Prepared remarks
Ladies and gentlemen, thank you for standing by. My name is Kelsey, and I will be your conference operator today. At this time, I would like to welcome you to the Better Home and Finance Holding Company second quarter 2026 results. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I would now like to turn the conference over to Tarek Afifi, corporate finance and investor relations manager. Tarek, please go ahead.
Welcome to Better Home and Finance Holding Company's second quarter 2026 earnings conference call. My name is Tarek Afifi on Better's corporate finance team. Joining me on today's call are Daniel Lewis, interim 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 second 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 06/30/2026 will be provided upon filing our quarterly report on Form 10-Q with the SEC. I will now turn the call over to Daniel.
Good afternoon, everyone, and thank you for joining us. This week, the board announced a leadership change and asked me to serve as interim chief executive officer. Better is not new to me. I have been working alongside management for the past three months after Vishal invited me to work directly with the business. I have attended virtually every management meeting in that time and contributed to many of the strategic initiatives we will be discussing today. I have been a significant shareholder for some time, and I have worked closely with our founder, Vishal Garg, over the past year. My initial mandate was straightforward: help strengthen execution and improve operational efficiency, delivering the company's strategic priorities. That work expanded into enterprise partnerships development and the day-to-day operations of the business. Along the way, I developed a deep understanding of the business, its leadership team, and the opportunities and challenges in front of us. I spent the last 30 years as an investor, board member, founder, and operator at highly regulated financial institutions. I want to address our forward outlook at the beginning of this call. Our third quarter guidance reflects the muted refinancing environment and the uncertain timing of several partnership launches. In Q3, we expect loan volume of $1.375 billion to $1.525 billion, total net revenues of $49 million to $52 million, and an adjusted EBITDA loss of $18 million to $15 million. Regarding our previously guided goal of reaching adjusted EBITDA breakeven by September, we now expect to fall short. I remain optimistic about Better's opportunity, but our objective is to establish credibility through execution. I do not want to anchor adjusted EBITDA breakeven expectations to a specific month, because achieving it depends on transaction volumes, revenue mix, and the timing of our cost reductions. Our cost reductions are expected to continue to flow through the P&L over the remainder of the year. At the same time, the timing of partnership launches and other revenue initiatives will naturally influence quarterly results. Sustainable profitability is a clear priority. We will strengthen our financial position without sacrificing the opportunity in front of us. We now expect our annual cost savings to exceed $45 million, well above our original target of $25 million. That represents meaningful progress; it is not where we intend to stop. Better has always been innovative, defined by our founder spirit and creativity. But, as is often the case, an organization moving into an enterprise strategy needs focus, as complexity slows execution. Going forward, we will concentrate on fewer priorities and execute them exceptionally well. No group is more excited about that focus than our AI engineering team. I am pleased to say that July was our most productive month for engineering in some time, largely because of clearer prioritization. Sustainable profitability and long-term growth are not competing priorities. When capital is allocated with discipline and execution is consistent, they reinforce one another. What gives me the greatest confidence is the team. Better has exceptional people who are energized by the opportunity ahead. Across the company, I see leaders who are eager to build, move fast, and execute at a higher standard. Just as importantly, we will not depend on a refinancing cycle or wait for interest rates to fall. We already have a compelling HELOC product. What we need is thoughtful distribution and continued improvement in customer acquisition costs, not additional demand or a different macro environment. We are building operating leverage in businesses where demand already exists. Our growth will come from better execution, not from waiting for the market to improve. I know our enterprise results can improve significantly. Our partnership support infrastructure still requires work, which reflects our direct-to-consumer heritage. The expansion from direct-to-consumer to an enterprise model is not a simple evolution. So why are the board and I enthusiastic about Better's future? The demand for Tinman and Betsy is no longer in question. It is coming from enterprise customers, independent mortgage brokers, and our own loan officers. Independent mortgage brokers have expressed interest in our Tinman solution, built specifically for the wholesale channel, and we are now preparing for launch. We have demonstrated product-market fit in one of the largest financial markets in the world, spanning first-lien mortgages, home equity lending, and an enterprise mortgage