >7% 30-year rates; leaning into growth in less rate-sensitive products (purchase, home equity) .CFO: Rates remained well above 7% into quarter end; base case is slow grind lower in mortgage rates in 2025, planning accordingly .Gradual improvement expected
Operating leverage/cost disciplineQ1: Total expenses down ~30% y/y while growing revenue . Q2: Expenses ~flat q/q; managed vendor/corporate costs .Q3: Expenses +$9.5M q/q due to growth investments; focus remains on efficiency and corporate cost management toward medium-term profitability .Near-term pressure, medium-term leverage
Product performanceQ1: HELOC/cash-out drove growth . Q2: Purchase +50% q/q; HELOC +76% q/q .Q3: Refi and home equity drove sequential revenue/volume; purchase mix 71% .Balanced mix, home equity momentum

Management Commentary

  • “We are pleased with the year-over-year growth we achieved in Q3 … despite limited interest rate relief and continued macro headwinds.” — Vishal Garg, CEO .
  • “We anticipate that Betsy will also help ensure our customers can instantly receive intelligent, instant and accurate answers throughout their loan journey with Better.” — Vishal Garg, CEO .
  • “We remain focused on driving operating leverage through continued investments in efficiency, corporate cost management, and diversifying our distribution channels.” — Kevin Ryan, CFO (prepared remarks) and call .

Q&A Highlights

  • Rate outlook and growth approach: Base case assumes a slow grind lower in mortgage rates through 2025; management is leaning into marketing/growth where effective and pulling back where not .
  • Refinance dynamics: Refinance volume increased off a small base; management observed similar trends among peers and expects continued gradual improvement as rates decline .
  • Betsy AI demonstration and impact: Team highlighted Betsy’s ability to handle customer interactions, collect and verify data, and route complex issues to humans, aiming to scale sales efficiency .
  • Channel expansion: Management discussed integrating NEO’s branches onto Tinman to expand reach in purchase mortgages via local loan officer networks .

Estimates Context

  • S&P Global/Capital IQ consensus estimates could not be retrieved due to a daily request limit error. As a result, consensus revenue and EPS comparisons for Q3 2024 are unavailable at this time. We will update when SPGI access is restored [GetEstimates error].

Key Takeaways for Investors

  • Sequential volume growth with product diversification: Q3 funded volume up 8% q/q to $1.035B, with rising contributions from refinance and home equity; purchase still dominant at 71% .
  • Underlying revenue softness versus Q2 headline: Q3 revenue of $29.0M versus $32.3M in Q2, which benefited from ~$5.5M lock pipeline mark-to-market; core momentum more visible in volume/KPIs than P&L .
  • Expense pressure near term: Total expenses increased ~$9.5M q/q to $82.9M, expanding GAAP and Adjusted EBITDA losses; near-term profitability remains challenged as the company invests in growth .
  • Technology-led margin pathway: Betsy and Tinman automation are intended to reduce sales/fulfillment costs and improve conversion; watch for traction in D2C and the distributed retail ramp with NEO .
  • Liquidity and funding capacity: ~$480M in cash/restricted/short-term investments/self-funded loans and $425M warehouse capacity provide flexibility to execute growth initiatives through a choppy mortgage cycle .
  • Q4 setup: Guidance for Q4 volume approximately flat vs Q3 amid seasonality suggests a focus on execution and unit economics; volume resilience could be a near-term sentiment driver .
  • Narrative that moves the stock: Demonstrable AI execution (Betsy), distributed retail expansion (NEO), and sustained D2C mix gains vs. the pace of operating leverage realization and rate trajectory will likely frame investor reactions .

Appendix: Additional Data

Detailed Q3 2024 Results of Operations (Company disclosure)

MetricQ3 2023Q2 2024Q3 2024
Gain on loans, net ($USD Thousands)$11,553 $24,229 $21,503
Other revenue ($USD Thousands)$4,009 $2,881 $3,070
Interest income ($USD Thousands)$4,043 $9,397 $9,867
Interest expense ($USD Thousands)($14,698) ($4,245) ($5,446)
Net interest income/(loss) ($USD Thousands)($10,655) $5,152 $4,421
Total net revenues ($USD Thousands)$4,907 $32,262 $28,994
Compensation & benefits ($USD Thousands)$84,329 $35,254 $37,752
Marketing & advertising ($USD Thousands)$5,064 $8,531 $12,101
Loan origination expense ($USD Thousands)$627 $791 $3,774
Depreciation & amortization ($USD Thousands)$10,491 $7,990 $8,259
Other expenses/(income) ($USD Thousands)$237,043 ($879) $1,332
Total expenses ($USD Thousands)$358,137 $73,424 $82,948

Q3 2024 Liquidity Footnote Definitions

  • “$480 million of cash, restricted cash, short-term investments, and self-funded loans” includes $208M cash and equivalents, $29M restricted cash, $54M short-term investments, and $189M self-funded loans (MLHFS and LHFI less warehouse lines and customer deposits) as of 9/30/2024 .

References and Source Links

  • Q3 2024 Earnings Press Release and exhibits (Form 8-K 2.02): .
  • Q3 2024 Investor Update slides (EX-99.2): .
  • Q3 2024 Earnings Call Transcript (Corrected): https://s202.q4cdn.com/797572621/files/doc_financials/2024/q3/CORRECTED-TRANSCRIPT_-Better-Home-Finance-Holding-Co-BETR-US-Q3-2024-Earnings-Call-13-November-2024-8_30-AM-ET.pdf
  • Company IR Q3 2024 page and links: https://investors.better.com/financials/quarterly-results/
  • Q2 2024 Earnings Press Release and Investor Update: .
  • Q1 2024 Earnings Press Release: .

Estimates disclaimer: Consensus estimates via S&P Global/Capital IQ were unavailable due to a daily request limit error today; we will refresh and add comparisons when access is restored.