Better Home & Finance Holding Co 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless otherwise indicated or the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Better Home & Finance,” the “Company,” “we,” “us,” “our” and other similar terms refer to Better and its subsidiaries prior to the Closing and to Better Home & Finance and its consolidated subsidiaries after the Closing. The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed interim consolidated financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022, in each case, together with related notes thereto, included elsewhere in this quarterly report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this quarterly report on Form 10-Q. See “Cautionary Statement Regarding Forward-Looking Statements.” Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. Certain amounts may not foot due to rounding. Company Overview We are building a next-generation platform that we believe can revolutionize the world’s largest, oldest and most tangible asset class, the home. Our holistic solution and marketplace model, enabled by our proprietary technology, allows us to take one of our customers’ largest and most complex financial journeys-the process of owning a home-and transform it into a more simple, transparent and ultimately affordable process. Our goal is to do our part in lowering the hurdles to homeownership by offering the lowest prices and the best experience to our customers. We are a technology-driven organization. We are seeking to disrupt a business model that has traditionally been centered around commissioned intermediaries by introducing a commission-free model that leverages our proprietary platform, Tinman, to enhance the automation of the home finance process. Through this process, we aim to reduce the cost to produce a loan and in the future to create a platform with all homeownership products embedded into a highly automated, single flow, allowing us to pass along savings to our customers. We generate substantially all of our mortgage platform revenue by selling our Home Finance mortgage loans and related Mortgage Servicing Rights (“MSRs”) to our loan purchaser network, recognizing revenue for each transaction. We also generate revenue through our Better Plus marketplace of non-mortgage, homeownership products. Better Plus includes Better Real Estate (real estate agent services and our Better Cash Offer product), Better Settlement Services (title insurance and settlement services), and Better Cover (homeowners insurance). Generally, we have historically sold substantially all of our loans and related MSRs shortly after closing, which reduces our balance sheet risk and capital requirements. For the nine months ended September 30, 2023, 96% of our Total Loans were eligible for purchase by government-sponsored enterprises (“GSEs”), providing access to liquidity for our loans through market cycles. For the remaining loans, which are not GSE eligible, we typically enter into sale agreements with purchasers prior to lock in order to mitigate our balance sheet and capital risk. As of September 30, 2023, we had approximately $0.42 billion in mortgage funding capacity through our warehouse facilities. We are focused on improving our platform and plan to continue making investments to build our business and prepare for future growth. We believe that our success will depend on many factors, including our ability to drive customers to our platform, and convert them once they come to us, through both our direct-to-consumer (“D2C”) channel and our partner relationship (“B2B”) channel, achieve leverage on our operational expenses, execute on our strategy to fund more purchase loans and diversify our revenue by expanding and enhancing our Better Plus offerings. We plan to continue to invest in technology to improve customer experience and further drive down labor costs through automation, making our platform more efficient and scalable. For the three months ended September 30, 2023, our aggregate dollar amount of loans funded based on the principal amount of the loan at funding (the “Funded Loan Volume”) was $731.0 million compared to $1.1 billion in the three months ended September 30, 2022. Our revenue was $16.4 million in the three months ended September 30, 2023 compared to $28.7 million (including Better Cash Offer revenue of $9.7 million, representing gross purchase price of homes purchased under the program) in the three months ended September 30, 2022. Our net loss was $340.0 million in the 45 Table of Contents three months ended September 30, 2023, compared to net loss of $226.6 million in the three months ended September 30, 2022. For the nine months ended September 30, 2023, our Funded Loan Volume was $2.5 billion compared to $10.8 billion in the nine months ended September 30, 2022. Our revenue was $67.6 million (including Better Cash Offer revenue of $304 thousand) in the nine months ended September 30, 2023 compared to $376.4 million (including Better Cash Offer revenue of $226.1 million, representing gross purchase price of homes purchased under the program) in the nine months ended September 30, 2022. Our net loss was $475.4 million in the nine months ended September 30, 2023, compared to net loss of $625.9 million in the nine months ended September 30, 2022. The mortgage market experiences significant fluctuations, and refinance loans are particularly exposed to changing interest rate and macroeconomic environments. As interest rates rise, refinancing volumes generally decrease as fewer consumers are incentivized to refinance their loans, which has adversely affected our revenues and Funded Loan Volume. With regard to our purchase mortgage loan business, higher interest rates have also reduced demand for homeownership loans as homeownership becomes more expensive and existing homeowners may find moving less attractive or affordable. Our Business Model We generate revenue through the production and sale of loans and other product offerings through our platform. The revenue and mix of revenue as a percentage of total revenue attributable to our sale of loan production (Mortgage platform revenue, net) and Better Plus (Cash offer program revenue and Other platform revenue) for the three and nine months ended September 30, 2023 and 2022 is as follows: Three Months Ended September 30, 2023 2022 (Amounts in thousands, except percentage amounts) Amounts Percentages Amounts Percentages Revenues - Sale of loan production Mortgage platform revenue, net $ 14,207 86 % $ 11,087 39 % Revenues - Better Plus & net interest income (expense) Cash offer program revenue — — % 9,739 34 % Other platform revenue 1,333 8 % 5,688 20 % Net interest income (expense) 909 6 % 2,139 7 % Total net revenues $ 16,449 $ 28,653 Nine Months Ended September 30, 2023 2022 (Amounts in thousands, except percentage amounts) Amounts Percentages Amounts Percentages Revenues - Sale of loan production Mortgage platform revenue, net $ 54,927 81 % $ 106,586 28 % Revenues - Better Plus & net interest income (expense) Cash offer program revenue 304 — % 226,096 60 % Other platform revenue 9,355 14 % 35,623 9 % Net interest income (expense) 2,983 4 % 8,143 2 % Total net revenues $ 67,569 $ 376,448 As the table indicates, revenue from our loan production and Better Plus businesses has decreased substantially from the third quarter of 2022 to the third quarter of 2023. Our total net revenues for the three months ended September 30, 2023 decreased by 43% compared to the three months ended September 30, 2022. Our total net revenues excluding the Better Cash Offer program revenue for the three months ended September 30, 2023 decreased by 13% compared to the three months ended September 30, 2022. Our total net revenues for the nine months ended September 30, 2023 decreased by 82% compared to the nine months ended September 30, 2022. Our total net revenues excluding the Better Cash Offer program revenue for the nine months ended September 30, 2023 decreased by 55% compared to the nine months ended September 30, 2022. 46 Table of Contents Revenue from the Better Cash Offer program includes the purchase price of homes paid to us by customers using our Better Cash Offer program, while expenses from the Better Cash Offer program are comprised of the purchase price of the home, which in nearly all cases is the same as the purchase price paid by the customer to Better Home & Finance that is recognized as revenue. Home Finance Mortgage Platform Revenue, Net Model We produce a wide selection of mortgage loans and leverage our platform to quickly sell these loans and related MSRs to our loan purchaser network. We source our customers through two channels: our D2C channel and our B2B channel. Through our D2C channel, we generate mortgage platform revenue, net by selling loans and MSRs to our loan purchaser network, recognizing D2C revenue per loan. Through our B2B channel, we generate revenue from integrated relationships (in which our technology platform and team members power the end-to-end home finance experience on behalf of a third-party lender, through an integrated, co-branded customer experience) and advertising relationships (in which we drive customers to the Better Home & Finance-branded platform through advertising on a third party’s platform and offering incentives and discounts to those consumers). Through our advertising relationships, we generate mortgage platform revenue, net the same way we do in our D2C channel, by selling loans to our loan purchaser network. Through our integrated relationships, we generate a fixed fee per loan originated, which we recognize as revenue upon the funding of the loan by the partner. We may also purchase certain of the loans from our integrated relationship partner which we may subsequently sell to our loan purchaser network at our discretion. For loans subsequently sold to our loan purchaser network, the partner receives a portion of the sale proceeds. Although we aim to expand our B2B channel, as of September 30, 2023, our relationships are primarily comprised of our integrated relationship with Ally Bank (which is our only current integrated relationship) and our B2B customer acquisition channel advertising relationships, including our advertising relationship with American Express. For the three months ended September 30, 2023, the $14.2 million in mortgage platform revenue, net was comprised of $7.1 million net gain on sale of loans, $3.1 million revenue from integrated relationships, and $4.0 million gain from changes in fair value interest rate lock commitments and forward sale commitments. For the nine months ended September 30, 2023, the $54.9 million in mortgage platform revenue, net was comprised of $36.7 million revenue from net gain on sale of loans, $9.8 million revenue from integrated relationships, and $8.4 million gain from changes in fair value interest rate lock commitments and forward sale commitments. We define Gain on Sale Margin as mortgage platform revenue, net, as presented on our statements of operations and comprehensive loss, divided by Funded Loan Volume, which for 2023 and prior years was positive. The table below presents a summary view of the components of mortgage platform revenue, net . For the three months ended September 30, 2022, the $11.1 million in mortgage platform revenue, net was comprised of $10.1 million net loss on sale of loans, $2.3 million revenue from integrated relationships, and $18.9 million revenue from changes in fair value interest rate lock commitments and forward sale commitments. For the nine months ended September 30, 2022, the $106.6 million in mortgage platform revenue, net was comprised of $59.1 million net loss on sale of loans, $8.5 million loss from integrated relationships, and $174.2 million gain from changes in fair value interest rate lock commitments and forward sale commitments. Mortgage platform revenue, net consisted of the following: Three Months Ended Nine Months Ended September 30 (Amounts in thousands) 2023 2022 2023 2022 Net gain (loss) on sale of loans $ 7,120 $ (10,125) $ 36,689 $ (59,105) Integrated partnership revenue (loss) 3,067 2,265 9,797 (8,526) Changes in fair value of IRLCs and forward sale commitments 4,019 18,947 8,441 174,217 Mortgage platform revenue, net $ 14,207 $ 11,087 $ 54,927 $ 106,586 Home Finance Funding Sources In our normal course of business, we fund substantially all of our Funded Loan Volume on a short-term basis primarily through our warehouse lines of credit. Our borrowings