Prepared remarks
Good morning. My name is Aaron, and I'll be your conference operator for today. At this time, I would like to welcome everyone to the Better Home & Finance Holding Company First Quarter 2026 Results Conference Call. And with that, I'm pleased to turn the call over to Tarek Afifi, Senior Corporate Finance and Investor Relations Manager. Tarek, with that, you may begin.
Welcome to Better Home & Finance Holding Company's First Quarter 2026 Earnings Conference Call. My name is Tarek Afifi. I'm on Better's Corporate Finance team. Joining me on today's call are Vishal Garg, Founder and Chief Executive Officer of Better; and Loveen Advani, Chief Financial Officer of Better. In addition to this conference call, please direct your attention to our first quarter 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 quarterly report on Form 10-Q with the SEC. More information as of and for the period ended March 31, 2026, will be provided upon filing our quarterly report on Form 10-Q with the SEC. I will now turn the call over to Vishal.
Thank you, Tarek. Good morning, everyone. Q1 was a strong quarter for Better. We generated approximately $1.64 billion in funded loan volume, exceeding the high end of our prior guidance and growing funded loan volume approximately 89% year-over-year. Revenue from continuing operations grew approximately 52% year-over-year to $47.5 million, and our adjusted EBITDA loss was approximately $19 million, which was a 48% improvement year-over-year. Just as importantly, we continued scaling the Tinman AI platform and expanding our partnership ecosystem, which remain the core drivers of our long-term strategy. Before discussing product innovation and partnerships, I want to address the macro environment directly and explain how we are thinking about the business in the current rate backdrop. The company entered 2026 with strong momentum, generating funded loan volume of $450 million, $521 million and $673 million in January, February and March, respectively, a month-over-month growth of 16% and 29% in February and March. What's more, in late April, pre-approval volume for our biggest Tinman AI platform partner went from approximately $100 million per day in pre-approved customer volume to over $200 million per day in pre-approved customer volume. That being said, the prolonged conflict in the Middle East has started to show a market impact on interest rates across the mortgage industry with rates for consumers on our platform growing from 5.75% to well over 6.5% in the last few weeks. And this is causing consumers to get stuck in the middle of the funnel, hesitating to lock at a higher rate, particularly if they feel the rate increase is temporary due to the situation in the Middle East. With our partners' help, we are converting some of these customers who need cash now to HELOCs. But for those looking just for savings per month, we are in a waiting pattern where we will go back to them with a lock as soon as rates come back down. So the bad news is that conversion rates are down from where they were in Q1 due to macro factors. The good news is that partner volume continues to increase dramatically as the partner opens us up to a broader section of their customer base and products. Despite the macro noise, we are structurally better positioned than most mortgage platforms for three reasons. Our partnership model creates structurally lower customer acquisition costs and scalable distribution and doesn't require us to spend money upfront, which then can get hung up when conversion cycles blow during volatile market periods. Tinman AI continues to improve conversion efficiency and operating leverage. Our diversified product mix spans across purchase, refi and HELOC. And when refis become more difficult, we can convert a segment of those into HELOCs, which is a tool we didn't have in prior rate cycles. That positioning is reflected in our Q2 guidance. We expect funded loan volume of approximately $1.65 billion, representing approximately 37% year-over-year growth, slower than what we had originally anticipated going into Q2. Importantly, while funded loan volumes are expected to remain approximately flat sequentially, revenue is still expected to grow meaningfully due to continued mix shift towards higher-margin HELOC products. We currently expect approximately 15% sequential revenue growth in Q2, which we believe is an important signal that the strategy works and the platform works despite the macro backdrop. We also continue to believe the business is positioned for substantial operating leverage as volumes recover. At the same time, we want to be direct with investors. The timing on when we achieve our $1 billion monthly funded volume target will depend in part on the rate environment. It looked highly doable this time last month. And right now, sitting for this month, it looks like it's going to be deferred. The long-term trend remains intact, but near-term visibility continues to be impacted by macro volatility and what that does to consumer benefit on a refi. That said, if rates improve meaningfully, we believe the lead funnel is already in place and positions us to accelerate towards that target relatively quickly. Regardless of the environment, we continue to execute aggressively. In April, we announced a series of deliberate steps to strengthen operations and continue our progress towards profitability. These actions are on track and are even more important