Part I - Financial Information This section provides a comprehensive overview of the company's financial statements, management's discussion, market risks, and internal controls [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity (deficit), and statements of cash flow, along with detailed notes explaining the company's accounting policies, financial instruments, and operational specifics for the periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=BETTER%20HOME%20%26%20FINANCE%20HOLDING%20COMPANY%20AND%20SUBSIDIARIES%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates | (Amounts in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $87,134 | $211,101 | | Short-term investments | $134,390 | $53,774 | | Mortgage loans held for sale, at fair value | $447,738 | $399,241 | | Loans held for investment (net) | $420,566 | $111,477 | | Total Assets | $1,231,861 | $913,057 | | **Liabilities** | | | | Warehouse lines of credit | $371,189 | $244,070 | | Convertible Notes | — | $519,749 | | Senior Notes | $200,409 | — | | Customer deposits | $482,360 | $134,130 | | Total Liabilities | $1,155,304 | $971,227 | | **Stockholders' Equity/(Deficit)** | | | | Total Stockholders' Equity/(Deficit) | $76,557 | $(58,170) | | Total Liabilities and Stockholders' Equity/(Deficit) | $1,231,861 | $913,057 | - Total Assets increased by **$318.8 million** (34.9%) from December 31, 2024, to June 30, 2025, primarily driven by increases in short-term investments, mortgage loans held for sale, and loans held for investment[11](index=11&type=chunk) - Total Liabilities increased by **$184.1 million** (18.9%) over the same period, with significant shifts including the extinguishment of Convertible Notes and issuance of Senior Notes, and a substantial increase in customer deposits[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=BETTER%20HOME%20%26%20FINANCE%20HOLDING%20COMPANY%20AND%20SUBSIDIARIES%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) This section details the company's financial performance over specific periods, including revenues, expenses, and net loss | (Amounts in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Revenues:** | | | | | | Gain on loans, net | $36,772 | $24,229 | $61,348 | $39,881 | | Other revenue | $3,300 | $2,881 | $7,330 | $5,698 | | Net interest income | $4,072 | $5,152 | $8,019 | $8,934 | | Total net revenues | $44,144 | $32,262 | $76,697 | $54,513 | | **Expenses:** | | | | | | Total Expenses | $80,320 | $73,424 | $163,285 | $147,024 | | Loss before income tax expense | $(36,176) | $(41,162) | $(86,588) | $(92,511) | | Net Loss | $(36,270) | $(41,365) | $(86,827) | $(92,857) | | Basic Loss per share | $(2.39) | $(2.74) | $(5.72) | $(6.15) | - Total net revenues increased by **36.8%** for the three months ended June 30, 2025, and by **40.7%** for the six months ended June 30, 2025, compared to the same periods in 2024, primarily driven by higher gain on loans, net[12](index=12&type=chunk) - Net Loss improved for both the three-month period (from **$(41.4) million** to **$(36.3) million**) and the six-month period (from **$(92.9) million** to **$(86.8) million**) year-over-year[12](index=12&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=6&type=section&id=BETTER%20HOME%20%26%20FINANCE%20HOLDING%20COMPANY%20AND%20SUBSIDIARIES%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This section outlines changes in the company's equity or deficit, reflecting transactions with owners and comprehensive income or loss | (Amounts in thousands) | Balance - Dec 31, 2024 | Balance - Jun 30, 2025 | | :--------------------- | :--------------------- | :--------------------- | | Common Stock Par Value | $2 | $2 | | Notes Receivables from Stockholders | $(9,158) | $(9,160) | | Additional Paid-In Capital | $1,863,288 | $2,077,303 | | Accumulated Deficit | $(1,910,366) | $(1,997,193) | | Accumulated Other Comprehensive Income/(Loss) | $(1,936) | $5,605 | | Total Stockholders' Equity/(Deficit) | $(58,170) | $76,557 | - Total Stockholders' Equity (Deficit) improved significantly from a deficit of **$(58.2) million** at December 31, 2024, to a positive equity of **$76.6 million** at June 30, 2025[22](index=22&type=chunk) - This improvement was primarily driven by a **$210.0 million** gain on troubled debt restructuring and a **$7.5 million** increase in accumulated other comprehensive income, partially offset by a net loss of **$86.8 million**[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flow](index=10&type=section&id=BETTER%20HOME%20%26%20FINANCE%20HOLDING%20COMPANY%20AND%20SUBSIDIARIES%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOW) This section reports the cash inflows and outflows from operating, investing, and financing activities over specific periods | (Amounts in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(113,515) | $(263,382) | | Net cash used in investing activities | $(381,967) | $(62,974) | | Net cash provided by financing activities | $365,350 | $144,827 | | Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(139,054) | $(180,666) | | Cash, cash equivalents, and restricted cash—End of period | $97,779 | $347,400 | - Net cash used in operating activities decreased by **$149.9 million** (57%) for the six months ended June 30, 2025, compared to the same period in 2024, indicating improved operational cash management[28](index=28&type=chunk) - Net cash used in investing activities significantly increased by **$319.0 million** (507%) due to higher purchases of short-term investments and originations of loans held for investment, primarily in the U.K. banking entity[28](index=28&type=chunk) - Net cash provided by financing activities increased by **$220.5 million** (152%) driven by a substantial increase in customer deposits, partially offset by a **$110.0 million** cash payment for the Convertible Notes exchange[28](index=28&type=chunk) [Note 1. Organization and Nature of the Business](index=12&type=section&id=1.%20Organization%20and%20Nature%20of%20the%20Business) This note describes the company's core business, recent corporate actions, and its market presence in the U.S. and U.K. - Better Home & Finance Holding Company provides comprehensive homeownership offerings in the U.S. and U.K., including mortgage loans, real estate agent services, title, and homeowner's insurance, leveraging its proprietary Tinman technology platform[32](index=32&type=chunk) - The company completed a Business Combination on August 22, 2023, and its Class A common stock and warrants are listed on Nasdaq under 'BETR' and 'BETRW'[34](index=34&type=chunk)[35](index=35&type=chunk) - A 1-for-50 reverse stock split was effected on August 16, 2024, to regain compliance with Nasdaq's minimum bid price requirement, retroactively recast in financial statements[36](index=36&type=chunk)[37](index=37&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimates used in preparing the financial statements, including revenue recognition and asset valuation - The financial statements are prepared in conformity with U.S. GAAP, with estimates and assumptions affecting reported amounts, including fair value of mortgage loans, derivatives, and allowance for credit losses[38](index=38&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - Mortgage loans held for sale are recorded at fair value, with changes recognized in gain on loans, net. Loans held for investment are reported at amortized cost[47](index=47&type=chunk)[52](index=52&type=chunk) - Revenue is disaggregated into Gain on loans, net (including gain on sale, broker revenue, loan repurchase reserve), Other revenue (real estate, insurance, international lending), and Net interest income[65](index=65&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk) [Note 3. Revenue](index=18&type=section&id=3.%20Revenue) This note provides a detailed breakdown of the company's revenue streams, including gain on loans, other revenue, and net interest income | (Amounts in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Gain on loans, net:** | | | | | | Gain on sale of loans, net | $34,015 | $18,374 | $55,293 | $28,195 | | Broker revenue | $2,335 | $2,476 | $3,506 | $4,744 | | Loan repurchase reserve recovery/(provision) | $422 | $3,379 | $2,549 | $6,942 | | Total gain on loans, net | $36,772 | $24,229 | $61,348 | $39,881 | | **Other revenue:** | | | | | | International lending revenue | $1,446 | $1,219 | $2,974 | $2,327 | | Insurance services | $825 | $537 | $1,498 | $1,176 | | Real estate services | $151 | $653 | $1,098 | $1,000 | | Other revenue | $878 | $472 | $1,760 | $1,195 | | Total other revenue | $3,300 | $2,881 | $7,330 | $5,698 | | **Net interest income:** | | | | | | Mortgage interest income | $7,787 | $4,468 | $14,223 | $7,432 | | Interest income on loans held for investment | $3,894 | $221 | $5,773 | $302 | | Interest income from investments | $2,476 | $4,708 | $4,606 | $10,299 | | Warehouse interest expense | $(5,727) | $(2,310) | $(8,515) | $(4,397) | | Interest expense on customer deposits | $(4,352) | $(267) | $(6,357) | $(370) | | Other interest expense | $(6) | $(1,668) | $(1,711) | $(4,332) | | Total net interest income/(loss) | $4,072 | $5,152 | $8,019 | $8,934 | - Gain on loans, net increased by **51.8%** for Q2 2025 and **53.8%** for YTD 2025, primarily due to higher gain on sale of loans, net[78](index=78&type=chunk) - Net interest income decreased by **20.9%** for Q2 2025 and **10.2%** for YTD 2025, mainly due to increased interest expense on warehouse lines and customer deposits, despite higher mortgage interest income[78](index=78&type=chunk) [Note 4. Mortgage Loans Held for Sale and Warehouse Lines of Credit](index=19&type=section&id=4.