are repaid with the proceeds we receive from the sale of our loans to our loan purchaser network, which includes GSEs. We had $424 million and $1.5 billion of available capacity under our warehouse facilities as of September 30, 2023 and December 31, 2022, respectively, which represents a decrease of 72% in 47 Table of Contents available capacity as of September 30, 2023 compared to December 31, 2022. Average days loans held for sale, other than Company-funded LHFS, for the three months ended September 30, 2023 and 2022 were approximately 21 and 21, respectively. Average days loans held for sale, other than Company-funded LHFS, for the nine months ended September 30, 2023 and 2022 were approximately 14 and 17 days, respectively. This is defined as the average days between funding and when the loan is sold to a loan purchaser. If a loan was subsequently required to be repurchased or if a loan is unable to be sold and is still on the our balance sheet this is not reflected in this metric. Better Plus Revenue Model Better Plus revenue consists of revenue from non-mortgage product offerings including real estate agent services and Better Cash Offer products (Better Real Estate), title insurance and settlement services (Better Settlement Services), and homeowners insurance (Better Cover). Through Better Settlement Services, we offer title insurance primarily as an agent and work with third-party providers that fulfill and underwrite the title insurance policies. Alongside our partners, we offer settlement services during the mortgage transaction, which include title policy preparation, title search, wire services, document preparation, and other mortgage settlement services. For the three months ended September 30, 2023 and 2022, we recognized revenue of $1.6 thousand and $130.4 thousand from settlement services, respectively. For the nine months ended September 30, 2023, we recognized revenue of $14.6 thousand and $4.2 million from settlement services, respectively. For the three months ended September 30, 2023 and 2022, we recognized revenue of $13.1 thousand and $219.7 thousand from title insurance, respectively. For the nine months ended September 30, 2023 and 2022, we recognized revenue of $44.5 thousand and $6,974.5 thousand from title insurance, respectively. Through Better Real Estate we offer real estate services through our national network of real estate agents (primarily third-party partner real estate agents), which is currently licensed in 27 states and the District of Columbia. Our technology matches prospective buyers with local agents, who help them identify houses, see houses, and navigate the purchase process. In addition to real estate services offered through our network of third-party partner real estate agents, Better Home & Finance historically has offered real estate services through in-house, Better Home & Finance-employed real estate agents. In the second quarter of 2023, we made the decision to wind down our in-house real estate agent business and focus on partnering with third-party real estate agents to provide our mortgage customers with real estate agent services. We hired the first agent in May 2020, reached 470 agents as of December 31, 2021 and have since scaled down our in-house agent headcount to approximately 80 agents as of December 31, 2022 and to zero as of September 30, 2023. We believe that offering real estate services through our network of third-party partner agents better aligns our costs with transaction volumes, particularly in market environments with decreased mortgage volumes, since our mortgage business serves as the primary lead source for Better Real Estate. In the partner agent model, we refer customers to a network of external agents that assist them with searching for a home for which we receive a cooperative brokerage fee. For the years ended December 31, 2022 and 2021, we recognized revenue from Better Real Estate of $23.1 million and $20.6 million, respectively. For the three months ended September 30, 2023 and 2022, we recognized revenue from Better Real Estate of $0.7 million and $4.0 million, respectively. For the nine months ended September 30, 2023, we recognized revenue from Better Real Estate of $6.2 million and $20.7 million, respectively. Through Better Cover we offer customers access to a range of homeowners insurance policy options through our digital marketplace of third-party insurance partners. We act as an agent to insurance carriers and receive an agency fee from the insurance carriers for policies sold and renewed. Revenue from Better Cover was immaterial for the three and nine months ended September 30, 2023 and 2022. In the fourth quarter of 2021, we began to offer the Better Cash Offer program that enables a prospective buyer to find a home, obtain pre-approval with the completion of initial mortgage due diligence, and make an all-cash offer, without a financing contingency. We believe the Better Cash Offer program attracts customers to our mortgage lending services and our Better Plus services by providing customers with a differentiated home purchase offering. Customers using our Better Cash Offer program may be viewed as more competitive by sellers because they are able to submit a cash bid and waive the financing contingency, enabling buyers to sell an existing home and close on their new home simultaneously. Revenue from the Better Cash Offer program includes the purchase price of homes paid to us by customers using our Better Cash Offer program, as well as any fee or rental revenue paid to us by customers using our Better Cash Offer program. Expenses from the Better Cash Offer program are comprised of the purchase price of the home, which in nearly all cases is the same as the purchase price paid by the customer to Better Home & Finance that is recognized as revenue. For the three months ended September 30, 2023 and 2022, we recognized revenue from the Better Cash Offer program in the amount of none 48 Table of Contents and $9.7 million. For the nine months ended September 30, 2023 and 2022, we recognized revenue from the Better Cash Offer program in the amount of $0.3 million and $226.1 million, respectively. Our Better Plus revenue decreased 91% in three months ended September 30, 2023 compared to the three months ended September 30, 2022, decreasing to $1.3 million in the three months ended September 30, 2023 (of which none was revenue from the Better Cash Offer program), from $15.4 million in the comparable period in 2022 (of which $9.7 million was revenue from the Better Cash Offer program). In the three months ended September 30, 2023 and 2022, Better Plus revenue comprised approximately 8% and 54% of our total net revenue, respectively. While Better Home & Finance maintains the functionality and would be able to serve inbound demand, we are not actively seeking Better Cash Offer customers. Our Better Plus revenue decreased 96% in nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, decreasing to $9.7 million in the nine months ended September 30, 2023 (of which $0.3 million was revenue from the Better Cash Offer program), from $261.7 million in the comparable period in 2022 (of which $226.1 million was revenue from the Better Cash Offer program). In the nine months ended September 30, 2023 and 2022, Better Plus revenue comprised approximately 14% and 70% of our total net revenue, respectively. Factors Affecting Our Performance Fluctuations in Interest Rates Changes in interest rates influence mortgage loan refinancing volumes and, to a relatively lesser degree, our mortgage loan home purchase volumes, balance sheet and results of operations. In a decreasing interest rate environment, mortgage loan refinance volumes typically increase. Conversely, in an increasing interest rate environment, mortgage loan refinancing volumes and home purchase volumes typically decline, with mortgage loan refinancing volumes being particularly sensitive to increasing interest rates as customers are no longer incentivized to refinance their current mortgage loans at lower interest rates. However, increasing interest rates are also indicative of overall economic growth and inflation that could generate demand for more cash-out refinancings, purchase mortgage loan transactions and home equity loans, which may partially offset the decline in rate and term refinancings resulting from a rising interest rate environment. In addition, the majority of our assets are subject to interest rate risk, including (i) loans held for sale (“LHFS”), which consist of mortgage loans held on our consolidated balance sheet for a short period of time after origination until we are able to sell them; (ii) interest rate lock commitments (“IRLCs”); (iii) MSRs, which may be held on our consolidated balance sheet for a period of time after origination until we are able to sell them; and (iv) forward sales contracts that we enter into to manage interest rate risk created by IRLCs and uncommitted LHFS. As interest rates increase, (i) our LHFS and IRLCs generally decrease in value, (ii) the corresponding hedging arrangements that hedge against interest rate risk typically increase in value and (iii) the value of our MSRs (to the extent retained) tend to increase due to a decline in mortgage loan prepayments. Conversely, as interest rates decline, (i) our LHFS and IRLCs generally increase in value, (ii) our hedging arrangements decrease in value and (iii) the value of our MSRs tend to decrease due to borrowers refinancing their mortgage loans. In order to mitigate direct exposure to interest rate risk between the time at which a borrower locks a loan and the sale of the loan into our purchaser network, we enter into IRLCs and other hedging agreements. For many years, including in particular the year ended December 31, 2020 and the first quarter of 2021, there was a prolonged period of historically low and declining interest rates. Beginning in April 2021, the United States began experiencing a significant rise in interest rates, which increased for a variety of reasons, including inflation concerns, increases to the federal funds rate and other monetary policy tightening, market capacity constraints and other factors, which continued in 2022 and 2023, resulting in a decrease in overall funding activities in the mortgage market generally. In 2022 and continuing in 2023, we experienced a substantial decline in Funded Loan Volume together with sizable compression in our Gain on Sale Margin relative to the levels in the first half of 2021, due in part to continued competitiveness among lenders given declining consumer demand resulting in an industry-wide mortgage supply-demand imbalance, offset by market volatility which positively impacted our Gain on Sale Margin in the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022. We expect that our results will continue to fluctuate based on a variety of factors, including interest rates, and that as we continue to seek to increase our business and our Funded Loan Volume, we may continue to incur net losses in the future. Market and Economic Environment The consumer lending market and the associated loan origination volumes for mortgage loans are influenced by general economic conditions, including the interest rate environment, unemployment rates, home price appreciation and consumer confidence. Purchase mortgage loan origination volumes are generally affected by a broad range of economic 49 Table of Contents factors, including interest rate fluctuations, the overall strength of the economy, unemployment rates and home prices, as well as seasonality, as home sales typically rise in the second and third quarters. However, in 2022, such housing market seasonality was outweighed by increases in interest rates and continued constrained housing supply. We continue to see diminished impact of seasonality on our business as a result of these and other factors. Mortgage loan refinancing volumes are primarily driven by fluctuations in mortgage loan interest rates. While borrower demand for consumer credit has typically remained strong in most economic environments, potential borrowers could defer seeking financing during periods with elevated or unstable interest rates or poor economic conditions. As a result, our revenues vary significantly from quarter to quarter, and recent increases to interest rates and inflationary macroeconomic conditions significantly affect our financial performance. Constrained Home Supply Ultimately Drives Further Construction and Purchase