Good afternoon. I'm Rayna Kumar, and I lead Oppenheimer's Fintech Equity Research. Today, I am joined by Better President and CFO, Kevin Ryan. Kevin, thanks for joining me today. Thank you for having me, Rayna. So, the agenda today is, Kevin's gonna give a brief presentation, then we're gonna go into my questions. We also want this to be as interactive as possible, so if you have any questions for Kevin and the team, feel free to type it into the Q&A dashboard, and I'll be happy to read it throughout the session. Kevin, over to you. Sure. And thank you again to Rayna and the Oppenheimer team for having me. So I'm gonna just go through a few slides here just to give you an introduction to Better, and just set the stage, and then we'll go through the Q&A. So we've been public for about a year now, just coming up on a year. We got public via SPAC transaction. Far and away, our largest shareholder and the sole PIPE provider was SoftBank, and they remain our largest shareholder. So just to, you know, what do we do? We are a digitally native, fully digital, no physical presence, mortgage company and homeownership business, and so we're in the mortgage business and adjacent businesses. What we like about the business are a few things. First, it is a very large and attractive market. The TAM is massive. Even in down years, the industry does $2 trillion in volume. In good years, when rates were low, COVID, it was more than $4 trillion a year of volume just in mortgage lending. And so the market is absolutely massive. It's far and away the largest consumer finance market in the world, is the U.S. home market. It's very manual, it's very costly, it's very regulated. If any of you out there have mortgages, you'll see that, you know, what a painful process it probably was to go through that. And so we believe it's the perfect industry for digital disruption. In part, because it's so rules-based, in part because it's very commoditized, interestingly, because we sell about 90-plus% of our loans to the government entities. Most of our competitors do as well. There's very strict standards of what those loans look like, and so we're actually creating a relatively standardized end product in each of the many products we have, and so it becomes very easy for technology to streamline that process. Given it's such a large market, we think it's due to come. We built all of our own end-to-end proprietary origination technology. Most of our competitors rely on third-party software to drive their loan operating system. We built it all in the cloud, digitally native, and we think it's the best operating system in the industry. So we started with engineers, built the business, and eventually went to market and started marketing to consumers. We have multiple distribution channels. We have a direct-to-consumer business. We do digital marketing, performance marketing. We use our technology advantage both to delight the consumer, but then also to make our people more efficient, and we also have a business-to-business strategy. A few of the large banks, for example, want to be in the mortgage business. They know it's important to their customers to be in that business, but given the complexity of being in the business, given the cyclicality of the business, and that'll come through as we talk about current numbers, both positive and negative, it is a very cyclical business. Many of the companies would like to outsource it, white label it, partner with it, and that is, that's where we come in. And so that is about 40% of our volume comes from a partnership, B2B channel, where we have no direct CAC, and we're really marketing to their customers with their permission. We are growing. We got as high as $58 billion of volume in 2021. We did $1.2 billion of revenue that year. We were profitable. Obviously, we went public, or started the process of going public via the SPAC during that period. The market changed a lot as interest rates went up. The market, this company is exposed to interest rates, so we spent the better part of two years cutting costs, deliberately reducing revenue, cutting marketing spend, taking fat out of the business, and getting ready for what we believe will be a U-shaped recovery in this business. And we're starting to see green shoots in that recovery. As you can see, we grew both volume and revenue in Q2 versus Q1 by over 40%. So very strong revenue and volume growth, Q1 to Q2. So, you know, we're tracking now for well over 100% growth. We don't expect to go 40% a quarter, but we are obviously on track, a very strong start to the year. Our expenses have remained constant, Q1 to Q2, so we have a lot of operating leverage in the business. We were EBITDA negative to the tune of $24-$25 million, but as you can see, we can grow volume and grow revenue with the minimal growth in expenses, ex marketing, of course. We'll have to grow more in marketing expenses, and that's important. We have a really strong balance sheet. I mean, thanks to our partners at SoftBank, look, we closed the SPAC in August of 