%20Mortgage%20Loans%20Held%20for%20Sale%20and%20Warehouse%20Lines%20of%20Credit) This note details the company's mortgage loan inventory and the credit facilities used to finance its mortgage origination activities | (Amounts in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | **Warehouse Lines of Credit** | | | | Total warehouse lines of credit | $371,189 | $244,070 | | **Mortgage Loans Held for Sale (LHFS)** | | | | Total LHFS pledged as collateral | $392,805 | $267,984 | | Company-funded LHFS | $24,928 | $10,056 | | Company-funded HELOC | $22,800 | $118,879 | | Total LHFS | $440,533 | $396,919 | | Fair value adjustment | $7,205 | $2,322 | | Total LHFS at fair value | $447,738 | $399,241 | - Total warehouse lines of credit increased by **52.1%** to **$371.2 million** as of June 30, 2025, reflecting increased borrowing to support mortgage production[80](index=80&type=chunk) - Total Mortgage Loans Held for Sale (LHFS) at fair value increased by **12.1%** to **$447.7 million**, with a significant shift in company-funded HELOCs decreasing from **$118.9 million** to **$22.8 million**[82](index=82&type=chunk) - The weighted average interest rate for warehouse lines of credit decreased from **7.40%** in H1 2024 to **6.46%** in H1 2025[83](index=83&type=chunk) [Note 5. Loans Held for Investment](index=20&type=section&id=5.%20Loans%20Held%20for%20Investment) This note describes the company's portfolio of loans held for investment, primarily U.K. buy-to-let property loans, and related credit loss allowances | (Amounts in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Property - Buy to Let | $422,397 | $111,630 | | Other | $970 | $1,514 | | Allowance for credit losses | $(2,801) | $(1,667) | | Total Loans Held for Investment, net | $420,566 | $111,477 | - The Loans Held for Investment portfolio, primarily U.K. property - buy to let loans, significantly increased by **277.3%** from **$111.5 million** at December 31, 2024, to **$420.6 million** at June 30, 2025[85](index=85&type=chunk) - There were no loans held for investment past due or placed on non-accrual status as of June 30, 2025, or December 31, 2024, and no modifications for borrowers experiencing financial difficulty[87](index=87&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) [Note 6. Goodwill and Internal Use Software and Other Intangible Assets, Net](index=21&type=section&id=6.%20Goodwill%20and%20Internal%20Use%20Software%20and%20Other%20Intangible%20Assets,%20Net) This note provides details on the company's intangible assets, including goodwill and capitalized software, and any related impairment charges | (Amounts in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $23,615 | $32,390 | | Goodwill impairment | $(488) | — | | Effect of foreign currency exchange rate changes | $1,638 | $(145) | | Balance at end of period | $24,765 | $32,245 | - Goodwill increased to **$24.8 million** at June 30, 2025, from **$23.6 million** at the beginning of the period, despite a **$0.5 million** impairment charge related to U.K. entities classified as held for sale[95](index=95&type=chunk) | (Amounts in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Internal use software and website development, net | $18,603 | $18,507 | | Intellectual property and other, net | $816 | $578 | | Domain name | $1,820 | $1,820 | | Licenses and other | $34 | $31 | | Total Internal use software and other intangible assets, net | $21,273 | $20,936 | - Capitalized internal use software and website development costs increased to **$5.6 million** for the six months ended June 30, 2025, from **$3.0 million** in the prior year period[97](index=97&type=chunk) [Note 7. Prepaid Expenses and Other Assets](index=23&type=section&id=7.%20Prepaid%20Expenses%20and%20Other%20Assets) This note presents a breakdown of the company's prepaid expenses and other current assets, including tax receivables and security deposits | (Amounts in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Prepaid expenses | $21,096 | $17,165 | | Tax receivables | $198 | $5,484 | | Security Deposits | $8,493 | $11,245 | | Prefunded loans in escrow | $3,567 | — | | Total prepaid expenses and other assets | $33,354 | $33,894 | - Total prepaid expenses and other assets remained relatively stable at **$33.4 million** as of June 30, 2025, compared to **$33.9 million** at December 31, 2024[99](index=99&type=chunk) - A new category, 'Prefunded loans in escrow,' emerged with **$3.6 million**, representing loans funded in the current period but closed in the subsequent period[99](index=99&type=chunk) [Note 8. Assets and Liabilities Held for Sale](index=23&type=section&id=8.%20Assets%20and%20Liabilities%20Held%20for%20Sale) This note details assets and liabilities classified as held for sale, primarily related to U.K. entities, and associated write-downs | (Amounts in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | **Assets held for sale** | | | | Cash and cash equivalents | $2,079 | $3,814 | | Restricted cash | $4,287 | $3,868 | | Mortgage loans held for sale, at fair value | $2,011 | $1,721 | | Internal use software and other intangible assets, net | $2,403 | $2,203 | | Goodwill | $724 | $1,112 | | Write down of assets to fair value less cost to sell | $(5,029) | $(4,220) | | Total assets held for sale | $9,071 | $10,411 | | **Liabilities held for sale** | | | | Accounts payable and accrued expenses | $1,775 | $1,684 | | Escrow payable and other customer accounts | $4,287 | $3,868 | | Other liabilities | $870 | $564 | | Total liabilities held for sale | $6,932 | $6,116 | - Total assets held for sale decreased by **12.9%** to **$9.1 million**, while total liabilities held for sale increased by **13.3%** to **$6.9 million** as of June 30, 2025[100](index=100&type=chunk) - The company recorded a **$0.4 million** write-down of the disposal group and a **$0.5 million** goodwill impairment for U.K. entities classified as held for sale during the three and six months ended June 30, 2025[100](index=100&type=chunk) [Note 9. Customer Deposits](index=24&type=section&id=9.%20Customer%20Deposits) This note describes the significant growth in customer deposits, primarily from U.K. banking operations, and associated interest expenses | (Amounts in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Balance of customer deposits | $482,360 | $134,130 | - Customer deposits, primarily from U.K. banking activities, surged by **259.6%** to **$482.4 million** as of June 30, 2025, from **$134.1 million** at December 31, 2024[101](index=101&type=chunk) | (Amounts in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Average Balance (Q2) | $409,151 | $28,739 | | | | Average Rate Paid (Q2) | 3.69% | 2.97% | | | | Average Balance (YTD) | | | $313,921 | $20,429 | | Average Rate Paid (YTD) | | | 3.50% | 2.97% | - Interest expense on customer deposits dramatically increased to **$4.4 million** for Q2 2025 (from **$0.3 million** in Q2 2024) and **$6.4 million** for YTD 2025 (from **$0.4 million** in YTD 2024), reflecting the significant growth in deposits[103](index=103&type=chunk) [Note 10. Senior Notes](index=25&type=section&id=10.%20Senior%20Notes) This note details the exchange of Convertible Notes for new Senior Notes, including the terms, security, and accounting treatment of the transaction - The company exchanged its **$532.5 million** Convertible Notes for **$155.0 million** in new 6.00% Senior Secured Notes due 2028 and a **$110.0 million** cash payment on April 28, 2025[105](index=105&type=chunk) - This exchange was accounted for as a troubled debt restructuring (TDR), resulting in a **$210.0 million** gain recognized through equity[107](index=107&type=chunk) - The Senior Notes are secured by substantially all company assets, accrue interest at **6.00%** per annum, payable semi-annually, and mature on December 31, 2028[111](index=111&type=chunk)[112](index=112&type=chunk) [Note 11. Related Party Transactions](index=26&type=section&id=11.