against the backdrop I just described. First, we're removing at least $25 million of annualized costs from our operations beginning in Q2 2026. Second, we expanded our total warehouse capacity by 48% to $850 million since the start of Q1. And third, in early April, we raised $69 million in equity that further strengthened liquidity and operational flexibility. All of these actions, along with greater focus on AI efficiencies, deep cuts in corporate overhead and the adjusted revenue growth and the change in the mix to HELOC versus refis means we remain in sight of the target of adjusted EBITDA breakeven by the end of Q3 2026. Turning to partnerships. Our Credit Karma, Finance of America and top five non-bank originator partnerships are all live and ramping. These partnerships are especially important because they leverage existing customer ecosystems rather than paid acquisition channels. For example, an increasing portion of Credit Karma's 140 million members are exposed to Credit Karma Home Loans powered by Better at zero upfront CAC to us. We believe that structural CAC advantage will become increasingly important as the industry consolidates. In late January, we marked the one-year anniversary of our partnership with NEO. NEO grew from a $1.5 billion run rate at onboarding to $2.9 billion in March 2026. Our Tinman AI platform generated approximately $821 million in funded loan volume during Q1, accounting for approximately 50% of total funded loan volume, up from 44% in Q4. That progression is important. Tinman represented 0% of funded loan volume in 2024, approximately 36% in full year 2025 and now approximately half of total funded loan volume. We expect that percentage to continue increasing in the coming quarters ahead. Now to product innovation. We had two recent launches I want to highlight, both of which serve buyers in this environment. Last week, we announced the launch of the Better Home Equity card in partnership with Stripe. The card is a Mastercard linked to a Better HELOC, letting customers spend funds drawn from their line with a single tap. Even more, customers get 1% cash back on all spend, which further lowers their total cost of financing and extends their stickiness in the Better ecosystem from a one-time transaction to a 30-year relationship. We believe HELOC demand remains durable across rate environments, and this product materially simplifies homeowner access to instant long-term liquidity against the value of their home. In March, we also launched the first Fannie Mae eligible token-backed mortgage in partnership with Coinbase. Qualified customers of Coinbase can pledge Bitcoin or USDC as collateral to fund their down payment without liquidating their holdings, triggering a taxable event. We have a large pipeline of Coinbase customers who are signed up on waitlist for the official commercial release of the product in Q2. We see digital assets increasingly becoming part of mainstream consumer finance infrastructure, and we intend for Better to lead that transition inside mortgage origination to leverage refinance technology to fundamentally lower the interest rates on home finance products for consumers. We believe the foundation is now in place for Better across our tech platform. Our distribution partnerships, our product expansion and our cost structure and the proof points are becoming visible in revenue growth and path to profitability in sight despite a choppy macro environment. With that, I'll turn it over to Loveen.
Thank you, Vishal. The Q1 financials reflect continued progress and growing operating leverage from our platform and improving efficiency in our business model. Funded loan volume grew approximately 89% year-over-year to $1.64 billion, while revenue from continuing operations increased approximately 52% year-over-year to $47.5 million. Importantly, total expenses grew approximately 27% year-over-year. That spread between revenue growth and expense growth reflects the operating leverage embedded within the Tinman AI platform. As Tinman AI volumes scale, revenue growth outpaces headcount and infrastructure growth. In Q1 2026, our adjusted EBITDA loss was approximately $19 million. That's a 48% improvement year-over-year and a 16% improvement quarter-over-quarter. Looking at product trends in Q1, refinance grew 542% year-over-year. Home equity grew 30% year-over-year, and purchase grew 2% year-over-year. By product mix, 50% of funded loan volume in Q1 was refinance, 36% was purchase and 12% was home equity. By channel, approximately half of funded loan volume in Q1 came through the Tinman AI platform and the other half through direct-to-consumer. As Vishal discussed, we're starting to see the impact of the prolonged conflict in the Middle East on rates. However, one of the most important dynamics in our model today is mix shift. HELOC products carry materially higher gain on sale economics, which allows revenue growth to outperform funded volume growth, which is reflected in our Q2 guidance. In Q2, we expect funded loan volume of $1.575 billion to $1.725 billion, of which the midpoint represents 37% growth year-over-year. We expect total net revenues of $53 million to $56 million, of which the midpoint represents 28% growth year-over-year. We also expect an adjusted EBITDA loss in the range of $12.5 million to $14 million, of which the midpoint represents 42% improvement year-over-year. Importantly, we continue making progress on our path