2023. We knew it was a terrible time to take a business like this public. We had a signed contract. We had a committed PIPE. There was nearly 100% redemptions in SPAC. I apologize for that, folks. Of course, that's right when the computer shut down. So, as I was saying, and apologize again for the pause, we ended the quarter with $507 million of cash, restricted cash, short-term investments, loans we're holding for liquidity on purpose because we know we have, I don't want to say excess cash, but surplus cash relative to the current working capital needs and burn of the business. So it's very important to complete this SPAC just to get ourselves well-funded. And we have a clear roadmap on new products, new initiatives, things that the clients and customers need in this type of interest rate environment that we continue to roll out. Okay, so faster, cheaper, better. Really, our value prop to the consumer is we are super fast. About 84% of our loans, I'll come to this in a minute, we approve. We give you a pre-approval in one day, in 24 hours. We call it One Day Mortgage. That's the far and away the bulk of our loans. We have lower rates than our competitors. So our principal business is mortgage, that's home finance. We also have a real estate matching engine, where we will match you up with a real estate agent. So if you come to us first and you do not yet have a real estate agent, we'll match you up with one of the best agents out there in the marketplace. If you come to us with an agent, we'll work directly with your agent throughout the real estate process. We have a title insurance business that's fully digital. We're not the underwriter ourselves. We're basically an agent, but we place with some of the largest digital title insurance companies, but we do it directly at the point of sale with the customer. Same with homeowners insurance. I talked about One-Day Mortgage. And given many people have very low rates on their mortgages right now, many sub 3%, we have a very quickly growing home equity business. Home equity lines of credit, and now home equity loans, closed-end loans, where we are offering second liens to customers as their homes have appreciated dramatically, but they don't want to give up their super low mortgage rate. And so they may have a loan to value on their house, so they may borrow $200,000, and their house is, they bought it, it was worth $300,000. Now, it's worth $400,000, as home prices have gone up. So maybe we'll lend them $100,000 to get back to that 75 LTV in a home equity line, something like, you know, that is a very obviously high-level numbers, but something like that. And then we have a e-business in the U.K. as well, where we own a small challenger bank. Because there's no Fannie Mae, Freddie Mac in the U.K., when we go to market in the U.K., we do it via challenger bank funding, where we take fully digital deposits. And again, no branches, no physical infrastructure. Tinman. As I mentioned in the outset, our entire system and everything we're doing with AI now is fully built in-house. Our first hire was an engineer, one of the senior engineers out of Spotify. He kind of built that engine to say, "Okay, if you like this song, you'll like this song, too." And that's really all the mortgage product is. Here are the rules that you need to actually meet in order to have your loan qualified to be sold into one of the government agencies. Here's what you've actually provided us. Here's what we need. So, you know, we call it a supervised learning network. It's all fully automated. The customer, our employees, our investors, our loan investors, all work within the same architecture. So unlike if you go to your average bank for a loan, where you may be emailing PDFs of documents, the bank may be ingesting it in one system and then exporting it to another system, that then gets transferred to a third system when the loans are sold on to the government or the capital markets. Everything is enclosed within Tinman. So we truly feel like we have the best technology in the industry. AI, we're doing a lot with AI. This is a huge focus for us now. Some of it is simple, and you've heard others talk about this, structured data capture, pre-populating things for us off voice calls and things like that, so that we don't actually makes it even simpler and allows us to approve loans faster and save our own people's time. Customer routing to the best loan officer, and, you know, and some other things we're gonna actually roll out in Q3 around actually communication, speed to lead efforts, where we're using AI. And then core automation, as I said, we think of Tinman as a supervised learning network. It's end-to-end fulfillment. Because we sell 100% of our loans we originate, we're really a fulfillment company. We're a marketing and fulfillment company. We're not running a balance sheet like a bank. And 12% of our loans in the quarter, in the Q2, were fully reviewed, signed off on an initial underwrite by the machine with no human intervention. And so we can get, you know, almost all the way through the process without there being human intervention. This does two things for us. It speeds up our times, it lowers our costs, it drives a better customer experience, and it also allows for us, for the labor we do need to offshore. We think we're the only mortgage company we know of, where more than 50% of our employees are based in India. So we've offshored almost all of our kind of core processing and administrative functions to India as a result of the automation we've built and the technology. So there's very few people in the U.S. actually touching these things. I talked about some of these tangible results. 