%20Related%20Party%20Transactions) This note discloses commercial agreements and financial transactions with entities affiliated with the company's CEO - The company has commercial agreements with related parties, including TheNumber, LLC, Notable Finance LLC, 1/0 Capital LLC, and Zethos Inc., all affiliated with CEO Vishal Garg[114](index=114&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk)[120](index=120&type=chunk) - Expenses paid to TheNumber for data analytics and technology integration were **$0.3 million** for Q2 2025 and **$0.5 million** for YTD 2025[116](index=116&type=chunk) - The company ceased offering products and services via Notable Agreements in 2024, but still holds **$3.3 million** in unsecured home improvement loans purchased from Notable as of June 30, 2025[119](index=119&type=chunk) [Note 12. Commitments and Contingencies](index=27&type=section&id=12.%20Commitments%20and%20Contingencies) This note outlines the company's legal proceedings, regulatory liabilities, and outstanding commitments to fund mortgage loans - The company is involved in legal proceedings, including employee labor disputes, with an estimated liability of **$6.9 million** as of June 30, 2025[123](index=123&type=chunk)[124](index=124&type=chunk) - A regulatory liability of **$5.0 million** exists for TILA-RESPA Integrated Disclosure (TRID) defects, with an additional accrual of **$0.1 million** in Q2 2025 and a reduction of **$0.8 million** in YTD 2025[125](index=125&type=chunk) - Outstanding commitments to fund mortgage loans increased to **$205.6 million** as of June 30, 2025, from **$129.9 million** at December 31, 2024[127](index=127&type=chunk) [Note 13. Risks and Uncertainties](index=28&type=section&id=13.%20Risks%20and%20Uncertainties) This note discusses key financial risks, including interest rate risk and credit risk, and the company's loan repurchase reserve - The company faces interest rate risk, which can decrease loan production and fair value of LHFS in a rising rate environment, or lead to withdrawal of loan applications in a declining rate environment[134](index=134&type=chunk)[135](index=135&type=chunk) - Credit risk exists with counterparties in mortgage securities transactions, though minimized by limiting to well-established banks and dealers[138](index=138&type=chunk) - The loan repurchase reserve decreased to **$4.3 million** at June 30, 2025, from **$11.7 million** at June 30, 2024, reflecting a reduced estimate for potential loss exposure due to lower historical funded loan volume[139](index=139&type=chunk) [Note 14. Net Loss Per Share](index=30&type=section&id=14.%20Net%20Loss%20Per%20Share) This note presents the calculation of basic and diluted net loss per share, considering the impact of potentially dilutive securities | (Amounts in thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(36,270) | $(41,365) | $(86,827) | $(92,857) | | Weighted average common shares outstanding — basic | 15,187,558 | 15,095,956 | 15,185,724 | 15,087,913 | | Basic Loss per share | $(2.39) | $(2.74) | $(5.72) | $(6.15) | | Diluted Loss per share | $(2.39) | $(2.74) | $(5.72) | $(6.15) | - Basic and diluted loss per share improved to **$(2.39)** for Q2 2025 from **$(2.74)** for Q2 2024, and to **$(5.72)** for YTD 2025 from **$(6.15)** for YTD 2024[140](index=140&type=chunk) - Potentially dilutive securities, including RSUs, options, warrants, and Sponsor locked-up shares, were excluded from diluted EPS computation as their effect would be anti-dilutive[142](index=142&type=chunk) [Note 15. Fair Value Measurements](index=31&type=section&id=15.%20Fair%20Value%20Measurements) This note details the fair value hierarchy and measurements for financial instruments, including mortgage loans held for sale and derivatives | (Amounts in thousands) | June 30, 2025 (Total) | December 31, 2024 (Total) | | :--------------------- | :-------------------- | :------------------------ | | **Assets at Fair Value** | | | | Mortgage loans held for sale | $447,738 | $399,241 | | Derivative assets | $5,248 | $2,539 | | Total Assets | $452,986 | $401,780 | | **Liabilities at Fair Value** | | | | Derivative liabilities | $2,402 | $86 | | Warrant and equity related liabilities | $1,751 | $1,407 | | Total Liabilities | $4,153 | $1,493 | - Derivative assets increased significantly to **$5.2 million** at June 30, 2025, from **$2.5 million** at December 31, 2024, primarily due to Interest Rate Lock Commitments (IRLCs)[144](index=144&type=chunk)[146](index=146&type=chunk) - IRLCs are classified as Level 3 fair value measurements due to the use of unobservable pull-through factors, with a weighted average pull-through factor of **75.4%** at June 30, 2025[146](index=146&type=chunk)[151](index=151&type=chunk) [Note 16. Income Taxes](index=34&type=section&id=16.%20Income%20Taxes) This note provides information on the company's income tax expense, effective tax rate, and the valuation allowance on deferred tax assets - Total income tax expense was **$0.2 million** for the six months ended June 30, 2025, compared to **$0.3 million** for the same period in 2024[154](index=154&type=chunk) - The year-to-date effective tax rate improved from **(0.37)%** in 2024 to **(0.28)%** in 2025, driven by a forecasted reduction in losses[154](index=154&type=chunk) - The company maintains a full valuation allowance on deferred income tax assets due to a three-year cumulative loss position and the unlikelihood of future realization[155](index=155&type=chunk) [Note 17. Stockholders' Equity](index=34&type=section&id=17.%20Stockholders'%20Equity) This note details changes in stockholders' equity, including warrant liabilities and notes receivable from stockholders for stock option exercises - Warrant and equity related liabilities totaled **$1.6 million** at June 30, 2025, with a **$0.3 million** loss from changes in fair value for the six months ended June 30, 2025[157](index=157&type=chunk) - Notes Receivable from Stockholders, primarily for financing stock option exercises, remained at **$9.2 million** for vested options and **$6.8 million** for unvested options as of June 30, 2025[161](index=161&type=chunk)[162](index=162&type=chunk) - The company no longer enters into new promissory note agreements for stock option financing or allows early exercise of stock options[160](index=160&type=chunk) [Note 18. Stock-Based Compensation](index=35&type=section&id=18.%20Stock-Based%20Compensation) This note reports the stock-based compensation expense recognized by the company and amounts capitalized for internal use software | (Amounts in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock-based compensation expense | $4,252 | $7,959 | $8,285 | $16,325 | - Stock-based compensation expense decreased by **46.6%** for Q2 2025 and **49.2%** for YTD 2025 compared to the prior year periods[163](index=163&type=chunk) - Capitalized stock-based compensation for internal use software was **$0.4 million** for Q2 2025 and **$0.8 million** for YTD 2025[163](index=163&type=chunk) [Note 19. Regulatory Requirements](index=35&type=section&id=19.%20Regulatory%20Requirements) This note outlines the company's compliance with various federal, state, and local regulatory requirements, including capital and liquidity standards - The company is subject to various federal, state, and local regulations, including minimum net worth, capital ratio, and liquidity requirements by HUD, FMCC, and FNMA[164](index=164&type=chunk)[165](index=165&type=chunk) - As of June 30, 2025, the company was in compliance with all necessary regulatory requirements[165](index=165&type=chunk) - After failing to meet additional financial requirements in 2023 due to declining profitability and net worth, the company has since implemented measures and remains in compliance[166](index=166&type=chunk) [Note 20. Subsequent Events](index=36&type=section&id=20.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, including regulatory approval for the sale of a disposal unit - Subsequent to June 30, 2025, the company received regulatory approval from the Financial Conduct Authority in the U.K. for the sale of one of its disposal units classified as held for sale[167](index=167&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting key business strategies, revenue drivers, expense trends, and liquidity management [Company Overview](index=38&type=section&id=Company%20Overview) This section introduces the company's mission to revolutionize homeownership through technology and its comprehensive service offerings - The company aims to revolutionize homeownership through its proprietary AI-powered platform, Tinman, and voice-based AI assistant, Betsy, to reduce loan production costs and enhance customer experience[172](index=172&type=chunk)[173](index=173&type=chunk) - Offerings include mortgage financing, real estate services, title, and homeowners' insurance across all 50 U.S. states and the U.K.