Volume The supply of homes available for purchase and the market prices for homes on offer are significant drivers of purchase mortgage volume. We believe that constrained home supply, including as a result of factors arising from the COVID-19 pandemic, has contributed to constrained new home sales and purchase mortgage volume. Concurrently, constrained home supply, including as a result of rising interest rates , and substantial demand has led to higher home prices, which in turn slows both growth of new home sales and purchase mortgage volume. In the longer term, however, we believe that such imbalances of supply and demand could drive greater homebuilding to bring additional home supply into the market and create additional purchase mortgage volume going forward. Continued Growth and Acceptance of Digital Loan Solutions Our ability to attract new customers depends, in large part, on our ability to provide a seamless and superior customer experience, maintain competitive pricing and meet and exceed the expectations of our customers. Consumers are increasingly willing to execute large and complex purchases through digital platforms. We believe this trend will also impact consumer preferences in loans, particularly as homeownership rates among Millennials and Generation Z rise. Our platform provides a seamless, convenient customer experience that provides us with a significant competitive advantage over legacy platforms. We also believe legacy financial institutions, real estate brokers, insurance companies, title companies and others in the homeownership ecosystem are increasingly looking for third-party technology solutions that will allow them to compete with digital-native companies and provide their customers with a better experience less expensively than they can build themselves. As a result, we expect the demand for loan technology solutions will continue to grow and support our ecosystem growth across B2B partners, market participants and loan purchaser networks. Expanding our Technological Innovation Our proprietary technology is built to optimize our customers’ experiences, increase speed, decrease cost, and enhance loan production quality. Through our investment in proprietary technology, we are automating and streamlining tasks within the origination process for our consumers, employees and partners. Our customized user interfaces replace paper applications and human interaction, allowing our customers and partners to quickly and efficiently identify, price, apply for and execute mortgage loans. We expect to continue to invest in developing technology, tools and features that further automate the loan manufacturing process, reducing our manufacturing and customer acquisition costs and improving our customer experience. Expanding Homeownership Product Offerings We expect to continue to add new types of Home Finance mortgage loans and integrated Better Plus marketplace offerings to our platform over time, providing our customers with a one-stop shop for all of their homeownership needs. We have invested significantly and expect to continue to invest in our proprietary technology, which is designed to allow us to seamlessly add new offerings, partners and marketplace participants without incurring significant additional marketing and advertising and product development cost, which allows for lower costs for our customers. Ability to Acquire New Customers and Scale Customer Acquisitions Our ability to attract new customers and scale customer acquisitions depends, in large part, on our ability to continue to provide seamless and superior customer experiences and competitive pricing. We seek to reach new customers efficiently 50 Table of Contents and at scale across demographics and to provide a high-touch personalized experience across digital interactions throughout the customer lifecycle. To the extent that our traditional approach to customer acquisitions is not successful in achieving the levels of growth that we seek, including in particular in an environment of rising interest rates or constrained housing capacity, or that we do not remain near the top of lead aggregator sites, we may be required to devote additional financial resources and personnel to our sales and marketing efforts, which would increase the cost base for our services. Key Business Metrics In addition to the measures presented in our consolidated financial statements, we use the following key business metrics to help us evaluate our business, identify trends affecting our business, formulate plans and make strategic decisions. Our key business metrics enable us to monitor our ability to manage our business compared to the broader mortgage origination market, as well as monitor relative performance across key purchase and refinance verticals. Key measures that we use in assessing our business include the following ($ in millions, except percentage data or as otherwise noted): Key Business Metric Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Home Finance Funded Loan Volume $ 731 $ 1,136 $ 2,488 $ 10,817 Refinance Loan Volume $ 47 $ 148 $ 178 $ 5,089 Purchase Loan Volume $ 656 $ 989 $ 2,268 $ 5,728 HELOC Volume $ 28 $ — $ 41 $ — D2C Loan Volume $ 384 $ 490 $ 1,392 $ 6,625 B2B Loan Volume $ 346 $ 647 $ 1,095 $ 4,191 Total Loans (number of loans) 2,067 3,045 6,936 28,286 Average Loan Amount ($ value, not millions) $ 353,547 $ 373,184 $ 358,660 $ 382,399 Gain on Sale Margin 1.94 % 0.98 % 2.21 % 0.99 % Total Market Share 0.2 % 0.2 % 0.2 % 0.6 % Better Plus Better Real Estate Transaction Volume $ 92 $ 257 $ 442 $ 1,546 Insurance Coverage Written $ 214 $ 899 $ 1,415 $ 6,301 Home Finance Funded Loan Volume represents the aggregate dollar amount of all loans funded in a given period based on the principal amount of the loan at funding. Our Funded Loan Volume of $731 million in the three months ended September 30, 2023 decreased by approximately 36% from $1,136 million in the three months ended September 30, 2022. Our Funded Loan Volume decreased by approximately 77% year-over-year to $2.5 billion in the nine months ended September 30, 2023 from $11 billion in the nine months ended September 30, 2022. Beginning in the third quarter of 2023, we also include HELOC loans in our Funded Loan Volume. For the three months ended September 30, 2023, purchase and refinance loans comprised $703 million and HELOC loans comprised $28 million of Funded Loan Volume. And for the nine months ended September 30, 2023 purchase and refinance loans comprised $2,447 million while HELOC loans comprised $41 million of Funded Loan Volume. 51 Table of Contents The following table shows the percentage of our Funded Loan Volume represented by the states of California, Texas, and Florida. No other state represented more than 8% of our Funded Loan Volume for the periods presented. Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 California 9 % 8 % 9 % 15 % Texas 9 % 10 % 12 % 11 % Florida 9 % 9 % 11 % 10 % Refinance Loan Volume represents the aggregate dollar amount of refinance loans funded in a given period based on the principal amount of the loan at refinancing date. Our Refinance Loan Volume of $47 million in the three months ended September 30, 2023 decreased by approximately 68% from $148 million in the three months ended September 30, 2022. Our Refinance Loan Volume decreased by approximately 97% year-over-year to $178 million in the nine months ended September 30, 2023 from $5.1 billion in the nine months ended September 30, 2022. Purchase Loan Volume represents the aggregate dollar amount of purchase loans funded in a given period based on the principal amount of the loan at purchase date. Our Purchase Loan Volume of $656 million in the three months ended September 30, 2023 decreased by approximately 34% from $989 million in the three months ended September 30, 2022. Our Purchase Loan Volume decreased by approximately 60% year-over-year to $2,268 million in the nine months ended September 30, 2023 from $5,728 million in the nine months ended September 30, 2022. HELOC Loan Volume represents the aggregate dollar amount of HELOC loans funded in a given period based on the principal amount of the loan at funding. The HELOC product was launched during the first half of 2023 and reached a material volume in the three months ended September 30, 2023. Our HELOC Loan volume increased to $28 million in the three months ended September 30, 2023 from zero in the three months ended September 30, 2022. Our HELOC Loan volume increased to $41 million in the nine months ended September 30, 2023 from zero in the nine months ended September 30, 2022. D2C Loan Volume represents the aggregate dollar amount of loans funded in a given period based on the principal amount of the loan at funding that have been generated from direct interactions with customers using all marketing channels other than our B2B partner relationships. Our D2C Loan Volume of $384 million in the three months ended September 30, 2023 decreased by approximately 22% from $490 million in the three months ended September 30, 2022. Our D2C Loan Volume decreased by approximately 79% year-over-year to $1,392 million in the nine months ended September 30, 2023 from $6,625 million in the nine months ended September 30, 2022. B2B Loan Volume represents the aggregate dollar amount of loans funded in a given period based on the principal amount of the loan at funding that have been generated through one of our B2B partner relationships. Our B2B Loan Volume of $346 million in the three months ended September 30, 2023 decreased by approximately 47% from $647 million in the three months ended September 30, 2022 and decreased by approximately 74% year-over-year to $1,095 million in the nine months ended September 30, 2023 from $4,191 million in the nine months ended September 30, 2022. Total Loans represents the total number of loans funded in a given period, including purchase loans, refinance loans and HELOC loans. Our Total Loans of 2,067 in the three months ended September 30, 2023 decreased by approximately 32% from 3,045 in the three months ended September 30, 2022. Our Total Loans decreased by approximately 75% year-over-year to 6,936 during the nine months ended September 30, 2023 from 28,286 in the nine months ended September 30, 2022. Purchase and refinance loans comprised 1,842 of the Total Loans in the three months ended September 30, 2023 and HELOC loans comprised 225. Purchase and refinance loans made up 6,610 of the funded loans in the nine months ended September 30, 2023 and HELOC loans comprised 326. Average days loans held for sale for the three months ended September 30, 2023 and 2022, were approximately 21 and 14 , respectively. Average days loans held for sale for the nine months ended September 30, 2023 and 2022, were approximately 21 and 17 days, respectively. This is defined as the average days between funding and sale for loans funded during each period. As of each such reporting date, we had an immaterial amount of loans either 90 days past due or non-performing, as Better Home & Finance generally aims to sell loans shortly after production. 