84% of our loans, you get certainty on the loans and the terms within one day. We think we're the only company that can move this fast. Our average time from when you come to the site to when your commitment letter is turned around is 10 hours. And really can be much faster if a customer is kind of engaged and interacting with the system to provide what it needs. We have much lower rates than the industry. We pass through our technology savings to the customer. That will help us grow market share as the market corrects here. We are twice as efficient as the industry, so our employees can do 10 loans a month. Most of those employees in India, we think the industry average, and we know the industry average is published, is 4.8. That's all because of the technology, and we can roll out products, you know, much quicker than others. Growth, as I said, you can see this is the origination volume on the left-hand side. We've grown our volume 83%, from Q4 2023 to Q2 2024. We guided on our earnings call last week that we will be safely north of $1 billion of volume in Q3, so we think we're growing. Off a lower base, rates are high. We're growing faster than anyone else in the industry right now, we believe. And our expenses have been roughly flat, as you can see. So we're, if we can take revenue up 40% and keep expenses flat, we're proud of that operating leverage, and it's putting us on a path to get to break even in profitability in the immediate term. Part of it does depend on what the Fed does, but part of it is just our own efforts to grow in a, you know, in what remains a challenging market, with mortgage rates still at 7%. And then our balance sheet. $507 million of liquidity, as I said. We're earning interest income above and beyond what we're doing in, you know, originating assets and mortgages and selling them to the GSEs. $5 million a quarter just on excess cash. And we have credit facilities from three large global banks. Think about the G-SIFIs, the really large banks, $425 million. And that's it. Well, wonderful. I have a bunch of questions for you, but we actually, you know, we have some questions from investors as well. I'll try to mix them up. I'll start with the investor question. Are there any new B2B prospects? Why is the price so low? Yeah. So, so yes, there are new B2B prospects. We actually have a better pipeline than we've ever had, I think in part because the mortgage market in general has been in the doldrums for three years now. Once the Fed started on its rate hiking cycle, a lot of the, a lot of our competitors have actually made the decision they want to be in the mortgage business, but they don't want to be fully committed to it, and so outsourcing to somebody like us, particularly with the best technology in the industry, is something that's getting a lot of traction. I will tell you, these things take months, if not a year plus, to actually get live, as you're doing integrations, as you're doing vendor review, particularly if it's a large bank, as you're mapping compliance, and so, they're, they don't happen overnight. But the prospect list is as good as it's ever been, in part, I think, just bluntly, where we are in the cycle and how we've built our technology. And then why is our price so good? Our price is so good because we've made a conscious decision to do that. We think it saves us some marketing dollars. We think we feel like we have a huge manufacturing cost advantage through the technology in India labor, and we pass some, not all of that, back through to the customer. We have taken prices up a bit, because bluntly, we need to get profitable. We know we need to get profitable. We have a lot of capital, but we did lose money in the quarter. We are taking price up to try to still be among the lowest, if not the lowest, of the majors in the sector, but add our revenue, you know, add to our revenue margin a bit. Got it. Okay, two more questions from investors. Let's get these out of the way first. Are expenses decreasing for the Q3? We didn't give formal guidance on expenses. I will make the following comment, though. I think we're running the business to grow revenue faster than expenses. Marketing expenses will be up, so the function as to whether expenses will decrease will really be a function of we can take corporate costs down more than marketing expenses go up. That's getting harder and harder to do. Just to level set, not