infrastructure. That brings me to our operating priorities. Our first priority is distribution. We will focus on enterprise partners whose businesses naturally align with Tinman and our API-driven operating model. We will win by manufacturing mortgages efficiently, not by outspending competitors on customer acquisition. That includes consumer platforms like Credit Karma and Coinbase, our Neo operation, as well as wholesale brokers and other enterprise partners whose customers can move seamlessly onto the Tinman platform. We are not simply interested in partnership announcements. Our objective is to build an organization that consistently implements, supports, and grows them. Since my appointment, we have spoken with each of our enterprise partners and those that are still in the pipeline. We talked about the exciting future ahead and those conversations reinforced my conviction about this opportunity. We are excited about a few select verticals, and today will highlight the wholesale channel. There is real interest from independent mortgage brokers who are already waiting for Tinman. We intend to serve them, but only when we can deliver a best-in-class loan officer experience, faster funding, lower cost, and better customer outcomes. We are interested in winning for the long term. Our second priority is product. We will continue investing aggressively in HELOC. Our offering combines sophisticated underwriting with a differentiated experience for both borrowers and loan officers. The wholesale market's interest has exceeded our expectations, and we intend to pursue the opportunity aggressively but thoughtfully. Today, HELOC is still largely a direct-to-consumer product. Over time, we expect it to become an important enterprise product as well. Our third priority is Tinman. Tinman is an AI-native, modular, end-to-end solution supporting the mortgage process from lead to fund. It is not a wrapper on someone else's technology. It is the manufacturing system itself. Further automation reduces expense, but it also enables a faster closing experience for customers. Near-term objectives are simple: give loan officers the best experience and continue driving automation throughout the platform. Let me explain why we expect to win here. D2C and Neo are our innovation platform and our feedback loop on the loan officer experience. Every day, our loan officers tell us what works, what does not, and what needs to improve. That feedback loop is how Tinman becomes an AI platform built by loan officers rather than just for them, and ultimately a platform that enterprise customers and independent brokers can adopt with confidence. Because our AI strategy is fundamental to Better's long-term success, I have asked our board member, Prabhu Narasimhan, to continue serving as a strategic adviser on enterprise artificial intelligence. As the founder and CEO of Brahma AI, Prabhu brings deep experience helping enterprises deploy AI at scale. Finally, we will continue simplifying operations. Our Neo and Better Mortgage operations are being combined, creating efficiencies while improving execution. A more focused company needs clear priorities, aligned engineering resources, disciplined capital allocation, and an operating model built around execution. Let me turn to how we intend to communicate with you, our shareholders. Today, I am signaling confidence in Better's future, but our objective is to establish credibility through execution. We will report on our prospects, our progress against stated objectives, and our cost structure, including the impact of stock-based compensation. At my request, I will receive the minimum salary permitted by law and no cash bonus. My compensation will consist of performance-based equity with the final terms to be determined by the board and disclosed in our public filings. That is the structure I requested because I believe in Better's future and I want my incentives aligned with those of our shareholders. The board's incentives are also aligned with yours. They have elected to receive their compensation in equity rather than cash. The board and I are aligned on my interim designation. The interim designation provides complete flexibility for the board as it considers the company's long-term leadership while allowing us to devote our full attention to executing the plan in front of us. My confidence is not built on hope, but on the information and experience I have gained over the past several months. It comes from employees rallying around a clear plan and shared sense of purpose. It comes from the opportunities I see to grow this business. And it comes from my belief that Better has the people, technology, and foundation to execute if we remain disciplined and focused. We will build partnerships we can support properly and put our engineers on the work that matters most. Better exists to solve deeply human problems: helping someone buy a first home, giving a growing family more space, enabling a retiree to lower monthly payments, or allowing a business owner to invest by unlocking home equity. The strongest impression I formed at Better was not about the technology but about the people who do that work. Finally, I want to thank Vishal Garg. Better would not exist without his vision, and the technology we are discussing today is the product of years of investment and innovation under his leadership. I appreciate his partnership through this transition. With that, I will turn the call over to Loveen.