52 Table of Contents Average Loan Amount represents Total Funded Loan Volume divided by number of loans funded in a period. Our Average Loan Amount decreased by approximately 5% to $353,547 in the three months ended September 30, 2023 from $373,184 in the three months ended September 30, 2022 and decreased approximately 6% year-over-year to $358,660 during the nine months ended September 30, 2023 from $382,399 in the nine months ended September 30, 2022. In general, HELOC loans have lower average loan amounts than purchase or refinance loans, and therefore Average Loan Amount has decreased as a result of HELOC growth in 2023. Gain on Sale Margin represents mortgage platform revenue, net, as presented on our statements of operations and comprehensive income (loss), divided by Funded Loan Volume. We do not manage our business to optimize for Gain on Sale specifically in respect of Purchase Loan offerings, Refinance Loan offerings or HELOC offerings and do not observe material differences in Gain on Sale between such products over time. Gain on Sale Margin increased by approximately 99% to 1.94% during the three months ended September 30, 2023 from 0.98% year-over-year from the three months ended September 30, 2022 . Gain on Sale Margin increased by 124% to 2.21% for the nine months ended September 30, 2023 from 0.99% for the nine months ended September 30, 2022. We saw an increase in our Gain on Sale Margin for three months ended September 30, 2023 compared to three months ended September 30, 2022, as well as for the nine months ended September 30, 2023 compared to nine months ended September 30, 2022 as a result of increasing our pricing to drive improved profitability, as well as market volatility which positively impacted our mortgage platform revenue, net. Total Market Share represents Funded Loan Volume in a period divided by total value of loans funded in the industry for the sam e period, as presented by FNMA. Our Total Market Share of 0.2% during the three months ended September 30, 2023 remain the same as 0.2% in the three months ended September 30, 2022. Our Total Market Share declined by approximately 67% year-over-year to 0.2% during the nine months ended September 30, 2023 from 0.6% in the nine months ended September 30, 2022 . The mortgage market remains competitive among lenders, given the interest rate environment and we continue to focus on originating the most profitable business available to us. As a result, we have pulled back on our most unprofitable channels, resulting in further declines to market share. Better Plus Better Real Estate Transaction Volume represents the aggregate dollar amount of real estate volume transacted in a given period across both in-house agents and third-party network agents. Insurance Coverage Written represents the aggregate dollar amount of insurance liability coverage provided to customers on behalf of insurance carrier partners across all insurance products on Better Home & Finance’s marketplace, specifically title and homeowners insurance offered through Better Settlement Services and Better Cover. This includes the value of the loan for lender’s title insurance and dwelling coverage for homeowners insurance. Description of Certain Components of Our Financial Data Components of Revenue Our sources of revenue include mortgage platform revenue, net, cash offer program revenue, other platform revenue, and net interest income (comprised of mortgage interest income and expense on warehouse lines of credit), net. Home Finance (Mortgage Platform Revenue, Net) Mortgage platform revenue, net, includes revenue generated from our mortgage production process. The components of mortgage platform revenue, net, are as follows: i. Net gain (loss) on sale of loans-This represents the premium we receive in excess of the loan principal amount and certain fees charged by loan purchasers upon sale of loans into the secondary market. Net gain (loss) on sale of loans includes unrealized changes in the fair value of LHFS, which are recognized on a loan by loan basis as part of current period earnings until the loan is sold on the secondary market. The fair value of LHFS is measured based on observable market data. Also included within net gain on sale (loss) of loans is the day one recognition of the fair value of MSRs and any subsequent changes in the measurement of the fair value of the MSRs for loans sold servicing retained, including any gain or loss on subsequent sales of MSRs. We do not manage our business to optimize for Gain on Sale for either our Purchase Loan or Refinance Loan offerings specifically and do not observe material differences in Gain on Sale between such products over time. 53 Table of Contents ii. Integrated relationship revenue (loss)-Includes fees that we receive for originating loans on behalf of an integrated relationship partner, which are recognized as revenue (loss) upon the integrated relationship partner’s funding of the loan. Some of the loans originated on behalf of the integrated relationship partner are purchased by us. Subsequent changes in the fair value of loans purchased by us are included as part of current period earnings. These loans may be sold in the secondary market at our discretion for which any gain on sale is included in this account. For loans sold on the secondary market, the integrated relationship partner will receive a portion of the execution proceeds. A portion of the execution proceeds that is to be allocated to the integrated relationship partner is accrued as a reduction of integrated relationship revenue (loss) when the loan is initially purchased from the integrated relationship partner. iii. Changes in fair value of IRLCs and forward sale commitments-IRLCs include the fair value upon issuance with subsequent changes in the fair value recorded in each reporting period until the loan is sold on the secondary market. Fair value of forward commitments hedging IRLCs and LHFS are measured based on quoted prices for similar assets. Since our mortgage platform revenue, net is driven primarily by the number of funded loans and our net gain on sale from each Funded Loan, fluctuations in interest rates significantly affect our revenues. As described above, in an increasing interest rate environment, mortgage loan refinance volumes and home purchase volumes typically decline, with refinance volumes being particularly sensitive to increasing interest rates. Furthermore, fluctuations in interest rates that affect the price at which we are able to sell our mortgage loan production in the secondary market also could affect our revenues and may even result in significant losses. We mitigate our risk of loss associated with changes in interest rates by entering into forward sale commitments and IRLCs. As a result, our revenue from net gain on sale of loans may vary significantly from quarter to quarter. Better Cash Offer Program Our product offerings include the Better Cash Offer program where we work with a home buyer (the “Buyer”) to identify and purchase a home directly from a property Seller. We will then subsequently sell the home to the Buyer. The Buyer may lease the home from us while the Buyer and Better Home & Finance go through the customary closing process to transfer ownership of the home to the Buyer. Arrangements where the Buyer leases the home from us are accounted for under ASC 842 while arrangements where the Buyer does not lease the home are accounted for under ASC 606. The Buyer does not directly or indirectly contract with the seller. For arrangements under the Better Cash Offer program that do not involve a lease, upon closing on the sale of the home from the Seller to us, we hold legal title to the home. We are responsible for any obligations related to the home while we hold title and are the legal owner and as such we are considered the principal in the transaction. We hold in inventory any homes where the Buyer does not subsequently purchase from us as well as homes held while we are waiting to transfer the home to the Buyer. We recognize revenue at the time of the closing of the home sale when title to and possession of the home are transferred to the Buyer. The amount of revenue recognized for each home sale is equal to the full sales price of the home. The contracts with the Buyers contain a single performance obligation that is satisfied upon the closing of the transaction and is typically completed in one to ninety days after the commencement of the transaction. We do not offer warranties for sold homes, and there are no continuing performance obligations following the transaction close date. Also included in Better Cash Offer program revenue is revenue from transactions where we lease the home to the Buyer until the title is transferred to the Buyer which is accounted for under ASC 842 as a sales-type lease. Revenue and expenses for sales-type leases under ASC 842 are recognized at the commencement of the lease. Revenue is recognized for the lease payments, which includes the sales price of the home and the related expenses include the cost of the home as well as transaction closing costs. For each Better Cash Offer transaction, the vast majority of revenue is comprised of the purchase price of the home paid by the customer to Better Home & Finance, and the vast majority of expense is comprised of the purchase price of the home paid by Better Home & Finance to the seller, which in nearly all cases is the same as the purchase price of the home paid by the customer to Better Home & Finance that is recognized as revenue. Relative to the purchase price of the home, leasing and fee revenue is immaterial. Although we believe this product will enhance the competitiveness of our platform in a suitable market, we are not actively seeking Better Cash Offer customers, although we maintain the functionality and would be able to serve inbound demand. 54 Table of Contents Better Plus (Other Platform Revenue) We generate other platform revenue through our Better Plus offerings, which includes Better Settlement Services (title insurance and settlement services), Better Real Estate (real estate agent services), and Better Cover (homeowners insurance). Our other platform revenue primarily consists of Better Settlement Services (title insurance and settlement services). For title insurance, we generate revenues from agent fees on title policies written by third parties and sold to our customers in loan transactions. We recognize revenues from agent fees on title policies upon the completion of the performance obligation, which is when the loan transaction closes. As an agent, we do not control the ability to direct the fulfillment of the service, are not primarily responsible for fulfilling the performance of the service, and do not assume the risk in a claim against the policy. For settlement services, we generate revenues from fees on services, such as policy preparation, title search, wire, and other services, required to close a loan, which were provided by third parties through our platform. We recognized revenues from fees on settlement services upon the completion of the performance obligation, which was when the loan transaction closes. For settlement services, we used a third party to fulfill these services, but we were considered the principal in the transaction as we direct the fulfillment of the services and ultimately bear the risk of nonperformance. As we were considered the principal, revenues from settlement services were presented on a gross basis. In December 2022, the Company terminated the service with the third party. And in March 2023, we entered into a work share agreement and a revenue share agreement with another third party to fulfill the settlement service and we are no longer considered the principal as we do not control the ability to direct the fulfillment of the service, are not primarily responsible for fulfilling the performance of the service, and do not assume the risk in a claim against the service. Our performance obligations for title insurance and settlement services are typically completed 40 to 60 days after the commencement of the loan origination process and are recognized in revenue upon the closing of the loan transaction. The remaining amount of other platform revenue consists of our Better Real Estate (real estate agent services) and Better Cover (homeowners insurance) offerings. For Better Real Estate, we generate revenues from fees related to real estate agent services, including cooperative brokerage fees from our network of third-party real estate agents, as well as brokerage fees earned when we provide our in-house real estate agents to assist our customers in the purchase or sale of a home. For Better Cover, we generate revenues from agent fees on homeowners insurance policies obtained by our customers through our marketplace of third-party insurance carriers. Net Interest Income (Expense) Net interest income (expense) includes interest income from LHFS calculated based on the note rate of the respective loan as well as interest expense on warehouse lines of credit. Components of Our Operating Expenses Our expenses consist of mortgage platform expenses, cash offer program expenses, other platform expenses, general and administrative expenses, marketing and advertising expenses, and technology and product development expenses. Mortgage Platform Expenses Mortgage platform expenses consist primarily of origination expenses, appraisal fees, processing expenses, underwriting, closing fees, servicing costs, and sales and operations personnel-related expenses. Sales and operations personnel-related expenses include compensation and related benefits, stock-based compensation, and allocated occupancy expenses and related overhead based on headcount. These expenses are expensed as incurred with the exception of stock-based compensation which is recognized over the requisite service period. Our mortgage platform expenses are primarily driven by our origination volume, principally the headcount required to produce funded loans. We expect that mortgage platform expenses will grow if our origination volume grows and decline if our origination volume declines. 