towards breakeven while simultaneously strengthening the balance sheet and improving liquidity. We previously announced at least $25 million of annualized cost reductions beginning in Q2. These reductions are underway and include lower corporate overhead, vendor rationalization and the planned divestiture of our U.K. bank. On the balance sheet, we ended Q1 2026 with approximately $136 million of liquidity, which includes cash and cash equivalents, restricted cash and net assets held for sale. This does not reflect our recent capital raise of $69 million, which closed after quarter end. We believe the balance sheet today is materially stronger and appropriately positioned to support our path towards profitability. In addition, we expanded warehouse capacity from approximately $575 million at year-end to approximately $850 million today, representing a 48% increase. That expansion reflects both lender confidence in our platform and the infrastructure required to support future partnership growth. As Vishal discussed earlier, based on our current operating structure and ongoing cost initiatives, we remain focused on adjusted EBITDA breakeven by the end of Q3. The timing for reaching that level will depend in part on the macro environment and the pace of rate normalization, but the operating model continues to move in the right direction. We believe Better today is materially more efficient, more diversified and more scalable than it was even 12 months ago. With that, I'll turn back to the operator for Q&A.
Questions and answers
Our first question for today comes from the line of Kyle Peterson with Needham.
I just wanted to first start off and clarify a couple of the moving pieces in the guide. One, have you assumed any improvement or resolution in the back half of the quarter given the macro and this frozen pipeline due to some of the Middle East tensions, or more of a status quo? And then also, could you give us a quick reminder on some of the relative gain on sale rates, specifically on the HELOC side? It seems like that's really offsetting some of the volume difference, but a reminder there would be helpful for everyone on the call.
We are assuming no resolution. We've been very conservative with respect to what we're guiding toward because going into April, we knew that volume top of funnel was about to almost double. Going into April, we were very confident in the number that we were quoting, which was $1 billion of volume. Then the rate spike and the escalation in the Middle East happened, and all that new volume came top of funnel. We shared that it went from about $100 million a day top of funnel for pre-approval volume to $200 million a day in the back half of April. But those customers are not converting at nearly the same rate. We're converting many of them to HELOCs, but many of them who come in just to do a rate-term refi or do a debt consolidation to bring down all the rates will save more if they wait it out than they would getting into it right now. We have to give them the right advice for them, and that's what we've always done: prioritize the long term over the short term. So that's what we're doing. We think that's a coiled spring for when things die down in the Middle East—you will see some bumper months as we convert all those customers who are effectively on a wait list to lock when rates come back down. On the gain on sale, HELOCs are averaging between six to seven points total gain on sale in combination of origination fees and gain on sale premium, whereas traditionally, mortgage on D2C has averaged 2.5 points and on NEO has averaged 3.5 points.
Okay. That's really helpful. And then a follow-up on the HELOC card initiative that you launched. That seems like a really interesting product. How are you thinking about when that goes live later this year, whether it increases engagement, gives you a competitive edge or creates monetization opportunities? Any more color on how you think that fits in and could potentially help accelerate growth in HELOCs would be great.
There are many utility functions of the home card. First, it tracks all your home spend, which helps customers effectively monitor that and provides discounts on things they use for their home. Second, you get 1% cash back, so for a customer, they're effectively getting their rate or fees bought down as a result of that 1% cash back. Third, it creates a 30-year relationship with the consumer for us versus a one-time transaction, which means that recurring refis for that consumer and cash-out refis will be nearly instant and we will have a highly engaged customer base for which we can market other products like homeowners insurance, life insurance and other products that come up for renewal. It creates an always-on relationship with the consumer rather than a once-every-three-, five-, seven-year relationship. We think it moves Better to being a home finance operating system for the consumer rather than just a one-time home transaction system. Our partners have already started asking for it. It's another way for a partner to service their customer and maintain that relationship. A number of our partners are already asking us to replicate what we're doing internally for our D2C business for them. So it gives us another advantage when we pitch HELOCs or home equity as a service to other companies or mortgage as a service to other companies.
Our next question is from the line of Ramsey El-Assal with Cantor Fitzgerald.