Thank you, Daniel, for clearly laying out the priorities ahead. We look forward to supporting you on their execution. On the macro environment, the rate backdrop got more difficult as the quarter progressed, and mortgage application activity has softened industry-wide. We do not expect this to be a short-term blip. We are planning for an elevated rate environment to persist over the medium term, and we are adapting accordingly. Despite the macro environment, in Q2 Better's loan volume grew 38% year-over-year to $1.67 billion, and total net revenues increased 28% year-over-year and 15% quarter-over-quarter to $54.7 million. This quarter, HELOC represented 18% of our loan volume, up from 12% last quarter. That is a direct reflection of how we are responding to this rate backdrop. HELOCs enable homeowners to access liquidity without giving up a lower rate that they have already locked in. Even though HELOCs carry smaller average loan sizes than first liens, they generate higher average revenue per loan, so they have an outsized impact on revenue. Turning to Neo: in Q2, our Neo business grew 60% in loan volume year-over-year and continues to recruit top loan officer teams across the country. In Q2, our adjusted EBITDA loss was $14 million. This $14 million loss is a 39% improvement year-over-year and a 26% improvement quarter-over-quarter. The adjusted EBITDA benefits from a one-time $6.5 million trade reserve release related to loans originated prior to June 2022. Looking at product trends in Q2, refinance loan volume grew 239% year-over-year to $549 million, home equity volume grew 23% year-over-year to $294 million, and purchase loan volumes grew 3% year-over-year to $824 million. By product mix, refinance made up 33% of Q2 loan volume, home equity made up 18% of Q2 loan volume, and purchase made up 49% of loan volume. By channel, in Q2, 55% of loan volume came from the Tinman AI platform and 45% from direct-to-consumer. Now turning to third quarter guidance: we expect loan volumes of $1.375 billion to $1.525 billion, of which the midpoint represents 20% growth year-over-year. We expect total net revenues of $49 million to $52 million, of which the midpoint represents 22% growth year-over-year. We also expect an adjusted EBITDA loss in the range of $18 million to $15 million, of which the midpoint represents a 28% improvement year-over-year. The range is wider than in prior quarters for two reasons. Refinance volume is more rate sensitive at current levels, and our revenue mix is actively shifting toward HELOCs. As our HELOC partnerships ramp and season, we expect that product to become a more predictable contributor and give us better visibility into our forecast. Building on Daniel's earlier statement on the September breakeven target, the cost reductions we have executed will continue to flow to the P&L over the remainder of the year. But the timing of the HELOC partnership ramps and launches and the pace of the refinance market will determine when we cross over. Rather than re-anchor to a specific month, we will report our progress each quarter and let the results speak for themselves. On the balance sheet, we ended Q2 2026 with approximately $102 million in cash and cash equivalents, and $10 million in restricted cash. We believe the balance sheet today is appropriately positioned to support our path toward profitability. In addition, our total warehouse capacity stands at approximately $850 million, a 48% increase from year-end 2025. That capacity reflects both the belief in the platform and the infrastructure required to support future partnership growth. Our warehouse vendors continued to expand their commitments alongside us, which we see as a strong vote of confidence in the direction we are headed. We continue to pursue the sale of our UK bank subsidiary, Birmingham Bank, through a process led by FD Partners. We will provide an update when there is a material development. We will continue to give you clear visibility into these numbers each quarter and let the results speak for the progress we are making. I will turn it back to the operator for Q&A.
Questions and answers
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Kartik Mehta with Northcoast Research. Your line is open, Kartik. Please go ahead.
Let's start off just looking at third quarter guidance. When looking at the third quarter guidance, it kind of assumes lower loan volume and revenue sequentially, yet the implied EBITDA performance suggests that you are realizing meaningful benefit from the cost initiatives. I was wondering if you could discuss how much of that improvement is already visible versus how much you can realize over the next 12 months?
Hey, Kartik. This is Loveen. Thanks for the question. In our Q2, if you adjust for the trade reserve release, our OpEx was around $75 million. The midpoint of our Q3 guidance has OpEx about $67 million, so about $8 million of savings quarter-over-quarter. We implemented many of the cost cuts later in the quarter, so we could not get the impact of the majority of them in Q2, but we expect to see a meaningful impact in Q3. Which is why, despite lower volumes and lower revenue in Q3, we should get better EBITDA.
And Daniel, you talked about partnerships—some of them are delayed. I am wondering if you could talk about the pipeline of new partnerships. Is it a delay because it takes time to implement them, or is it a delay because demand is different today than it was six months ago for those partnerships?
Thanks for the question. When you deal with large enterprises, you are subject to their rollout schedule, both in terms of the percentages of leads we would get and the actual launch dates. So it is not a lack of demand at all for Tinman. In fact, we made some announcements about our HELOC product coming to market. We have signed HELOC partnerships; they just have not launched or ramped yet. The pipeline is very robust. We have spoken to all the partners this week, and we feel that we are in a great position. But in terms of guiding you for Q3, it becomes difficult, so we decided we were not going to include the impact of any launches in those numbers. Certainly, as we head into Q4 this year, I think you will really start to see some activity. The other thing I would add is leaning into the HELOC side, because right now our enterprise partnerships are very skewed toward the refinancing business, which obviously has the macro headwind. The partnerships in the second half of the year that we expect to ramp are the right kind of partner and the right kind of product, which is our HELOC.
So it is good to hear. Go ahead.
Your next question comes from the line of Kyle Peterson with Needham. Your line is open, Kyle. Please go ahead.
Great. Good afternoon. Thank you for taking the questions. I wanted to dig into the third quarter guide a little bit, more on the top-line base. Could you help us bridge in a little more detail in terms of how we get from the Q2 level to Q3? I assume there is a good amount of mix changing there with less refi and more home equity, but any more color on the mix and the puts and takes to get to third quarter revenue would be helpful.