[174](index=174&type=chunk) - The company is expanding its distribution strategy by building out a distributed retail channel, 'NEO Powered by Better,' leveraging its technology for local loan officers[179](index=179&type=chunk) [Our Business Model](index=40&type=section&id=Our%20Business%20Model) This section describes the company's primary revenue sources, including mortgage production, real estate, and insurance services | (Amounts in thousands, except percentage amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gain on loans, net | $36,772 (83%) | $24,229 (75%) | $61,348 (80%) | $39,881 (73%) | | Other revenue | $3,300 (7%) | $2,881 (9%) | $7,330 (10%) | $5,698 (10%) | | Net interest income | $4,072 (9%) | $5,152 (16%) | $8,019 (10%) | $8,934 (16%) | | Total net revenues | $44,144 | $32,262 | $76,697 | $54,513 | - The primary revenue source is 'Gain on loans, net' from mortgage production and sales, which increased its share of total revenue to **83%** in Q2 2025 from **75%** in Q2 2024[181](index=181&type=chunk)[182](index=182&type=chunk) - 'Better Plus' revenue, from real estate and insurance services, and 'International Lending Revenue' contribute to 'Other revenue'[183](index=183&type=chunk)[188](index=188&type=chunk) [Key Business Metrics](index=42&type=section&id=Key%20Business%20Metrics) This section presents key operational metrics, such as funded loan volume, loan types, and gain on sale margin, reflecting business performance | Key Business Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Home Finance** | | | | | | Funded Loan Volume | $1,205 million | $962 million | $2,074 million | $1,623 million | | Refinance Loan Volume | $162 million | $77 million | $295 million | $159 million | | Purchase Loan Volume | $803 million | $794 million | $1,381 million | $1,323 million | | HELOC Volume | $240 million | $90 million | $398 million | $142 million | | D2C Loan Volume | $774 million | $670 million | $1,388 million | $1,030 million | | B2B Loan Volume | $4 million | $292 million | $95 million | $594 million | | Retail Loan Volume | $428 million | — | $591 million | — | | Total Loans (number) | 4,032 | 2,995 | 7,007 | 4,986 | | Average Loan Amount | $298,952 | $321,178 | $295,962 | $325,544 | | Gain on Sale Margin | 3.05% | 2.52% | 2.96% | 2.46% | | Total Market Share | 0.2% | 0.2% | 0.2% | 0.2% | | **Better Plus** | | | | | | Better Real Estate Transaction Volume | $93 million | $105 million | $164 million | $161 million | | Insurance Coverage Written | $1,001 million | $1,164 million | $1,997 million | $2,232 million | - Funded Loan Volume increased by **25.3%** in Q2 2025 and **27.8%** in YTD 2025, driven by significant growth in HELOC volume and the introduction of the Retail channel[190](index=190&type=chunk) - B2B Loan Volume decreased substantially due to the winding down of the integrated relationship with Ally, while the new Retail Loan Volume contributed **$428 million** in Q2 2025 and **$591 million** in YTD 2025[190](index=190&type=chunk) - Gain on Sale Margin improved to **3.05%** in Q2 2025 from **2.52%** in Q2 2024, and to **2.96%** in YTD 2025 from **2.46%** in YTD 2024[190](index=190&type=chunk) [Description of Certain Components of Our Financial Data](index=43&type=section&id=Description%20of%20Certain%20Components%20of%20Our%20Financial%20Data) This section explains the various components of the company's revenues and expenses, and factors influencing them - Revenue components include Gain on loans, net (from loan production and sales, broker revenue, and loan repurchase reserve adjustments), Other revenue (from Better Plus offerings and international lending), and Net interest income[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[204](index=204&type=chunk) - Expenses comprise compensation and benefits, general and administrative, technology, marketing and advertising, loan origination, depreciation and amortization, and other expenses[205](index=205&type=chunk) - The winding down of the integrated relationship with Ally Bank is impacting broker revenue in the Home Finance segment[207](index=207&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, highlighting revenue and expense trends over comparative periods | (Amounts in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total net revenues | $44,144 | $32,262 | $76,697 | $54,513 | | Total expenses | $80,320 | $73,424 | $163,285 | $147,024 | | Net loss | $(36,270) | $(41,365) | $(86,827) | $(92,857) | - Gain on sale of loans, net, increased by **85%** in Q2 2025 and **96%** in YTD 2025, primarily due to increased Funded Loan Volume, especially from home equity products[216](index=216&type=chunk)[217](index=217&type=chunk) - Broker revenue decreased by **6%** in Q2 2025 and **26.1%** in YTD 2025, mainly due to the reduction in B2B Loan Volume from the Ally partnership wind-down, partially offset by new Retail channel broker revenue[218](index=218&type=chunk)[219](index=219&type=chunk) - International lending revenue increased by **19%** in Q2 2025 and **27.8%** in YTD 2025, driven by increased operations in U.K. brokerage businesses[223](index=223&type=chunk)[224](index=224&type=chunk) - Mortgage interest income increased by **74%** in Q2 2025 and **91.4%** in YTD 2025, due to higher origination volume and interest earned on loans held and serviced[231](index=231&type=chunk)[232](index=232&type=chunk) - Interest income on loans held for investment saw substantial increases of **1662.0%** in Q2 2025 and **1812%** in YTD 2025, driven by increased originations in U.K. banking operations[233](index=233&type=chunk)[234](index=234&type=chunk) - Compensation and benefits expenses increased by **17%** in Q2 2025 and **20%** in YTD 2025, due to increased headcount, particularly in the Retail channel, and higher incentive compensation[243](index=243&type=chunk)[244](index=244&type=chunk) - General and administrative expenses decreased by **24%** in Q2 2025 and **20.8%** in YTD 2025, primarily from reductions in rent, occupancy, insurance premiums, and professional services[244](index=244&type=chunk)[245](index=245&type=chunk) - Marketing and advertising expenses increased by **31%** in Q2 2025 and **51.5%** in YTD 2025, reflecting investments in advertising to drive volume and test new channels[248](index=248&type=chunk)[249](index=249&type=chunk) [Non-GAAP Financial Measures](index=52&type=section&id=Non-GAAP%20Financial%20Measures) This section presents and reconciles non-GAAP financial measures, such as Adjusted Net Loss and Adjusted EBITDA, to provide additional insights into core operations - The company reports Adjusted Net Loss and Adjusted EBITDA as non-GAAP measures to supplement GAAP results, providing insights into core operating performance by excluding non-recurring or non-cash items[253](index=253&type=chunk)[256](index=256&type=chunk) | (Amounts in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Adjusted Net Loss** | | | | | | Net (loss) income | $(36,270) | $(41,365) | $(86,827) | $(92,857) | | Stock-based compensation expense | $4,252 | $7,959 | $8,285 | $16,325 | | Change in fair value of warrants and equity related liabilities | $572 | $102 | $344 | $(721) | | Restructuring, impairment, and other expenses | $1,206 | $184 | $1,776 | $905 | | Adjusted Net Loss | $(30,240) | $(33,121) | $(76,422) | $(76,349) | | **Adjusted EBITDA** | | | | | | Net (loss) income | $(36,270) | $(41,365) | $(86,827) | $(92,857) | | Income tax expense / (benefit) | $94 | $203 | $239 | $346 | | Depreciation and amortization expense | $3,535 | $7,990 | $7,510 | $17,064 | | Stock-based compensation expense | $4,252 | $7,959 | $8,285 | $16,325 | | Interest and amortization on non-funding debt | $6 | $1,668 | $1,711 | $4,332 | | Restructuring, impairment, and other expenses | $1,206 | $184 | $1,776 | $905 | | Change in fair value of warrants and equity related liabilities | $572 | $102 | $344 | $(721) | | Adjusted EBITDA | $(26,605) | $(23,260) | $(66,962) | $(54,607) | - Adjusted Net Loss improved to **$(30.2) million** in Q2 2025 from **$(33.1) million** in Q2 2024, and remained stable at **$(76.4) million** for YTD 2025[261](index=261&type=chunk) - Adjusted EBITDA worsened to **$(26.6) million** in Q2 2025 from **$(23.3) million** in Q2 2024, and to **$(67.0) million** in YTD 2025 from **$(54.6) million** in YTD 2024[261](index=261&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its financial obligations, including funding sources, capital structure, and cash flow activities - The company primarily funds mortgage loans through warehouse lines of credit, with an aggregate available amount of **$575.0 million** across three facilities as of June 30, 2025[265](index=265&type=chunk)[269](index=269&type=chunk) - Growth in U.K. banking operations led to loans held for investment increasing to **$420.6 million**, primarily funded by customer deposits which grew to **$482.4 million** as