55 Table of Contents Cash Offer Program Expenses Cash offer program expenses include the full cost of the home, including transaction closing costs and costs for maintaining the home before the title is transferred to the buyer. For each Better Cash Offer transaction, the vast majority of expenses are comprised of the purchase price of the home paid by Better Home & Finance to the seller, which in nearly all cases, is the same as the purchase price paid by the Buyer to Better Home & Finance that is recognized as revenue. Relative to the purchase price of the home, closing costs and other maintenance costs are immaterial. Cash offer program expenses are recognized when title is transferred to the Buyer for arrangements recognized under ASC 606 and when the lease commences for arrangements recognized under ASC 842. Other Platform Expenses Other platform expenses relate to other non-mortgage homeownership activities, including settlement service expenses, lead generation, and personnel related costs. Settlement service expenses consist of fees for transactional services performed by third-party providers for borrowers while lead generation expenses consist of fees for services related to real estate agents. Personnel related expenses include compensation and related benefits, stock-based compensation, and allocated occupancy expenses and related overhead based on headcount. Other platform expenses are expensed as incurred with the exception of stock-based compensation, which is recognized over the requisite service period. We expect other platform expenses to increase if we grow our Better Plus products and services and decline if business from Better Plus products and services declines. Other platform expense includes personnel expense associated with our in-house real estate agent business. In the second quarter of 2023, we made the decision to wind down our in-house real estate agent business and focus on partnering with third-party real estate agents to provide our mortgage customers with real estate agent services. General and Administrative Expenses General and administrative expenses include personnel-related expenses, including stock-based compensation and benefits for executive, finance, accounting, legal, and other administrative personnel. In addition, general and administrative expenses include external legal, tax and accounting services, and allocated occupancy expenses and related overhead based on headcount. General and administrative expenses are generally expensed as incurred, with the exception of stock-based compensation, which is recognized over the requisite service period. We expect general and administrative expenses to increase in absolute terms as a result of our transition to being a public company. However, we expect general and administrative expenses to change at a slower rate than the changes in origination volumes. As we reduced headcount drastically in previous years and have continued headcount reductions in 2023, and expect to continue to do so, we expect employee related costs to decrease as a smaller administrative function is needed to support an organization with a much lower headcount but we expect this to be offset by increased costs related to legal and professional services with our transition to a public company to support the different regulatory and legal matters we are subject to. Marketing and Advertising Expenses Marketing and advertising expenses consist of customer acquisition expenses, brand costs, paid marketing and personnel-related costs for brand teams. For customer acquisition expenses, we primarily generate loan origination leads through third-party financial service websites for which we incur “pay-per-click” expenses. A majority of our marketing expenses are incurred from leads that we purchase from these third-party financial service websites. Personnel-related expenses include compensation and related benefits, including stock-based compensation, and allocated occupancy expenses and related overhead based on headcount. Marketing expenses are generally expensed as incurred with the exception of stock-based compensation, which is recognized over the requisite service period. Although we are working towards increasing organic traffic and demand from B2B partners to drive a growing portion of our loan origination volume, we also expect that advertising expenses will continue to be important to drive loan origination volume and revenue growth, and therefore we expect that these expenses will increase if origination volume increases, and decrease if origination volume decreases. Marketing expenses may also vary based on the costs of leads that we purchase from digital lead aggregators, which we expect will increase in more challenging mortgage lending markets. Technology and Product Development Expenses Technology and product development expenses consist of employee compensation, amortization of capitalized internal-use software costs related to our technology platform and expenses related to vendors engaged in product 56 Table of Contents management, design, development and testing of our websites and products. Employee compensation consists of stock-based compensation and benefits related to our technology team, product and creative team and engineering team. Technology and product development expenses also include allocated occupancy expenses and related overhead based on headcount. Technology and product development expenses are generally expensed as incurred with the exception of stock-based compensation, which is recognized over the requisite service period. We expect technology and product development expenses to increase if we choose to continue to develop our platform and add new features and functionalities, including additional homeownership products and services. Stock-based Compensation We measure and record the expense related to stock-based compensation awards based on the fair value of those awards as determined on the date of grant. We recognize stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period, and use the straight-line method to recognize stock-based compensation. For stock-based compensation with performance conditions, we record stock-based compensation expenses when it is deemed probable that the performance condition will be met. We use the Black-Scholes-Merton (“Black-Scholes”) option-pricing model to determine the fair value of stock options. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based compensation awards, including the option’s expected term and the price volatility of the underlying stock. We calculate the fair value of options granted using the following assumptions: i. Expected volatility—We estimated volatility for option grants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the options’ expected term. ii. Expected term—The expected term of our options represents the period that the stock-based awards are expected to be outstanding. We have elected to use the midpoint of the stock options vesting term and contractual expiration period to compute the expected term, as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. iii. Risk-free interest rate—The risk-free interest rate is based on the implied yield currently available on US Treasury zero-coupon issues with a term that is equal to the options’ expected term at the grant date. iv. Dividend yield—We have not declared or paid dividends to date and do not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero. Forfeitures of stock options are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from initial estimates. We record compensation expenses related to stock options issued to non-employees, including consultants, based on the fair value of the stock options on the grant date over the service performance period as the stock options vest. We expect stock-based compensation to increase in the near term as we have recognized an increase in expense due to employee awards that contain both time vested criteria and the close of the Business Combination in order to vest. Public Company Expenses We expect our expenses, including accounting, legal and personnel-related expenses and directors’ and officers’ insurance expenses, to increase as we establish more comprehensive compliance and governance functions, remediate any material weaknesses, significant deficiencies and deficiencies and maintain effective internal controls over financial reporting and prepare and distribute periodic reports as required by the rules and regulations of the SEC. As a result, our historical results of operations may not be indicative of our results of operations in future periods. 57 Table of Contents Results of Operations The following table sets forth certain consolidated financial data for each of the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands, except per share amounts) 2023 2022 2023 2022 Revenues: Mortgage platform revenue, net (1) $ 14,207 $ 11,087 $ 54,927 $ 106,586 Cash offer program revenue — 9,739 304 226,096 Other platform revenue 1,333 5,688 9,355 35,623 Net interest income (expense): — Interest income 3,667 4,977 12,527 22,918 Warehouse interest expense (2,758) (2,838) (9,544) (14,775) Net interest income (expense) 909 2,139 2,983 8,143 Total net revenues 16,449 28,653 67,569 376,448 Expenses: Mortgage platform expenses (2)(3) 19,166 55,545 70,809 292,915 Cash offer program expenses — 9,813 398 227,509 Other platform expenses (2)(3) 3,161 8,951 11,787 55,250 General and administrative expenses (2)(3) 59,189 46,499 113,392 161,293 Marketing and advertising expenses (2)(3) 5,128 9,948 17,122 59,801 Technology and product development expenses (2)(3) 20,732 29,414 66,639 100,354 Restructuring and impairment expenses (2)(3) 679 45,781 11,798 212,490 Total expenses 108,055 205,951 291,945 1,109,612 Loss from operations (91,606) (177,298) (224,376) (733,164) Interest and other expense, net: Other income (expense) 977 746 5,187 861 Interest and amortization on non-funding debt (11,939) (3,304) (18,237) (10,077) Interest on Bridge Notes - (80,099) — (213,513) Change in fair value of warrants 861 — 861 — Change in fair value of convertible preferred stock warrants — 4,202 266 24,613 Change in fair value of bifurcated derivative (237,667) 29,089 (236,603) 306,866 Total interest and other expenses, net (247,768) (49,366) (248,526) 108,750 Loss before income tax expense (339,374) (226,664) (472,902) (624,414) Income tax expense / (benefit) 659 (52) 2,539 1,450 Net loss $ (340,033) $ (226,612) $ (475,441) $ (625,864) Earnings (loss) per share attributable to common stockholders (Basic) $ (0.68) $ (0.77) $ (1.30) $ (2.16) Earnings (loss) per share attributable to common stockholders (Diluted) $ (0.68) $ (0.77) $ (1.30) $ (2.16) 58 Table of Contents __________________ (1) The components of mortgage platform revenue, net for the periods presented were as follows: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2023 2022 2023 2022 Net gain (loss) on sale of loans $ 7,120 $ (10,125) $ 36,689 $ (59,105) Integrated relationship revenue (loss) 3,067 2,265 9,797 (8,526) Changes in fair value of IRLCs and forward sale commitments 4,019 18,947 8,441 174,217 Total mortgage platform revenue, net $ 14,207 $ 11,087 $ 54,927 $ 106,586 __________________ (2) Includes stock-based compensation expense as follows: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2023 2022 2023 2022 Mortgage platform expenses $ 4,176 $ 1,491 $ 5,905 $ 4,941 Other platform expenses 1,493 426 1,837 675 General and administrative expenses 16,828 6,862 25,123 20,479 Marketing and advertising expenses 146 369 216 709 Technology and product development 2,401 1,825 4,317 4,217 Total stock-based compensation expense $ 25,044 $ 10,973 $ 37,398 $ 31,021 __________________ (3) Includes depreciation and amortization expense as follows: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2023 2022 2023 2022 Mortgage platform expenses $ 684 $ 1,935 $ 2,960 $ 6,404 Other platform expenses 26 47 77 289 General and administrative expenses 453 1,022 1,569 3,116 Marketing and advertising expenses 20 45 59 133 Technology and product development 9,308 9,120 28,126 26,904 Total depreciation and amortization $ 10,491 $ 12,168 $ 32,791 $ 36,845 Three and Nine Months Ended September 