to... Look, we lost money in Q2, but not to, you know, overly pat ourselves on the back, but we ran an expense program starting in 2022, that ran through the end of 2023, where we took out $1.2 billion, with a B, of run rate expenses. We literally topped out at an expense base of $1.6 billion. So do that math. You know, that's, you know, that's a lot, a lot, a lot of money, right? You know, you're like, okay, you're spending $400 million a quarter on expenses, and you're doing $300 million of revenue. We've got that expense base down about $75 million a quarter, and that's including non-cash expenses, stock-based comp, et cetera. Our cash expenses are much lower. So as I said, we lost about $8 million bucks a month on an EBITDA basis in Q2. Yes, expenses will continue to come down on that-... Overhead expenses, leases, technology vendors, non-revenue producing employees will continue to come down, but it will be offset, maybe in whole, but certainly in part by marketing expenses, as we need more loans in order to get breakeven, and we need more loans in order to continue to bring our product to consumers. And so our primary focus now is getting back to a growth trajectory as the market is starting to turn, right? Rates have gotten marginally better. They're still not great, but we think Q3 is gonna be better than Q2 as it relates to the overall macro, and we are expecting at least 25 basis points of cuts next month, which on the margin will help us and our competitors just in the marketplace. Got it. Okay, another investor question: Have you reached $1 billion in loans yet? Yes. Yes. I mean, we have reached—we have, we've done $100 billion of loans over the life of the company. Company was founded in 2016, and we, we will get to $1 billion-plus of loans in the quarter, this quarter, Q3. We were at $962 million in Q2. Okay, got it. We're over $100 billion of total loans since inception. That's obviously not an annual number. That's a since inception number. Understood. All right, could you elaborate on your AI initiatives? I mean, a lot of fintechs I speak to, they talk about how they're using their AI capabilities. Tell me a little bit about what differentiates your capabilities versus competitors? Sure. And as I said, we're gonna roll some things out in Q3 that I think will be clearly differentiated, and we don't wanna get ahead of ourselves. Around speed to lead and the way we communicate with customers and making the customer experience better and our own people more efficient. You know, a lot of time is wasted in this industry, humans on the phone with humans. "Hey, so what's your income? Let me write that down and type it into a system." This is not us, but this is others, and so we think this industry is classically set up for generative AI because 90% of the conversations that happen are commoditized. Which is the best product for me amongst these three products? How do I think about this? Like, there is definitely a human element for us and for others, and so. But we, you know, I think the AI marries very well with Tinman, Tinman, which I said is a supervised learning network. So the machine is doing most, almost all of the calculations. The machine is actually doing many of the approvals on the loan files, so our focus is really upfront on sales, communicating with customers. Do I really need a salesperson on the phone, or through different AI mechanisms, can we communicate with the customer? And then we're doing the normal transcription stuff, which I wouldn't even think of as that innovative. I think several people, banks, are trying to do that now as well. "Oh, your income, you said your income was $100,000?" The machine just automatically populates that into the application file. We're doing that, but I think that is not necessarily unique to us. But we have some pretty unique things that we're gonna try to roll out over the next two quarters. Understood. Can you tell me a little bit more about your role in the refi purchase and the home equity loan markets? What are your strategies to grow each through the cycle? Sure. So we got up to nearly 2% market share in refi as a small company with no brand, company no one had ever heard of in 2021. Our system is classically set up for refinance. Not a lot of human involvement, see rate on screen, press button, super fast, super efficient. Here you go. Your 6% goes to 3%. That's circa 2021. So on refi, we are very good at that. So as rates come down and the refi market reemerges, we are even better set up than we were in 2019, heading into, you know, the COVID-driven collapse in rates, which led to us driving a lot of refinance volume. So that product is very small for us now because, bluntly, there's just not a lot of consumers who can save money by refinancing their mortgages right now. Anybody who bought a home in 2020, 2021, 2022, will not refinance, and it's part of the reason why the market's so slow. And there's just, you know, pages and pages and pages written on the home market being slow for that reason. Purchase, we've had