Hey, Kyle. Thanks. As we said on our first quarter earnings call, we expect the percentage of HELOC in our total volumes to increase, and we saw that in the second quarter. We went from 12% of volumes in the first quarter to 18% of volumes in the second quarter. We expect HELOC to be meaningfully higher in the third quarter. We do not want to give exact pinpoint guidance for a couple of reasons. One is we factored in no HELOC partnerships in our Q3 guide—right now it is purely D2C. The second piece is the macro environment affects the refi business, making it uncertain as well.
That is helpful. As a follow-up, I hear you on not including any HELOC contribution from partnerships. Could you discuss what that could look like in the future, specifically with Credit Karma? How long would it take a partnership like this to get up and running and start contributing to volumes? Is that in the fourth quarter of this year, or more of a next-year event? Any directional rough timing on the ramp would be great.
Multiple partnerships should start to kick in HELOC in the fourth quarter. So far this quarter, we have done no partner launches and no HELOC launches specifically, which is why the revenue bridge looks the way it does. We basically still have the refi environment in our largest enterprise segment and we do not have anything additional in terms of channel development in the HELOC product implemented this quarter. But we expect multiple partner HELOC ramps kicking in in Q4.
Got it. Thank you.
Your next question comes from the line of Joseph Vafi with Canaccord Genuity. Your line is open, Joseph. Please go ahead.
Hey, guys. Good afternoon. Welcome onboard, Daniel. Could we talk a little bit about ramping HELOC volume? It sounds like it will continue to ramp on a mix-shift basis into Q3, but it does not sound like you are signing any new partners right now. Could you double-click on where HELOC volume growth is coming from in more detail across your existing channels? Is it just direct B2C, or is there a channel benefit here?
To correct that point, we have signed HELOC partnerships; they just have not launched or ramped yet. That is why I am pointing toward the fourth quarter when you start to see some impact. The HELOC product itself is very competitive versus peers. Tinman is a great solution for HELOC, as is our loan operation. We are excited about the HELOC partnerships and intend to be thoughtful about our Q3 guidance because we are not in control of those start dates. We know they are coming, but they are not coming in this quarter.
That is helpful. Are there any channels that Better is going to deemphasize moving forward relative to previously?
That echoes my comments on focus. There are types of partnerships we want and types that we do not think make a ton of sense for the business right now. When you are thinking about ripping out existing systems and training other people's loan officers on the use of Tinman, those are very long sales cycles and very expensive in terms of customer support. We prefer partnerships where we can use our API-driven culture to plug in Tinman and provide a white-label solution. That includes the wholesale channel, which I think is going to be starting toward the end of September, and includes enterprise platforms where our API integration is straightforward. There is a wide market that covers most of the TAM of the industry, particularly in HELOC. But the really complicated enterprise integrations so far have not yielded material results and the cost associated with them has been high.
And maybe one more: can you provide an update on your pricing strategy in the market? When Tinman launched, it was a little disruptive. Any update on the outlook for pricing would be helpful.
We are going to price to contribution margin. Our pricing methodology targets roughly a 20% to 25% incremental contribution margin across all channels and products. We want you to think less about loan volume because of the change in mix between HELOCs and first-lien mortgages, and more about contribution margin, which better reflects marketing expense and loan platform fees. That is a more proper metric than simply looking at revenue growth driven by buying business in the DTC marketing channel.
Your next question comes from the line of Ramsey El-Assal with Cantor Fitzgerald. Your line is open, Ramsey. Please go ahead.
Hi. Thank you for taking my question this evening. Daniel, congratulations on the new role. My first question is: why now on the CEO transition? Why did the board decide to act now? Also, you were listed as interim CEO, but your prepared remarks sounded more permanent. Is the board running a search for a permanent CEO, or is the interim title itself interim?
The board is committed to running a search for a full-time CEO, and part of my service on the board and stepping into this role is giving them the most flexibility they need. They have also given me the total authority to act against a strategic plan, which is why I probably sounded less interim today. We have a strategic plan, we are acting, and we have a search firm. In terms of why now, the board concluded that we are in a transitional phase between a founder-mode company—characterized by creativity and many projects—and an enterprise-stage company that needs to execute against very select ideas with demonstrated product-market fit. That is the transition moment. Vishal has been an incredible founder for the company, and we are all very grateful for his work.
Let me squeeze one more in. Given your background, is the board exploring any kind of strategic alternatives for the business? Is that on the table or not being contemplated?
There is no formal strategic alternative process at this time.
We have reached the end of the Q&A session. I will now turn the call back to Daniel Lewis for closing remarks.
Thank you all for joining us. I am grateful to our team for all the hard work. We are focused on executing with discipline and delivering on the opportunity ahead. I look forward to speaking to you all again next quarter.
This concludes today's call. Thank you for attending. You may now disconnect.