Better Home & Finance pany(BETR) - 2025 Q2 - Quarterly Report

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 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 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] - 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] Condensed Consolidated Statements of Operations and Comprehensive Loss 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] - 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] Condensed Consolidated Statements of Stockholders' Equity (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] - 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] Condensed Consolidated Statements of Cash Flow 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] - 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] - 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] Note 1. Organization and Nature of the Business 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] - 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][35] - 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][37] Note 2. Summary of Significant Accounting Policies 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][42][43] - 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][52] - 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][68][70] Note 3. Revenue 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] - 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] Note 4. Mortgage Loans Held for Sale and Warehouse Lines of Credit 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] - 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] - The weighted average interest rate for warehouse lines of credit decreased from 7.40% in H1 2024 to 6.46% in H1 2025[83] Note 5. Loans Held for Investment 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] - 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][89][90] Note 6. Goodwill and Internal Use Software and Other Intangible Assets, Net 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] | (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] Note 7. Prepaid Expenses and Other Assets 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] - 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] Note 8. Assets and Liabilities Held for Sale 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] - 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] Note 9. Customer Deposits 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] | (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] Note 10. Senior Notes 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] - This exchange was accounted for as a troubled debt restructuring (TDR), resulting in a $210.0 million gain recognized through equity[107] - 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][112] Note 11. Related Party Transactions 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][115][117][120] - 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] - 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] Note 12. Commitments and Contingencies 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][124] - 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] - 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] Note 13. Risks and Uncertainties 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][135] - Credit risk exists with counterparties in mortgage securities transactions, though minimized by limiting to well-established banks and dealers[138] - 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] Note 14. Net Loss Per Share 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] - 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] Note 15. Fair Value Measurements 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][146] - 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][151] Note 16. Income Taxes 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] - 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] - 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] Note 17. Stockholders' Equity 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] - 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][162] - The company no longer enters into new promissory note agreements for stock option financing or allows early exercise of stock options[160] Note 18. Stock-Based Compensation 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] - Capitalized stock-based compensation for internal use software was $0.4 million for Q2 2025 and $0.8 million for YTD 2025[163] Note 19. Regulatory Requirements 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][165] - As of June 30, 2025, the company was in compliance with all necessary regulatory requirements[165] - 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] Note 20. Subsequent Events 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][173] - Offerings include mortgage financing, real estate services, title, and homeowners' insurance across all 50 U.S. states and the U.K.[174] - 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] Our Business Model 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][182] - 'Better Plus' revenue, from real estate and insurance services, and 'International Lending Revenue' contribute to 'Other revenue'[183][188] Key Business Metrics 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] - 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] - 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] Description of Certain Components of Our Financial Data 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][199][200][204] - Expenses comprise compensation and benefits, general and administrative, technology, marketing and advertising, loan origination, depreciation and amortization, and other expenses[205] - The winding down of the integrated relationship with Ally Bank is impacting broker revenue in the Home Finance segment[207] Results of Operations 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][217] - 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][219] - 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][224] - 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][232] - 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][234] - 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][244] - 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][245] - 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][249] Non-GAAP Financial Measures 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][256] | (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] - 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] Liquidity and Capital Resources 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][269] - 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] - The exchange of Convertible Notes for Senior Notes and a cash payment of $110.0 million in April 2025 impacted the capital structure[267][272] - 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][281] Off-Balance Sheet Arrangements 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] Critical Accounting Policies and Estimates 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - 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][289] - 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][291][294] Part II - Other Information This section covers legal proceedings, risk factors, equity sales, defaults, other information, and exhibits Item 1. Legal Proceedings 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] - 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][125] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities[298] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[299] Item 5. Other Information 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] - 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] Item 6. Exhibits 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] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act are also filed[305] 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]