Has the more challenging macro backdrop caused any slowdown in your partnership discussions or partnership pipeline conversion?
I think it's accelerated, especially within the traditional mortgage broker and retail mortgage lender channel. A lot of people were hoping 2026 was the year they were going to thrive in, and with the Middle East conflict, things are tougher. More and more banks are looking to get into the business. Of course, the conflict, higher elevated rates and oil prices impact the number of customers eligible for refi, but it has an even bigger impact on unsecured consumer credit. We're starting to see a lot of inbound interest from other fintechs and large consumer credit companies looking to pivot from their traditional unsecured offerings into a secured offering like a HELOC.
Okay. And could you also comment on the loan mix between Tinman and direct and how the changing environment might play out in terms of your target there? I think it was 60% Tinman by the end of the year. I was curious if the changing backdrop has any impact on that target.
I think we're well on our way to achieving that target.
You're hitting on a great point. Had we been a traditional D2C play, we would have spent money on these leads upfront and not had them convert. Because we're now relying on our partnership volumes, we're derisking ourselves from that eventuality.
Our next question is from the line of Rohit Kulkarni with ROTH Capital Partners.
One comparison of unit economics: can you flag the difference between Tinman platform-generated volume versus D2C specifically, like relative CAC profile and gain on sale? And longer term, do you see a scenario where the contribution margin for the platform volume would be structurally higher than your traditional D2C business?
That's a great question. Right now, we try to price our platform partnerships so we make the same amount of contribution margin. Revenue can change because different partners ask us to do different services for them, but we try to make the same contribution margin that we do on D2C in our platform business. As we scale, we're hoping to make around $2,000 per loan contribution margin on mortgage and slightly less than that on HELOCs in our Tinman AI platform business. Over time, as the sale becomes more and more software-driven, the margin profile will be much better on Tinman AI platform. But right now, gains from AI are captured first in D2C, which is why you saw continued improvement in our unit economics on the D2C business. We then port those things that work in D2C into the Tinman AI platform business.
Okay. Regarding the current macro environment and rate changes in the last 45 days: historically, what is the typical lag in consumer behavior and how that impacts your business, assuming there's a pathway toward more stable macro in the next 60 to 90 days? How do you anticipate that to impact your business and over what duration? Are you assuming any improvement in macro in your Q2 guide?
We're assuming no improvement in the macro in our Q2 guide, so we're being conservative. The typical cycle: on refis in particular, you can see behavior immediately within a week if a consumer comes in as a pre-approval and whether they're going to lock or are hesitant. When they are hesitant, we register in our data the price point at which they would transact and then we hold them until they come back, similar to a limit order in stock trading. Purchase is more like a six-month cycle. HELOC, depending on the use case, can vary: if it's for debt consolidation, it can take a consumer a month to decide which debts to pay off; if it's for home improvement, tuition or other time-sensitive needs, the decision can happen within a week to a few weeks.
As we think about beyond the second quarter, if the environment stays where it is, we'll have increased indexation towards HELOCs and less so towards refi. If the macro changes, then that equation will flip.
I know you reaffirmed breakeven EBITDA by the end of Q3. Q2 is still close to negative $13 million in EBITDA. Can you help us understand what specifically bridges Q2 to Q3? What are the factors under your control? And how much of the $25 million cost reduction program is in Q2? What other levers do you have in Q3?
Absolutely. Our current financials exclude the U.K. business, which we are considering discontinued operations. As we think about getting to our breakeven targets, our current cash OpEx is about $68 million. To get to profitability by the end of Q3, we'll need to reach a revenue mix or a revenue component of around the low to mid-70s percentage for us to breakeven at the end of Q3. The $25 million of annualized cost reductions beginning in Q2 include lower corporate overhead, vendor rationalization and the planned divestiture of our U.K. bank. Those reductions are underway.
Our next question for today comes from the line of Owen Rickert with Northland Capital Markets.
Could you talk a bit more about how some of those newer partnerships are ramping today? Are you seeing encouraging trends in engagement and conversion rates so far? And how have those partnerships trended on a monthly basis throughout the quarter?