to build. We were not bluntly set up well for purchase coming into a higher rate cycle. We didn't have real estate agent relationships. We're fully digital. We don't have people out in the field talking to real estate agents. It has taken us a while, and we think we're finally at a place where we can deliver a best-in-class digital product, that compensates for the fact that we're not day-to-day in the field. And then HELOC is a lot like refi. You need money. The HELOC market had been dead for 10 years coming out of the financial crisis, 12 years coming out of the financial crisis. You have a lot of equity in your home. You wanna pay down credit card debt. You wanna pay off student loans. You wanna take your family on vacation. You can go to, you know, buy now, pay later company. You can go to a, you can go to a personal loan company, many of which build pretty good apps and digital experiences, but they're gonna charge you 16%, 17%. We're gonna charge you a lot less when we take a second lien on your home in the form of a HELOC, and so we think we're perfectly set up, perfectly set up for that business, and we've grown it very quickly. ... Understood. You've, you've talked about recent changes to the loan officer commission model on recent calls. Can you elaborate on the new operational model and its impact on productivity and conversion rates? Sure. So if I go back to 2021, we were growing loans, sometimes 100% quarter-over-quarter. The market was on fire, rates were low, the whole country was refinancing, people were buying homes. We were hiring people like, no joke, we were hiring people out of coffee shops saying: "Hey, you've got a good voice, you wanna sell loans?" And training them and taking them through, teaching them how the system works, and just putting them out there, to talk to customers that needed some handholding as they were going through the digital experience. The market has contracted massively. Competitors have closed as rates have been up, and they can't figure out how to make money. We've now went out and replaced the people we unfortunately had to cut or who left the company with much more experienced people in the industry. We're marrying people with years of industry knowledge, with the best-in-class new technology to create the loan officer of the future. We're paying them approximately $30,000 a year in base compensation, and then we see how they do and how the system performs for them. We deliver them leads because we're a big lead aggregator and purchaser of leads. And we take their industry experience, we marry it with our technology. It is much more commission-based cost structure, which lowers our fixed costs, which is important, given we're not currently profitable. And that is what we're doing, and it's been working extremely well. And I think that's part of the reason why we're growing again, so much faster than the industry. Understood. Can you walk us through your platform revenue model, just to help us understand how the company makes money, just for, really the people new to your business here? Sure, sure. I think it's a really important question, and it's- I think people have a conception, okay, so you do like... You lend, so you're like SoFi, or you're like Affirm or something like that, and it's actually much different. As I said before, we're really a marketing and fulfillment company. So we go direct to consumer, or we take a B2B partner's customer, Ally Bank, for example. We take one of their customers, we take them through the process. We almost immediately sell that loan to the GSEs, Fannie Mae, Freddie Mac. I mean, people, I think most technology investors have heard of Fannie Mae and Freddie Mac, although they may even be superficial with it. And then we originate a loan at 100. So we lend you $100,000. You send us a note that says you'll pay us back $100,000. We'll immediately sell that note to somebody for $102. We'll make $2 of revenue, and then they own the loan in perpetuity. So our GAAP balance sheet is bouncing around $1 billion, and we're doing much more than that per annum in volume. And we'll not have to grow much as we grow the company. And of that $1 billion, more than half of it is cash that just is on our balance sheet. So our actual working capital and loans held for sale are a much smaller number. So we're an originate-to-distribute business, but we're not relying on the capital markets or securitization to fund our loans. Like many of the other fintechs that are engaged in lending businesses, we're going directly to the government, the government agencies. And so we make money by lending at one price and moving the paper to an investor, generally the government agencies, at a higher price. And that all happens within a 2-3-week period. Got it. Okay. Could you talk to us about your capital allocation priorities? Sure, sure. So our number... There's two top priorities. One is just continuing to invest in our technology. We never, you know, we didn't pull back a lot as we were taking out $1.2 billion of expenses. We got