30, 2023 as Compared to Three and Nine Months Ended September 30, 2022 Revenues The components of our revenues for the period were: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) Revenues: Mortgage platform revenue, net 14,207 11,087 54,927 106,586 Cash offer program revenue — 9,739 304 226,096 Other platform revenue 1,333 5,688 9,355 35,623 Net interest income (expense): Interest income 3,667 4,977 12,527 22,918 Warehouse interest expense (2,758) (2,838) (9,544) (14,775) Net interest income 909 2,139 2,983 8,143 Total net revenues $ 16,449 $ 28,653 $ 67,569 $ 376,448 59 Table of Contents Mortgage Platform Revenue, Net Mortgage platform revenue, net increased $3.1 million or 28% to $14.2 million for the three months ended September 30, 2023 compared to $11.1 million for the three months ended September 30, 2022. The increase in mortgage platform revenue, net was largely driven by the removal of the negative revenue impact that resulted from the decline in fair value of loans held for sale during the period ended September 30, 2022. In certain periods, such as the three months ended September 30, 2022, the negative revenue impact from the decline in fair value of loans held for sale due to increasing interest rates resulted in a net loss on sale of loans, which was offset by the gain resulting from our hedging activities, or gain from changes in fair value interest rate lock commitments and forward sale commitments. The impacts of hedging LHFS are included within changes in fair value of IRLCs and forward sale commitments within total mortgage platform revenue, net. The combined impact of the decline in fair value of loans and gains resulting from our hedging resulted in overall lower revenue in the period ending September 30, 2022 compared to the period ended September 30, 2023 because interest rates were no longer increasing as rapidly, thereby resulting in overall higher revenue in the period ending September 30, 2023. This increase in revenue was offset by a decrease in Funded Loan Volume in the period ending September 30, 2023 compared to the period ending September 30, 2022. During the three months ended September 30, 2023, we experienced market volatility which positively impacted our mortgage platform revenue, net compared to the three months ended September 30, 2022, resulting in our Gain on Sale Margin increasing from 0.98% in the three months ended September 30, 2022 to 1.94% in the three months ended September 30, 2023. Further, net gain (loss) on sale of loans increased $17.2 million, or 170%, to a gain of $7.1 million for the three months ended September 30, 2023 compared to a loss of $10.1 million for the three months ended September 30, 2022. Mortgage platform revenue, net decreased $51.7 million or 48% to $54.9 million for the nine months ended September 30, 2023 compared to $106.6 million for the nine months ended September 30, 2022. The decrease in mortgage platform revenue, net was largely driven by the reduction of Funded Loan Volume. As a result of our continued focus on originating the most profitable business available to us, as well as the removal of some of the fluctuations in interest rates and other market factors that led to negative revenue impacts from the decline in fair value of loans held for sale during the nine months ended September 30, 2022 , mortgage platform revenue, net decreased less on a percentage basis than Funded Loan Volume. During the nine months ended September 30, 2023, we experienced market volatility which positively impacted our mortgage platform revenue, net compared to the nine months ended September 30, 2022, resulting in our Gain on Sale Margin increasing from 0.99% in the nine months ended September 30, 2022 to 2.21% in the nine months ended September 30, 2023. Further, net gain (loss) on sale of loans increased $95.8 million, or 162%, to a gain of $36.7 million for the nine months ended September 30, 2023 compared to a loss of $59.1 million for the nine months ended September 30, 2022. Integrated relationship revenue increased $0.8 million, or 35% to a gain of $3.1 million for the three months ended September 30, 2023, compared to gain of $2.3 million for the three months ended September 30, 2022. The increase in integrated relationship revenue was primarily driven by the increase in the fair value of loans purchased from the integrated relationship partner due to fluctuations in interest rates and other market factors. The increase in revenue was offset by a decrease in origination fees received for originating loans on behalf of the integrated relationship partner driven by decreased loan origination volume. Integrated relationship revenue increased $18.3 million, or 215% to a gain of $9.8 million for the nine months ended September 30, 2023, compared to loss of $8.5 million for the nine months ended September 30, 2022. The increase in integrated relationship revenue was primarily driven by the increase in the fair value of loans purchased from the integrated relationship partner due to fluctuations in interest rates and other market factors. In certain periods, such as the nine months ended September 30, 2022, the negative revenue impact from the decline in fair value of loans held for sale due to increasing interest rates resulted in a loss from integrated relationships, which were offset by the gain resulting from our hedging activities, or gain from changes in fair value interest rate lock commitments and forward sale commitments. The impacts of hedging LHFS purchased from the integrated relationship partner are included within changes in fair value of IRLCs and forward sale commitments within mortgage platform revenue, net. The increase in revenue was offset by a decrease in origination fees received for originating loans on behalf of the integrated relationship partner driven by decreased loan origination volume. Changes in the fair value of IRLCs and forward sale commitments decreased $14.9 million, or 79%, to a gain of $4.0 million for the three months ended September 30, 2023, compared to a gain of $18.9 million for the three months ended September 30, 2022 and decreased $165.8 million, or 95%, to a gain of $8.4 million for the nine months ended September 30, 2023, compared to a gain of $174.2 million for the nine months ended September 30, 2022. We record the fair value of 60 Table of Contents our IRLCs, net of any related changes in the recorded fair value of our forward sale commitments. The decrease in the fair value of IRLCs and forward sale commitments were primarily driven by a reduction in Funded Loan Volume as hedging a smaller portfolio of loans results in a decrease to changes in the fair value of IRLCs and forward sale commitments. Additionally, increased market volatility in the three and nine months ended September 30, 2022 resulted in higher gain from our hedging activities to offset a net loss on sale of loans and loss from integrated relationships during this period. We did not see this same market dynamics in the three and nine months ended September 30, 2023, as we saw a positive net gain on sale of loans and gain from integrated relationships. The changes in fair value of IRLCs and forward sale commitments were also driven by increased average 30-year mortgage rates during the three and nine months ended September 30, 2023, compared to the three and nine months ended September 30, 2022. Generally, as interest rates increase, the fair value of our IRLCs decrease and the fair value of our forward sale commitments increases. Cash Offer Program Revenue Cash offer program decreased $9.7 million or 100%, to none for the three months ended September 30, 2023 compared to $9.7 million for the three months ended September 30, 2022. We began offering the Better Cash Offer program in the fourth quarter of 2021 and grew the offering significantly in the first half of 2022. Starting in the second half of 2022, revenue from the Better Cash Offer program scaled back significantly due to market conditions which softened significantly compared to the first half of 2022. By the start of 2023, revenue and expenses from the Better Cash Offer program were immaterial. Although we believe this product will enhance the competitiveness of our platform in a suitable market, we are not actively seeking Better Cash Offer customers, although we maintain the functionality and would be able to serve inbound demand. For the three months ended September 30, 2023 and 2022, we completed 0 and 15 Better Cash Offer transactions, respectively. Cash offer program decreased $225.8 million or 100%, to $0.3 million for the nine months ended September 30, 2023 compared to $226.1 million for the nine months ended September 30, 2022. Cash offer program revenue decreased as we are not actively seek Better Cash Offer customers and began to scale back significantly in the second half of 2022. For the nine months ended September 30, 2023 and 2022, we completed 1 and 401 Better Cash Offer transactions, respectively. Other Platform Revenue Other platform revenue decreased $4.4 million or 77% to $1.3 million for the three months ended September 30, 2023 compared to $5.7 million for the three months ended September 30, 2022. The decrease in other platform revenue was primarily driven by a decline in our real estate transaction volume and title insurance and settlement services due to lower mortgage volume, as our mortgage business serves as the primary lead generation source for the Better Plus businesses. During the three months ended September 30, 2023 we focused on partnering with third-party real estate agents to provide our customers with real estate agent services which has negatively impacted other platform revenue, as in-house agents provide higher revenue per transaction than third-party real estate agents. Other platform revenue decreased $26.3 million or 74% to $9.4 million for the nine months ended September 30, 2023 compared to $35.6 million for the nine months ended September 30, 2022. The decrease in other platform revenue was primarily driven by a decline in our real estate transaction volume and title insurance and settlement services due to lower mortgage volume, as our mortgage business serves as the primary lead generation source for the Better Plus businesses. In the third quarter of 2023, we continued to wind down our in-house real estate agent business and focus on partnering with third-party real estate agents to provide our customers with real estate agent services. We expect this to negatively impact other platform revenue going forward, as in-house agents provide higher revenue per transaction than third-party real estate agents. Net Interest Income (Expense)-Interest Income Interest income decreased $1.3 million, or 26% to $3.7 million for the three months ended September 30, 2023 compared to $5.0 million for the three months ended September 30, 2022. The decrease in interest income was primarily driven by the decrease in origination volume and the interest income earned on the unpaid principal balance for loans held and serviced during the interim between the origination of the loan and its sale on the secondary market. Interest income decreased $10.4 million, or 45% to $12.5 million for the nine months ended September 30, 2023 compared from $22.9 million of the nine months ended September 30, 2022. The decrease in interest income was primarily driven by the decrease in origination volume and the interest income earned on the unpaid principal balance for loans held and serviced during the interim between the origination of the loan and its sale on the secondary market. 