of June 30, 2025[266](index=266&type=chunk) - The exchange of Convertible Notes for Senior Notes and a cash payment of **$110.0 million** in April 2025 impacted the capital structure[267](index=267&type=chunk)[272](index=272&type=chunk) - Net cash used in operating activities decreased by **$150 million** (57%) in YTD 2025, while net cash used in investing activities increased by **$319 million** (507%) due to U.K. banking growth[280](index=280&type=chunk)[281](index=281&type=chunk) [Off-Balance Sheet Arrangements](index=57&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet arrangements that could significantly impact the company's financial position - The company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on its financial condition, results of operations, liquidity, capital expenditures, or capital resources[283](index=283&type=chunk) [Critical Accounting Policies and Estimates](index=57&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section states that there have been no significant changes to the company's critical accounting policies and estimates from the prior annual report - There have been no significant changes in the company's critical accounting policies and estimates during the period ended June 30, 2025, compared to those disclosed in the 2024 Annual Report on Form 10-K[284](index=284&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Better Home & Finance Holding Company is not required to provide detailed quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is therefore not required to provide the information typically required under this item[285](index=285&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to identified material weaknesses, primarily related to the control environment and oversight of complex accounting valuations - Disclosure controls and procedures were not effective as of June 30, 2025, due to identified material weaknesses[286](index=286&type=chunk) - Material weaknesses include the CEO's failure to set a strong tone at the top, an ineffective control environment due to limited accounting personnel, and insufficient review of third-party valuations[288](index=288&type=chunk)[289](index=289&type=chunk) - Remediation efforts include establishing a management ethics and compliance committee, executive coaching for the CEO, enhancing reporting lines, creating a Chief Accounting Officer role, investing in accounting personnel, and designing controls for complex accounting matters[290](index=290&type=chunk)[291](index=291&type=chunk)[294](index=294&type=chunk) Part II - Other Information This section covers legal proceedings, risk factors, equity sales, defaults, other information, and exhibits [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings and claims arising in the ordinary course of business, including employee labor disputes and regulatory matters, as detailed in Note 12 to the financial statements - The company is subject to legal and administrative proceedings, including inquiries, complaints, audits, investigations, employee labor disputes, and potential enforcement actions from regulatory agencies[122](index=122&type=chunk) - An estimated liability of **$6.9 million** for employee labor disputes and **$5.0 million** for TRID defects is included in accounts payable and accrued expenses as of June 30, 2025[124](index=124&type=chunk)[125](index=125&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K filed on March 19, 2025 - No material changes to the risk factors disclosed in the company's 2024 Annual Report on Form 10-K[296](index=296&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities and use of proceeds to report[297](index=297&type=chunk) [Item 3. Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities[298](index=298&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[299](index=299&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This section discloses the resignation of a director and details an insider trading arrangement entered into by a company officer - Steven Sarracino resigned from the Board of Directors, effective August 14, 2025, with no disagreement on company operations, policies, or practices cited[301](index=301&type=chunk) - Nicholas Calamari, Chief Administrative Officer, entered into a Rule 10b5-1 trading arrangement on June 5, 2025, for the sale of up to **34,837** shares of Class A common stock by February 4, 2026[304](index=304&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the Indenture and Security Agreement related to the Senior Notes, the Note Exchange Agreement, and certifications - Key exhibits include the Indenture and Security Agreement dated April 28, 2025, and the Note Exchange Agreement dated April 12, 2025[305](index=305&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act are also filed[305](index=305&type=chunk) [Signatures](index=62&type=section&id=Signatures) The report is duly signed on behalf of Better Home & Finance Holding Company by its Chief Financial Officer, Kevin Ryan, on August 13, 2025 - The report was signed by Kevin Ryan, Chief Financial Officer, on August 13, 2025[311](index=311&type=chunk)

Financial Data and Key Metrics Changes - In Q2 2025, the company achieved a funded loan volume of approximately $1.2 billion, representing a 25% year-over-year growth, while revenue increased by 37% to $44.1 million [14][34]. - The adjusted EBITDA loss for the quarter was approximately $27 million, with expectations to reach adjusted EBITDA breakeven by Q3 2026 [34][36]. - Total expenses decreased by approximately 3% in Q2 compared to Q1 2025 [35]. Business Line Data and Key Metrics Changes - Funded loan volume by product was composed of 67% purchase loans, 20% second lien, and 13% refinance loans [34]. - The home equity and HELOC loans saw a significant increase of 166% year-over-year, while refinance loan volume increased by 109% [14]. - The direct-to-consumer (D2C) model generated 64% of the funded loan volume, while the Tinman AI platform contributed 36% [34]. Market Data and Key Metrics Changes - The company reported a lead-to-lock conversion rate increase of over 30%, from 3.3% to 4.4%, attributed to the implementation of Betsy AI [10][46]. - The Birmingham Bank in the UK grew its loan book by 90% sequentially in Q2 2025 [38]. Company Strategy and Development Direction - The company aims to achieve profitability by focusing on AI-driven technology, reducing corporate costs, and diversifying product and distribution channels [7][14]. - The strategic priorities include driving growth opportunities independent of broader economic conditions, reducing expenses, and improving operational efficiency [14][16]. - The company is expanding its Tinman AI platform to serve local mortgage bankers and financial institutions, creating a unique market position [7][19]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving adjusted EBITDA breakeven by Q3 2026, driven by volume growth and improved contribution margins [34][36]. - The company highlighted the increasing consumer adoption of AI and its potential to enhance operational efficiency and profitability [10][16]. - Management noted that the mortgage market presents significant opportunities, particularly in home equity lending, which is expected to grow substantially [60][64]. Other Important Information - The company has built a comprehensive AI platform that integrates various mortgage processes, enhancing customer experience and operational efficiency [10][12]. - The company has a strong pipeline of partners interested in utilizing the Tinman AI software, indicating robust demand for its technology [23][28]. Q&A Session Summary Question: Can you characterize the partners trying to enter the space using your technology? - The company is engaging with next-gen wealth management firms, traditional fintech lenders, and mega fintechs looking to offer mortgage products to their customer bases [41][44]. Question: How much volume is needed to see meaningful benefits from cost reductions? - The company indicated that it already sees benefits from reduced costs, with labor costs per fund significantly lower than industry averages [46]. Question: What has driven the lead-to-lock conversion rate increase with Betsy? - The expanded functionality of Betsy, which now assists throughout the entire loan process, has significantly improved efficiency and customer outcomes [51][52]. Question: Can you provide updates on the B2B side, specifically regarding the Tinman AI software? - The company has successfully onboarded a small to medium-sized bank onto the Tinman AI platform, achieving rapid implementation and loan processing [54]. Question: Can you elaborate on the home equity business growth? - The company reported a 260% year-over-year growth in home equity volume, positioning itself as a leading home equity lender in the U.S. [60][61].