certain areas of the company, and there are disciplines that we don't even really do anymore, that we did do in that $1.2 billion expense cost, but technology was not one of them. We have very strong engineering team. We'll continue to add new products in the Tinman. We're continue to innovate, we're continue to invest in AI. We think the future of this industry is digital, and it's going analog to digital. It's been slower than I would have thought, and I think part of that has been the fact that, you know, real estate agents, at least in the purchase market, have a strong hold on the industry. And so we've, you know, we've partnered with real estate agents in recognition of that fact. And then growth. We are gonna spend more money in marketing, and we're gonna continue to fight to get the burn down. We don't see traditional acquisitions, you know, buy stock in companies in our future, or at least not material. We're not thinking that way. Never say never, we would never do a deal at this point. Again, never say never, but we wouldn't do a deal at this part in the cycle when you're not profitable. It's not accretive. So we would only buy a profitable business if we were gonna do a stock deal. And if we, we may bolt on teams, acqui-hire engineers, acqui-hire mortgage people, sure, that are good salespeople. But as we think about capital allocation, we're earning 5%-7% on the cash now, which all drops to the bottom line 'cause there's no expense base against that. So we have to be really convinced that the marketing dollar is gonna pay off, the technology spend is gonna pay off, and anything else we're gonna do is pay off before we allocate capital somewhere else. And so it's really technology and marketing expense is where we're gonna allocate capital. ... Got it. Since we only have a few minutes left of the session, I just have one final question for you. It's actually two parts. What excites you the most about Better's future, and, in reverse, like, what are you most concerned about? Sure. So what excites me the most is from looking from today forward, right? We learned how to restructure as rates went up, and I think it's a really good discipline to have going forward. But what excites me the most is basically all the trends at this point are our friend, and it's varying degrees to how much of a friend that trend will be. But in a year from now, rates will be lower than they are today, not higher. I think that's the market consensus now. That's kind of built into the capital markets. We agree with that. We're actually probably more conservative than others. I'm not personally convinced the Fed's gonna massively cut rates over the next year, but they should be lower, not higher, and that's clearly the market's expectation, and that's irregardless of who wins the election. Inflation is much lower than it was 2 years ago, and so that's point one, and that's just a macro support to our business. The trend towards consumers navigating to digital is real. It's real in this product. This industry is slower than others, I think in part because it's the single largest financial decision for 99% of Americans, so maybe it was always gonna be slower to go fully digital, don't talk to a human, deal with an online business versus go to your, you know, your classic bank, Chase, Wells Fargo, whoever it may be. But that is clearly a trend. Then the next group of home buyers are millennials or younger. We have generally found we do better with the younger cohorts, in part because, bluntly, they're just more digitally savvy, and that's your next cohort of home buyers as the housing market thaws going forward. So all of those things support what we're doing as long as you are tech first. Lower rates, we think the industry will continue to democratize, and the way to advertise the fact that you have lower rates has gotten better. So, those are the things that most excite us. You know, what most concerns us is that the recovery in the housing market is slow. It's been a very difficult three years. It was not easy to take out $1.2 billion of expenses. To your investor's question, like, cutting your expense base 50% from here is just not possible. And so we've done 90% of the work at this point, and so we do need some of these trends to actually recognize themselves. So it's the timing of when it happens, and our fallback is we have more capital than basically anybody our size. Like, Rocket will have more capital than us, but they're much bigger than us at this point. And so we feel like we're well-positioned to weather it if it doesn't go that way. But you know, we're looking for the spring here 'cause it's been a relatively long winter for the industry, and so we've, you know, we've learned a lot from that. But that's our biggest risk, is that just takes a while to play out. Got it. Well, Kevin, it was wonderful speaking to you today. Thank you for your time, and if anyone has any further questions for the Better management team, feel free to reach out to me. Thank you, Rayna. Thank you again for the time.