Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Better Home & Finance Holding Co (NASDAQ:BETR) reported a significant improvement in nonal margin from 1.58% to 2.08% year-over-year.
• The company experienced substantial growth in loan volumes, with home equity loan volume increasing by 493% and refinance loan volume by 177% year-over-year.
• BETR launched Betsy, the first voice-based AI loan assistant in the US mortgage industry, enhancing operational efficiency and customer experience.
• The company is expanding its distribution channels by integrating Neo home loans, potentially tripling its addressable market.
• BETR successfully reduced its mortgage processing costs by over 35% compared to the industry average through automation and technology investments.

Negative Points

• Total expenses increased by approximately $9.5 million quarter-on-quarter due to growth-related expenses such as marketing and compensation.
• The company reported an adjusted EBITDA loss of approximately $39 million and a GAAP net loss of approximately $54 million for the third quarter.
• Marketing and advertising expenses rose from $9 million in Q2 to $12 million in Q3, impacting overall profitability.
• Despite growth initiatives, the challenging macro environment continues to strain customers with high mortgage rates above 7%.
• The onboarding of Neo home loans is still in early stages, with no immediate material impact expected on volume or financials.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with BETR.

Q: How is Betsy, the AI loan assistant, differentiated from other AI technology in the lending space? A: Betsy is advanced compared to other AI technologies in the mortgage industry. While many companies use AI for back-office tasks like processing or underwriting, Betsy is integrated into our platform to handle customer interactions directly. Betsy can understand missing items from a consumer's loan file, append data into our system, and determine the next steps, such as transferring to a human loan officer. This integration allows Betsy to replace traditional loan assistants, significantly reducing costs and improving efficiency. (Respondent: Unidentified_3)

Q: What is your view on the current Total Addressable Market (TAM) and how does it compare to future potential? A: Currently, the TAM for consumer direct mortgage companies in the purchase mortgage space is between 10% to 15%. By integrating Betsy and Tinman with local lenders, we aim to tap into a market four times larger, which includes the traditional loan officer-realtor referral relationship, representing about 40% to 45% of the market. This expansion significantly broadens our addressable market. (Respondent: Unidentified_3)

Q: Can you discuss your outlook for 2025 and the expected operating environment? A: We anticipate a gradual improvement in the market environment throughout 2025, with a slow decline in mortgage rates. Our strategy involves increasing marketing expenses and focusing on growth, adapting to market conditions. We expect a marginally better operating environment by November 2025 and are planning accordingly. (Respondent: Unidentified_5)

Q: How has the company's focus shifted in terms of purchase versus refinance volume? A: Three years ago, 95% of our volume was refinance and only 5% was purchase. Now, 71% of our volume is purchase mortgage, which is higher than most direct-to-consumer online peers. We have successfully pivoted to focus on purchase mortgages and continue to improve our execution in this area. (Respondent: Unidentified_3)

Q: What impact do you expect from the integration of Neo Home Loans into your platform? A: The integration of Neo Home Loans, a leading distributed retail mortgage platform, is expected to expand our technology platform and digital lead funnel. This move aims to empower local loan officers and tap into a larger market segment. While it's too early to provide financial expectations, we believe this opportunity could significantly increase our addressable market. (Respondent: Unidentified_1)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.