Company Overview - Better Home & Finance Holding Company is developing a next-generation AI mortgage platform aimed at simplifying and accelerating the mortgage process[11] - Mortgages originated with Better technology cost 43% less than the industry average[17] - The company's platform delivers a best-in-class experience with a 64 Net Promoter Score and a 4.1 out of 5 Trustpilot Score[21] Market Opportunity - The cumulative homeownership market size is estimated at $19+ trillion[19] - Home mortgages represent approximately 69% of total household debt[19] - Buyers pay fees to up to 10 intermediaries, accounting for ~10% of home price[21] Technology and Platform - The platform is powered by Tinman® AI, which enables faster rate quotes (3 seconds), pre-approvals (3 minutes), and loan closes (3 weeks)[21, 13] - The company's AI agent, Betsy, has led to a 3x increase in loan officer productivity[57] - The company retains loans on its balance sheet for approximately 26 days on average[30, 32] Financial Performance - In Q2 2025, the total mortgage revenue was $7886 thousand per fund[58] - In Q2 2025, the contribution margin per fund was $1064[58] - Adjusted EBITDA for Q2 2025 was $(26605) thousand, compared to $(23259) thousand in Q2 2024[79]

Core Viewpoint - BetterLife Pharma Inc. has received an ISSUE NOTIFICATION from the US Patent and Trademark Office for its BETR-001 composition of matter patent, which provides strong intellectual property protection until at least 2042 [1][4]. Patent and Intellectual Property - The patent covers various claims related to crystalline forms of BETR-001, its formulations, and isomers [3]. - The composition of matter patent is considered the strongest level of intellectual property coverage for a compound [4]. Product Development - BETR-001 is a non-hallucinogenic neuroplastogen aimed at treating psychiatric and neurological disorders, including depression, anxiety, PTSD, traumatic brain injury, migraines, and neuropathic pain [4][8]. - The company has completed most IND-enabling studies and plans to file for IND and start human trials in H1 2026 [5]. Financial and Shareholder Information - BetterLife has issued a total of 6,473,712 common shares and the same number of share purchase warrants, related to convertible debentures and accrued interest totaling $647,371 [6]. - The share purchase warrants are exercisable at an exercise price of $0.10 per warrant and have varying expiration dates [6]. Company Overview - BetterLife Pharma is focused on developing and commercializing compounds for neuro-psychiatric and neurological disorders, specifically BETR-001 and BETR-002 [7]. - BETR-002 is based on honokiol and is also in preclinical studies, targeting anxiety-related disorders [9]. - The company is exploring strategic alternatives for further development of a drug candidate for viral infections [10].

Financial Performance - For the three months ended March 31, 2025, the company reported total net revenues of $32,553,000, a 46.4% increase from $22,251,000 in the same period of 2024[165] - Total net revenues for the three months ended March 31, 2025, were $32,553,000, an increase of 46% compared to $22,251,000 for the same period in 2024[196] - Gain on loans, net for the same period was $24,576,000, representing 75% of total net revenues, up from 70% in the prior year[165] - Gain on loans, net increased by $8,924,000 or 57% to $24,576,000 for the three months ended March 31, 2025, compared to $15,652,000 for the same period in 2024[196] - Mortgage interest income rose by $3,473,000 or 117% to $6,437,000 for the three months ended March 31, 2025, compared to $2,964,000 for the same period in 2024[204] - Other revenue increased by $1,213,000 or 43% to $4,030,000 for the three months ended March 31, 2025, compared to $2,817,000 for the same period in 2024[203] Loan and Investment Activity - Funded loan volume increased to $868,000,000 in Q1 2025, compared to $661,000,000 in Q1 2024, marking a 31.4% growth[172] - Direct-to-consumer (D2C) loan volume rose to $614,000,000, a significant increase from $360,000,000 in the previous year[172] - The average loan amount decreased to $291,909 from $332,111 year-over-year, indicating a shift in loan size[172] - Loans held for investment grew to $207.2 million as of March 31, 2025, up from $111.5 million as of December 31, 2024[229] - Net cash used in investing activities surged by $125 million, or 376%, to $159 million in Q1 2025, primarily due to increased loan originations[242] Expenses and Losses - Compensation and benefits expenses increased by $8,595,000 or 23% to $46,668,000 for the three months ended March 31, 2025, compared to $38,073,000 for the same period in 2024[210] - Marketing and advertising expenses increased by $4,133,000 or 91% to $8,687,000 for the three months ended March 31, 2025, compared to $4,554,000 for the same period in 2024[213] - Total expenses for the three months ended March 31, 2025, were $82,965,000, an increase of 13% compared to $73,600,000 for the same period in 2024[210] - Net loss for the three months ended March 31, 2025, was $50,557,000, compared to a net loss of $51,492,000 for the same period in 2024[196] - Adjusted Net Loss for Q1 2025 was $46.2 million, compared to $42.8 million in Q1 2024, reflecting an increase of 8%[223] - Adjusted EBITDA for Q1 2025 was $(40.4) million, compared to $(31.0) million in Q1 2024, indicating a decline of 30%[223] Strategic Initiatives - The company plans to continue investing in technology to enhance customer experience and reduce operational costs through automation[163] - The company aims to expand its market presence and diversify revenue streams through new product offerings and strategic partnerships[163] - The company is winding down its integrated relationship with Ally Bank, which has been a primary source of B2B loan volume[166] Cash Flow and Financing - Net cash used in operating activities increased by $14 million, or 34%, to $57 million in Q1 2025 from $43 million in Q1 2024[241] - Net cash provided by financing activities increased to $118.8 million for the three months ended March 31, 2025, a rise of $120 million or 10450% compared to $1 million for the same period in 2024[243] - The company raised approximately $568 million in gross proceeds from the Business Combination in August 2023, with $528.6 million in the form of a Convertible Note[230] - The company entered into a Note Exchange Agreement to exchange $532.5 million of existing Convertible Notes for $155 million in New Notes and a cash payment of $110 million[234] - The New Notes will accrue interest at a rate of 6.00% per annum, payable semi-annually, with the first payment due on June 30, 2025[238] Risk Factors and Accounting - Forward-looking statements indicate potential risks including the ability to expand customer base and market share, and to respond to economic conditions[246] - The company emphasizes the importance of maintaining profitability and the ability to raise additional financing in the future[246] - Risks discussed in the 2024 Annual Report may cause actual results to differ materially from forward-looking statements[247] - The company is classified as a smaller reporting company and is not required to provide additional market risk disclosures[248] - There have been no significant changes in critical accounting policies and estimates during the three months ended March 31, 2025, compared to the previous year[245]

Core Viewpoint - Better Home & Finance Holding Company (NASDAQ: BETR) has experienced a significant decline in share value, losing about one-third of its value over the past year, despite a recent recovery of approximately 50% from its lows [1] Company Performance - The company's shares have lost about 33% of their value in the past year [1] - Recently, shares have increased by around 50% from their recent lows [1] Investment Strategy - The company has over fifteen years of experience in making contrarian bets based on macro views and stock-specific turnaround stories to achieve outsized returns with a favorable risk/reward profile [1]