61 Table of Contents Net Interest Income (Expense)-Warehouse Interest Expense Warehouse interest expense decreased $0.1 million, or 3% to $2.8 million for the three months ended September 30, 2023 compared to $2.8 million for the three months ended September 30, 2022. The decrease in warehouse interest expense was primarily driven by decreased borrowings on funding facilities used in the mortgage production process to meet the decreased origination volume and was offset by a higher cost of borrowing on our funding facilities driven by significant increases in the reference rate, SOFR. For the three months ended September 30, 2023 and 2022, the average 1-month SOFR rate was 5.24% and 2.15%, respectively. Warehouse interest expense decreased $5.2 million, or 35% to $9.5 million for the nine months ended September 30, 2023 compared to $14.8 million for the nine months ended September 30, 2022. The decrease in warehouse interest expense was primarily driven by decreased borrowings on funding facilities used in the mortgage production process to meet the decreased origination volume and was offset by a higher cost of borrowing on our funding facilities driven by significant increases in the reference rate, SOFR. For the nine months ended September 30, 2023 and 2022, the average 1-month SOFR rate was 4.90% and 0.99%, respectively. Operating Expenses The components of our operating expenses for the period were: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) Mortgage platform expenses 19,166 55,545 70,809 292,915 Cash offer program expenses — 9,813 398 227,509 Other platform expenses 3,161 8,951 11,787 55,250 General and administrative expenses 59,189 46,499 113,392 161,293 Marketing and advertising expenses 5,128 9,948 17,122 59,801 Technology and product development expenses 20,732 29,414 66,639 100,354 Restructuring and impairment expenses 679 45,781 11,798 212,490 Total operating expenses $ 108,055 $ 205,951 $ 291,945 $ 1,109,612 Mortgage platform expenses were $19.2 million for the three months ended September 30, 2023, a decrease of $36.4 million or 65% as compared with $55.5 million in the three months ended September 30, 2022. The decrease in mortgage platform expenses was primarily driven by reductions in Funded Loan Volume, which led to a reduction in variable loan origination expenses to support lower volume, as well as reductions in headcount related expenses such as compensation and benefits including stock-based compensation. One-time termination benefits, such as employee severance are recorded in restructuring and impairment expenses within the statements of operations and comprehensive loss. Mortgage platform expenses were $70.8 million for the nine months ended September 30, 2023, a decrease of $222.1 million or 76% as compared with $292.9 million in the nine months ended September 30, 2022. The decrease in mortgage platform expenses was primarily driven by reductions in Funded Loan Volume, which led to a reduction in variable loan origination expenses to support lower volume, as well as reductions in headcount related expenses such as compensation and benefits including stock-based compensation as a result of restructuring initiatives. Cash Offer program expenses were none for the three months ended September 30, 2023, a decrease of $9.8 million or approximately 100% as compared with $9.8 million in the three months ended September 30, 2022. Cash offer program expenses primarily consist of the full cost of the home, including transaction closing costs and costs for maintaining the home before the title is transferred to the buyer, and these costs move in line with cash offer program revenue. We scaled back the Better Cash Offer program significantly in the second half of 2022 due to weaker market conditions and for the three months ended September 30, 2023 we did not actively seek Better Cash Offer customers. As we scaled back Better Cash Offer revenue, expenses from the Better Cash Offer program also scaled back commensurately. Cash Offer program expenses were $0.4 million for the nine months ended September 30, 2023, a decrease of $227.1 million or approximately 100% as compared with $227.5 million in the nine months ended September 30, 2022. We began offering the Better Cash Offer program in the fourth quarter of 2021 and grew the offering significantly in the first half of 62 Table of Contents 2022. Starting in the second half of 2022 and continuing in the first half of 2023, we scaled back the Better Cash Offer program significantly due to weaker market conditions. In the second half of 2023 we did not actively seek Better Cash Offer customers. As we scaled back Better Cash Offer revenue, expenses from the Better Cash Offer program also scaled back commensurately. Other platform expenses were $3.2 million for the three months ended September 30, 2023, a decrease of $5.8 million or 65% as compared with $9.0 million in the three months ended September 30, 2022. The decrease in other platform expenses was driven primarily by decreases in headcount which reduced personnel related expenses such as cash compensation, related benefits, and stock-based compensation. The decreases in these expenses are due to the reduction in headcount related to our restructuring initiatives which accelerated during 2022 and continued in the first half of 2023. One-time termination benefits, such as employee severance are recorded in restructuring and impairment expenses within the statements of operations and comprehensive loss. Other platform expenses were $11.8 million for the nine months ended September 30, 2023, a decrease of $43.5 million or 79% as compared with $55.3 million in the nine months ended September 30, 2022. The decrease in other platform expenses was driven primarily by decreases in headcount which reduced personnel related expenses such as cash compensation, related benefits, and stock-based compensation. The decreases in these expenses are due to the reduction in headcount related to our restructuring initiatives which accelerated during 2022, as the headcount was the highest during the first half of 2022, and continued in 2023. General and administrative expenses were $59.2 million for the three months ended September 30, 2023, an increase of $12.7 million or 27% as compared with $46.5 million in the three months ended September 30, 2022. The change in general and administrative expenses was driven primarily by an increase in compensation and benefits as well as stock based compensation as a result of the consummation of the Business Combination. Upon the consummation of the Business Combination, we recognized additional compensation expense in the form of transaction-related bonuses for executives as well as additional compensation expense related to a one-time retention bonus given to an executive in the form of a forgivable loan that was forgiven upon the Closing. Stock based compensation increased due to the recognition of the expense for those awards that met the vesting criteria of both time and the Closing of the Business Combination. This was offset by decreases in legal, accounting, and other professional services which we expect to increase over the short term in relation to operating and supporting a now public company. General and administrative expenses were $113.4 million for the nine months ended September 30, 2023, a decrease of $47.9 million or 30% as compared with $161.3 million in the nine months ended September 30, 2022. The change in general and administrative expenses was driven primarily by the reduction in headcount related to our restructuring initiatives and was offset by the above mentioned executive transaction related bonuses and executive one-time retention bonus upon the Closing. Our organization had a much higher headcount at start of 2022 and it was not until later in 2022 did we see benefits from our restructuring initiatives which is why compensation and benefits is higher for the nine months ended September 30, 2022. One-time termination benefits, such as employee severance are recorded in restructuring and impairment expenses within the statements of operations and comprehensive loss. The increase in stock based compensation is due to the recognition of the expense for those awards that met the vesting criteria of both time and the Closing of the Business Combination. Overall, our legal, accounting, and other professional services expenses decreased as we incurred lower amounts to support a smaller organization for the nine months ended September 30, 2023. The following table presents a disaggregation of our general and administrative expenses as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) Compensation and benefits 28,821 16,102 48,338 69,689 Stock-based compensation 16,828 6,862 25,123 20,479 Depreciation and amortization 453 1,022 1,569 3,116 Rent 81 180 285 923 Legal, accounting, and other professional services 13,006 22,334 38,077 67,086 Total general and administrative expenses $ 59,189 $ 46,499 $ 113,392 $ 161,293 63 Table of Contents Marketing and advertising expenses were $5.1 million for the three months ended September 30, 2023, a decrease of $4.8 million or 48% as compared with $9.9 million in the three months ended September 30, 2022. Substantially all of the decrease in marketing and advertising expenses was driven by decreases in customer acquisition-related expenses, as our lower origination volume resulted in less required customer acquisition spend in the aggregate. Marketing and advertising expenses were $17.1 million for the nine months ended September 30, 2023, a decrease of $42.7 million or 71% as compared with $59.8 million in the nine months ended September 30, 2022. Substantially all of the decrease in marketing and advertising expenses was driven by decreases in customer acquisition-related expenses, as our lower origination volume resulted in less required customer acquisition spend in the aggregate. Technology and product development expenses were $20.7 million for the three months ended September 30, 2023, a decrease of $8.7 million or 30% as compared with $29.4 million in the three months ended September 30, 2022. The decrease in technology and product development expenses was driven primarily by decreased personnel-related compensation expenses due to decreased engineering, product and data headcount as well as decreases in rent and occupancy expenses required to support a smaller engineering and product and data workforce. The decrease in technology and product development expenses was also driven by a reduction in technology vendor expenses as we terminated or renegotiated vendor contracts that were designed for a much larger workforce. One-time termination benefits, such as employee severance are recorded in restructuring and impairment expenses within the statements of operations and comprehensive loss. Technology and product development expenses were $66.6 million for the nine months ended September 30, 2023, a decrease of $33.7 million or 34% as compared with $100.4 million in the nine months ended September 30, 2022. The decrease in technology and product development expenses was driven primarily by decreased personnel-related compensation expenses due to decreased engineering, product and data headcount as well as a reduction in technology vendor expenses as we terminated or renegotiated vendor contracts that were designed for a much larger workforce. Interest and other expense, net The components of our Interest and other expense, net for the period were: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) Other income (expense) 977 746 5,187 861 Interest and amortization on non-funding debt (11,939) (3,304) (18,237) (10,077) Interest on Pre-Closing Bridge Notes — (80,099) - (213,513) Change in fair value of convertible preferred stock warrants — 4,202 266 24,613 Change in fair value of bifurcated derivative (237,667) 29,089 (236,603) 306,866 Total interest and other expense, net $ (247,768) $ (49,366) $ (248,526) $ 108,750 Other income (expense) was a gain of $1.0 million for the three months ended September 30, 2023, an increase of $0.2 million or 31% as compared with a gain of $0.7 million in the three months ended September 30, 2022. The increase is due to income on cash invested in short term marketable securities with maturities of 90 days or less as well as income from short-term investments which are made up of U.K. government Treasury securities with maturities ranging from 91 days to one year. Other income (expense) was a gain of $5.2 million for the nine months ended September 30, 2023, an increase of $4.3 million or 502% as compared with a gain of $0.9 million in the nine months ended September 30, 2022. The increase is due to income on cash invested in short term marketable securities with maturities of 90 days or less as well as income from short-term investments which are made up of U.K. government Treasury securities with maturities ranging from 91 days to one year. We began investing in U.K. government Treasuries in the second quarter of 2023 in conjunction with the acquisition of Birmingham Bank. Interest and amortization on non-funding debt was $11.9 million for the three months ended September 30, 2023, an increase of $8.6 million or 261% as compared with $3.3 million in the three months ended September 30, 2022. The 64 Table of Contents increase in interest expense is due to the pay off of the remaining principal balance