The newest partnerships are ramping extremely well. In April, we went from $100 million a day top of funnel to $200 million a day top of funnel. $200 million a day top of funnel multiplied by 250 business days is $50 billion of pre-approval volume, and we're still just scratching the surface. For our biggest partner, Credit Karma, we are exposed in many of the products to less than 1% of their customer base. For the top five retail lenders, we're ramping up their salespeople on the HELOC product, and they have hundreds of billions of dollars of MSR on their books that we're going to target, which has a very high conversion rate. Our top three fintech partners are scaling and becoming a meaningful part of our HELOC volume. Monthly HELOC volumes continue to trend up. We also have a couple of banks in the queue off our ChatGPT announcement from about two months ago, and we're hoping to get them closed, operational and live shortly.
Got it. And then on the technology side, where are you seeing the biggest operational or customer-facing benefits from tools like Betsy, Tinman AI and the broader machine learning initiatives?
The biggest benefit is in customer contact capability, where consumers are now able to transact with Betsy 24/7, 365. We're increasing the exposure of Betsy branded tools for our partners in their funnels. The biggest uplift will be when we can fully deploy Betsy in our partner funnels, not just in our D2C funnel.
Our next question comes from the line of Kartik Mehta with Northcoast Research.
Vishal, one thing you've talked about is partnerships and their growth. If in the interim the mortgage market stays soft but we get a big bump—if the war ends and activity spikes—how do you manage infrastructure if demand suddenly spikes?
We are already getting geared up for that. In the past, we had to rely on humans to staff up and pick up the phone, work late shifts and weekends. Now we can leverage Betsy: Betsy loan officer, Betsy loan processor, Betsy loan underwriter. In preparation, we're implementing Betsy on autopilot after over 1.5 years of learning data. That will dramatically reduce operating costs and allow us to capture all the volume as it comes in.
On a couple of partnerships, you may not be the only mortgage provider, but you seem to have a competitive advantage because of your technology. Have your partners compared your ability to serve their customers versus others on the platform? What type of advantage is that giving you?
Our partners typically see an improvement of 2x relative to the incumbent in both productivity and customers served. We promise to help them double revenue and cut their cost structure by 30% to 50%, and they often realize 4x to 6x more profit. That value proposition is why there's a waitlist for the Tinman AI platform and ChatGPT Enterprise Edition. The mortgage industry still relies on antiquated systems and many staff are used to those systems. Frequently, partners say they'll keep their staff and adapt them to the new system, but often we have to implement and operate much of it for them. That implementation work is upside in the margin profile we achieve with a particular product, and then we expand from there.
Our next question comes from the line of Brendan McCarthy with Sidoti.
I wanted to ask a quick question on Birmingham Bank, the U.K.-based bank. I know you classified it as discontinued operations held for sale. Can you give any detail on when we might expect a sale and potential capital release or sale proceeds?
We're in an active sale process. We have an investment bank leading it and are in active discussions with potential buyers. That's all I want to disclose at this time while we're in active discussions. Even if we do sign, there's a regulatory approval process in the U.K., which will take about two to four months. Think of the impact in Q4.
Understood. Looking at the Coinbase partnership with the crypto-backed mortgage product, can you walk us through the economics of that, the revenue profile and the launch timeline of when we might see an impact in the P&L?
The publicly stated launch timeline is sometime in late Q2. The revenue profile from that product is beginning to manifest. We have more pricing power in that product than in traditional direct-to-consumer products, and you should start to see NEO-like margins on that product.
Got it. One last question on the Q3 breakeven for adjusted EBITDA: is there any risk to achieving that if rates move meaningfully higher or the Middle East conflict is more prolonged than expected?
If rates move meaningfully higher or the conflict is more prolonged, we'll have to cut costs deeper. We're committed to achieving the breakeven target and will take the necessary actions to get there.
That concludes our Q&A session for today. Vishal, I'd like to turn it back over to you for any closing comments. Thank you.
Thanks, everyone. Q1 was a really good quarter for us. We signed a number of large deals, executed on our plan and beat guidance. I know it's disappointing for the Q2 guidance to not reach the $1 billion mark of loan originations that we had planned for May, but we will make up for that through cost cutting, a change in mix to HELOC products—which have lower balances but similar revenue per loan—and continued revenue growth and a clear path toward profitability. We expect to achieve adjusted EBITDA breakeven by the end of Q3 2026. Thank you all for continuing to have an interest in and belief in Better; we appreciate your support.
Thank you, everybody. Have a great day.