Financial Data and Key Metrics Changes - In Q1 2025, the company achieved a 31% year-over-year increase in funded loan volume to $868 million and a 46% increase in revenue to $33 million, driven by growth in both direct-to-consumer (DTC) and Tinman AI platform channels [7][21][22] - The adjusted EBITDA loss was $40.4 million, with a total GAAP net loss of approximately $50.6 million [21][22] - Funded loan volume was 71% generated through DTC and 29% through the Tinman AI platform [21] Business Line Data and Key Metrics Changes - Funded loan volume growth was driven by home equity products and refinance loans, with HELOC and home equity loan volume increasing by 207%, refinance loan volume by 64%, and purchase loan volume by 9% [9][21] - The company reported that the DTC business has seen increasing contribution margins as operating costs decrease due to AI implementation [11] Market Data and Key Metrics Changes - The total addressable market (TAM) for the mortgage industry is estimated at $2.1 trillion for 2025, with $1.4 trillion for purchases and $700 billion for refinancing [5][6] - The company aims to capture even a 1% market share, which would result in $14 billion of volume, approximately three times its current volume [6] Company Strategy and Development Direction - The company is focused on three strategic priorities: driving growth through AI, improving operational efficiency, and diversifying distribution channels [7][10] - The Tinman AI platform is being positioned as a disruptive technology in the mortgage industry, aiming to replace traditional systems and improve efficiency [12][18] - The company is also expanding its B2B partnerships, particularly with banks and fintechs, to license its software and enhance operational capabilities [56][58] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in the mortgage industry but emphasized the opportunities created by these dynamics, particularly through the use of AI technology [5][20] - The company expects funded loan volume to increase in Q2 2025, driven by efficiencies in the Tinman AI platform, with a projected growth of over 250% in Neo originations compared to Q1 [25][26] - The outlook for 2025 includes expectations for improved adjusted EBITDA losses due to efficiency gains and corporate cost reductions [26][27] Other Important Information - The company successfully retired approximately $530 million of convertible notes, creating about $200 million of positive pretax equity value [8][23] - The company is undergoing efforts to exit non-core UK assets while focusing on growing Birmingham Bank, expecting to double UK bank originations in 2025 [27] Q&A Session Summary Question: What is the expected timeline for loan officers to feel the impact of the Neo platform? - Management indicated that loan officers start seeing the impact within 30 days as the platform automates many of their tasks, allowing them to regain time and increase productivity [29][30] Question: How many more loan officers does the company plan to onboard in 2025? - The company aims to triple or quadruple the Neo channel, with plans to double it in the upcoming quarter [36] Question: How have unit economics trended year over year? - Unit economics have improved, with March showing a significant reduction in losses, indicating that the mortgage company was nearly breakeven [40][41] Question: What are the long-term leverage levels that make sense for the business? - The company operates a capital-light model and is comfortable with its current leverage, having restructured its debt to improve its balance sheet [49][52] Question: What opportunities exist for B2B partnerships? - The company is focusing on software-only partnerships with banks and fintechs, allowing them to utilize the Tinman platform without extensive integration costs [56][58]

Financial Data and Key Metrics Changes - In Q1 2025, funded loan volume increased by 31% year-over-year to $868 million, while revenue grew by 46% to $33 million, driven by funding more loans through both DTC and Tinman AI platform channels [6][19][20] - The adjusted EBITDA loss was $40.4 million, and the total GAAP net loss was approximately $50.6 million [19] - Funded loan volume by channel was 71% from direct-to-consumer (DTC) and 29% from Tinman AI platform [19] Business Line Data and Key Metrics Changes - Funded loan volume growth was driven by home equity products and refinance loans, with HELOC and home equity loan volume increasing by 207%, refinance loan volume by 64%, and purchase loan volume by 9% [8] - The DTC business continues to improve contribution margin as operating costs decrease due to AI implementation [10] Market Data and Key Metrics Changes - The mortgage industry is projected to have a total origination volume of $2.1 trillion for 2025, with approximately $1.4 trillion for purchases and $700 billion for refinancing [5] - The company aims to capture even a 1% market share, which would result in $14 billion of volume, approximately three times the current level [5] Company Strategy and Development Direction - The company is focused on three strategic priorities: driving growth through AI, improving operational efficiency, and diversifying distribution channels [6][9] - The Tinman AI platform is being expanded to serve local mortgage brokers and banks, aiming to disrupt traditional retail mortgage origination [11][14] - The company is also working on exiting non-core UK assets while focusing on growing Birmingham Bank [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges in the mortgage industry but sees significant opportunities for growth through technology and AI [5][6] - The company expects funded loan volume to increase in Q2 2025, driven by efficiencies in the Tinman AI platform, with a projected $450 million in Neo originations, representing over 250% growth compared to Q1 [23] - The outlook for 2025 includes expectations for year-over-year growth in funded loan volume, despite macro pressures and the loss of the Ally business [23] Other Important Information - The company successfully retired approximately $530 million of convertible notes, creating about $200 million of positive pretax equity value [7][21] - The company is focused on building a leading AI platform in the mortgage industry to enhance customer experience and drive down costs [17][22] Q&A Session Summary Question: What is the expected timeline for loan officers to feel the impact of the Neo platform? - Management believes loan officers will start seeing the impact within 30 days as the platform automates many of their tasks, allowing them to regain time and increase productivity [26][27] Question: How many more loan officers does the company plan to onboard in 2025? - The company aims to triple or quadruple the Neo channel, with plans to double it in the coming quarter [31][32] Question: How have unit economics trended year-over-year? - Unit economics have improved, with March showing a significant reduction in losses and approaching breakeven for the mortgage company [36][38] Question: What is the long-term leverage level that makes sense for the business? - The company operates a capital-light model and is comfortable with its current leverage, having reduced debt and improved its balance sheet [45][48] Question: What opportunities exist for B2B partnerships? - The company sees potential in software-only partnerships with banks and fintechs looking to enter the mortgage business, with a strong pipeline of interest [50][54]

Financial Data and Key Metrics Changes - In 2024, the company achieved a 19% year-over-year increase in funded loan volume, totaling $3.6 billion, and a 50% increase in revenue, reaching $108 million [10][11] - The adjusted EBITDA loss was reduced by 26% year-over-year, amounting to $121 million [10] - For Q4 2024, funded loan volume was $936 million, a 77% year-over-year increase, while revenue was $25 million, up from $18 million in Q4 2023 [12][49] Business Line Data and Key Metrics Changes - Funded loan volume growth in Q4 was driven by home equity products and refinance loans, with purchase loan volume increasing by 25% and refinance loan volume surging by 611% year-over-year [14] - Home equity loan volume increased by 416% in Q4 2024 compared to the previous year [14] - The company reported that 81% of funded loan volume in Q4 was generated through the direct-to-consumer (D2C) channel, with 62% being purchase loans [50] Market Data and Key Metrics Changes - The overall mortgage market saw improvements in Q4 2024, but 30-year fixed mortgage rates remained high, impacting mortgage demand [16] - The company outperformed the market, with a reported 619% increase in HELOC originations compared to a 10% industry-wide increase [14] Company Strategy and Development Direction - The company aims to leverage AI and technology to enhance the home ownership experience, focusing on growth, efficiency improvements, and diversification of distribution channels [9][10] - The partnership with NEO Home Loans is expected to enhance local loan officer capabilities and improve conversion rates [33][45] - The company is committed to reducing expenses and improving operational efficiency to achieve profitability in the medium term [16][47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential in 2025, despite macroeconomic headwinds and the wind down of the Ally business [51][53] - The company anticipates a 10% to 15% decrease in funded loan volume in Q1 2025 due to seasonal slowness and the exit from non-core businesses [51] - Management highlighted the importance of AI in driving down operational costs and improving customer experience [18][30] Other Important Information - The company has implemented significant cost-saving measures, including reducing loan origination expenses by 28% and marketing expenses by 27% in Q4 [17] - The AI-driven assistant, Betsy, has significantly increased customer interactions, growing from 5,000 in June 2024 to over 115,000 by February 2025 [19][20] Q&A Session Summary Question: How does the underwriting and AI technology adjust for high property insurance costs? - Management explained that their technology integrates multiple data sources to provide instant homeowners insurance quotes, significantly reducing the need for manual processing [58] Question: How does profitability impact risk-taking? - Management clarified that their marketplace model does not involve holding loans on the balance sheet, thus minimizing risk while focusing on efficiency and cost reduction [62][68] Question: Can you walk through the savings opportunities from Tinman's AI application? - Management detailed that AI has reduced costs associated with loan officer tasks and improved customer service efficiency, leading to significant savings per funded loan [78] Question: How are gain on sale margins trending in Q1? - Management reported that gain on sale margins are trending higher, particularly with the NEO partnership, which is expected to enhance overall profitability [85][88] Question: Can you contextualize contribution profit per loan? - Management indicated that contribution margins have been improving, and they are focused on reducing costs in the mortgage business to drive profitability [98][100]

Revenue and Business Operations - The company derives almost all of its revenue from its mortgage loan production business, referred to as Home Finance, and related services [182]. - Approximately 30% of the company's Funded Loan Volume for the fiscal year ended December 31, 2024, was secured by properties concentrated in California (12%), Texas (9%), and Florida (9%) [187]. - The company has invested significant resources in developing new products and refining existing offerings, focusing on long-term growth areas despite reductions in near-term spending [182]. - The company is expanding its Better Plus business lines, including partnerships with third-party real estate agents and insurance providers [182]. - The company has been expanding internationally, including operations in the United Kingdom [182]. Risks and Compliance - The company faces risks associated with non-conforming loans, which involve a high degree of business and financial risk, potentially leading to substantial losses [184]. - The company is subject to significant legal and reputational risks related to the privacy and security of customer information, with approximately 10,000 data points captured per customer during the loan transaction process [194]. - The company may experience increased claims and reputational damage due to risks associated with new product offerings and potential defects in technology [182]. - The company is required to comply with various cybersecurity regulations, including the NYDFS Cybersecurity Regulation, which mandates the establishment of a cybersecurity program [196]. - The company acknowledges that failure to accurately predict demand for new products could adversely affect its financial condition and results of operations [183]. - The company faces significant risks related to network security breaches, which could lead to increased costs, litigation, and reputational damage [197]. - Inappropriate access to customer information could result in financial liabilities and regulatory actions, potentially impacting the company's financial condition [198]. - The company operates in a heavily regulated industry, requiring compliance with a wide array of U.S. federal, state, and local laws, which may be inconsistent [234]. - The company is subject to various telecommunications, data protection, and consumer protection laws, with ongoing compliance and monitoring required as these laws evolve [237]. - Regulatory actions for noncompliance could result in fines, loss of licenses, and damage to the company's reputation, affecting its ability to operate [240]. Financial Condition and Performance - The company has incurred debt to finance operations and acquisitions, which may limit its ability to raise additional funds for working capital and other business activities [224]. - The company is dependent on warehouse lines of credit for funding loans, and any termination of these facilities could materially impact its liquidity [227]. - A decline in the performance of loans underlying warehouse lines could affect the company's ability to renew these lines [229]. - The company is exposed to interest rate risk due to variable rates on borrowings, which could increase debt service obligations and decrease net income [233]. - The company has experienced net losses in recent years, leading to lower advance rates under warehouse facilities [227]. - The company reported a net loss of $206,290 thousand for 2024, a decrease in loss of 61.6% from $536,420 thousand in 2023 [487]. - Total liabilities increased to $971,227 thousand in 2024, up 24% from $782,954 thousand in 2023 [486]. - Customer deposits surged to $134,130 thousand in 2024, compared to $11,839 thousand in 2023, marking an increase of 1,133% [486]. Technology and Innovation - The company relies on proprietary technology, including its loan operating system, Tinman, to deliver services and evaluate loan applicants, making technological adaptation critical for growth [199]. - The loan production process is increasingly dependent on technology, and failure to meet advertised processing times could adversely affect the company's reputation and financial performance [200]. - The integration of AI technology is ongoing, and the company must address ethical and legal challenges to maintain competitive advantage and financial performance [207]. - The use of third-party software and services poses risks, including potential errors or failures that could materially affect the company's operations and financial results [209]. Stock and Market Performance - The market price of Class A Common Stock has shown significant weakness, influenced by the company's ability to integrate operations and execute its business plan [281]. - Sales of substantial amounts of Class A Common Stock could adversely affect its market price and impair capital-raising efforts [283]. - CEO Vishal Garg controls approximately 20% of the voting power and could increase to about 34.9% as Class B shares convert to Class A shares [284]. - The company does not expect to pay any cash dividends for the foreseeable future, with future determinations at the discretion of the Board [291]. - The existence of multiple classes of common stock may adversely affect the value and liquidity of Class A Common Stock, potentially leading to a less active trading market [289]. Regulatory Environment - The company must maintain appropriate state licenses to produce or service loans, with risks of inadvertently conducting unlicensed activities [250]. - The evolving regulatory environment may lead to increased scrutiny and enforcement actions, impacting the company's business strategies and growth plans [245]. - Noncompliance with applicable laws could lead to civil and criminal liability, including class action lawsuits and diminished ability to sell loans [246]. - The CFPB has the authority to impose civil money penalties ranging from approximately $6,800 per day for ordinary violations to approximately $1,360,000 per day for knowing violations [262]. - The revised definition of "qualified mortgage" by the CFPB has created additional compliance burdens for lenders [258]. Growth and Future Outlook - The company anticipates that interest rates will remain its primary market risk for the foreseeable future [464]. - The company expects its exposure to foreign currency exchange risk to increase as it focuses growth on specific entities in the United Kingdom [478]. - The management team has limited experience in overseeing a public company, which could hinder effective management during the transition [292]. - The market opportunity estimates and growth forecasts presented are subject to significant uncertainty and may prove to be inaccurate [303].