on our Corporate Line of Credit in August 2023 which required payment of a make-whole amount that represents minimum interest for the Lender of $4.5 million as well as the write off of the remaining $5.1 million capitalized debt issuance expenses that were yet to be amortized upon payoff. The increase in interest expense also includes $0.5 million of interest related to the Post-Closing Convertible Notes which were issued in August 2023. Interest and amortization on non-funding debt was $18.2 million for the nine months ended September 30, 2023, an increase of $8.2 million or 81% as compared with $10.1 million in the nine months ended September 30, 2022. The increase in interest expense is due to the pay off of the remaining principal balance on our Corporate Line of Credit in August 2023 which required payment of a make-whole amount that represents minimum interest for the Lender of $4.5 million as well as the write off of the remaining $5.1 million capitalized debt issuance expenses that were yet to be amortized upon payoff. The increase in interest and amortization on non-funding debt was offset by carrying a lower principal balance on our Corporate Line of Credit as we began to make principal payments throughout 2023 until the eventual payoff in August 2023. The increase in interest expense also includes $0.5 million of interest related to the Post-Closing Convertible Notes which were issued in August 2023. Interest on Pre-Closing Bridge Notes was none for the three months ended September 30, 2023, a decrease of $80.1 million or 100% as compared with $80.1 million in the three months ended September 30, 2022. The decrease is due to the discount on the Pre-Closing Bridge Notes being fully accreted up to $750.0 million by November 2022, the contractual maturity, as such there was no interest expense related to the Pre-Closing Bridge Notes for the three months ended September 30, 2023. Interest on Pre-Closing Bridge Notes was none for the nine months ended September 30, 2023, a decrease of $213.5 million or 100% as compared with $213.5 million in the nine months ended September 30, 2022. The decrease is due to the discount on the Pre-Closing Bridge Notes being fully accreted up to $750.0 million by November 2022, the contractual maturity, as such there was no interest expense related to the Pre-Closing Bridge Notes for the nine months ended September 30, 2023. Change in fair value of convertible preferred stock warrants was none for the three months ended September 30, 2023, a decrease of $4.2 million or 100% as compared with a gain $4.2 million in the three months ended September 30, 2022. The change in fair value of convertible preferred stock warrants is driven by changes in the significant unobservable inputs used to determine the fair value, mainly the fair value of our preferred stock, and upon the Closing of the Business Combination warrant holders exercised their warrants which resulted in no further changes in fair value as the exercise was recognized through additional paid-in-capital. Change in fair value of convertible preferred stock warrants was a gain of $0.3 million for the nine months ended September 30, 2023, a decrease of $24.3 million or 99% as compared with a gain $24.6 million in the nine months ended September 30, 2022. The change in fair value of convertible preferred stock warrants is driven by changes in the significant unobservable inputs used to determine the fair value, mainly the fair value of our preferred stock and upon the Closing of the Business Combination warrant holders exercised their warrants which resulted in no further changes in fair value as the exercise was recognized through additional paid-in-capital. Change in fair value of bifurcated derivative was a loss of $237.7 million for the three months ended September 30, 2023, a decrease of $266.8 million or 917% as compared with a gain $29.1 million in the three months ended September 30, 2022. The changes in the bifurcated derivative are largely driven by changes in the fair value of this embedded conversion feature in the Pre-Closing Bridge Notes that required bifurcated accounting. The fair value of the embedded conversion feature is based on significant unobservable inputs used to determine the fair value, mainly the changes in the fair value of our preferred stock. For the three months ended September 30, 2023, the bifurcated derivative had a loss of $237.7 million as upon the Closing of the Business Combination the Pre-Closing Bridge notes converted to or were exchanged for common stock and as such embedded conversion feature had no value at that time. For the three months ended September 30, 2022, the bifurcated derivative had $29.1 million increase in value as the value of the bifurcated derivative changed from $277.8 million to $306.9 million on the consolidated balance sheets as of June 30, 2022 to September 30, 2022, respectively. Change in fair value of bifurcated derivative was a loss of $236.6 million for the nine months ended September 30, 2023, a decrease of $543.5 million or 177% as compared with a gain $306.9 million in the nine months ended September 30, 2022. The changes in the bifurcated derivative are largely driven by changes in the fair value of this embedded conversion feature in the Pre-Closing Bridge Notes that required bifurcated accounting. The fair value of the embedded 65 Table of Contents conversion feature is based on significant unobservable inputs used to determine the fair value, mainly the changes in the fair value of our preferred stock. For the nine months ended September 30, 2023, the bifurcated derivative had a loss of $236.6 million as upon the Closing of the Business Combination the Pre-Closing Bridge Notes converted to or were exchanged for common stock and as such embedded conversion feature had no value at that time. For the nine months ended September 30, 2022, the bifurcated derivative had a gain of $306.9 million as prior to 2022, this embedded conversion feature had no value. Other Changes in Financial Condition The following table sets forth material changes to our summary condensed balance sheet between September 30, 2023 and December 31, 2022: (Amounts in thousands, except share and per share amounts) September 30, 2023 December 31, 2022 Increase/ (Decrease) Assets Cash and cash equivalents $ 526,765 $ 317,959 $ 208,806 Mortgage loans held for sale, at fair value 160,025 248,826 (88,801) Bifurcated derivative — 236,603 (236,603) Loan commitment asset — 16,119 (16,119) Other combined assets 250,265 267,015 (16,750) Total Assets $ 937,055 $ 1,086,522 $ (149,467) Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit) Liabilities Warehouse lines of credit $ 73,536 $ 144,049 $ (70,513) Corporate line of credit, net — 144,403 (144,403) Accounts payable and accrued expenses 103,435 88,983 14,452 Convertible Notes 513,001 — 513,001 Pre-Closing Bridge Notes — 750,000 (750,000) Other combined liabilities 89,851 132,907 (43,056) Total Liabilities 779,823 1,260,342 (480,519) Convertible preferred stock — 436,280 (436,280) Stockholders’ Equity (Deficit) Additional paid-in capital 1,826,848 626,628 1,200,220 Accumulated deficit (1,656,856) (1,181,415) (475,441) Other combined equity (12,760) (55,313) 42,553 Total Stockholders’ Equity (Deficit) 157,232 (610,100) 767,332 Total Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit) $ 937,055 $ 1,086,522 $ (149,467) Total Cash and cash equivalents increased $208.8 million or 66%, to $526.8 million at September 30, 2023 compared to $318.0 million at December 31, 2022. The increase in Cash and cash Equivalents was largely driven by net cash provided by financing activities during the period. Upon the Closing of the Business Combination, the Company issued to SoftBank senior subordinated convertible notes in the aggregate principal amount of $528.6 million. See Liquidity and Capital Resources for further details. Mortgage loans held for sale, at fair value decreased $88.8 million, or 36%, to $160.0 million at September 30, 2023 compared to $248.8 million at December 31, 2022. The decrease in Mortgage loans held for sale, at fair value was largely driven by a bulk sale of LHFS during the third quarter as well as changes in funded loan volume. 66 Table of Contents Bifurcated derivative decreased $236.6 million, or 100.0%, to none at September 30, 2023 compared to $236.6 million at December 31, 2022. The Bifurcated derivative was written off as upon the Closing of the Business Combination the Pre-Closing Bridge notes converted to or were exchanged for common stock and as such the embedded conversion feature had no value at that time. Loan commitment asset decreased $16.1 million or 100% to none at September 30, 2023 compared to $16.1 million at December 31, 2022. Upon issuing the Convertible Notes, the loan commitment asset on our balance sheet was reclassified as a discount on debt which will be amortized as part of interest expense over the term of the Convertible Notes. Loans outstanding under warehouse lines of credit decreased $70.5 million, or 49%, to $73.5 million at September 30, 2023 compared to $144.0 million at December 31, 2022. The decrease in loans outstanding under warehouse lines of credit was commensurate with the decrease in Mortgage loans held for sale at fair value discussed above. Corporate line of credit, net decreased $144.4 million, or 100%, to none at September 30, 2023 compared to $144.4 million at December 31, 2022. In August 2023, the Company paid off the remaining principal balance on its 2023 Credit Facility of $144.4 million. Accounts payable and accrued expenses increased $14.5 million, or 16%, to $103.4 million at September 30, 2023 compared to $89.0 million at December 31, 2022. The increase in Accounts payable and accrued expenses was largely driven by an increase in the payables balances owed to vendors as a result of longer payment cycles. We are party to a number of contracts with vendors or service providers that we entered into which now are either too large and expensive for the business as it exists now, or have proven to be significantly less valuable than anticipated. Convertible Notes increased $513.0 million to $513.0 million at September 30, 2023 compared to none at December 31, 2022. In connection with the Closing of the Business Combination, the Company issued to SoftBank senior subordinated convertible notes in the aggregate principal amount of $528.6 million less the unamortized debt discount. Pre-Closing Bridge Notes decreased $750.0 million to none at September 30, 2023 compared to $750.0 million at December 31, 2022. In connection with the Closing of the Business Combination, the Pre-Closing Bridge Notes held by SoftBank and the Sponsor were exchanged for common stock. Convertible preferred stock decreased $436.3 million to none as September 30, 2023 compared to $436.3 million at December 31, 2022. In connection with the Closing of the Business Combination, all of our convertible preferred stock converted into common stock. Additional paid-in capital increased $1.2 billion, or 192%, to $1.8 billion at September 30, 2023 compared to $626.6 million at December 31, 2022. The increase in additional paid-in capital was driven by the Closing of the Business Combination and the conversion of the Pre-Closing Bridge Notes and convertible preferred stock to common stock. Accumulated deficit increased $475.4 million, or 40%, to $1.7 billion at September 30, 2023 compared to $1.2 billion at December 31, 2022. The increase in accumulated deficit was driven by the net loss of $475.4 million generated for the nine months ended September 30, 2023. Non-GAAP Financial Measures We report Adjusted Net Income (Loss) and Adjusted EBITDA, which are non-GAAP financial measures that we use to supplement our financial results presented in accordance with GAAP. These non-GAAP financial measures should not be considered in isolation and are not intended to be a substitute for any GAAP financial measures. These non-GAAP measures provide supplemental information that we believe helps investors better understand our business, our business model, and how we analyze our performance. Non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning and are not prepared under any comprehensive set of accounting rules or principles. Accordingly, other companies, including companies in our industry, may calculate similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our financial results prepared and presented in accordance with GAAP. 67 Table of Contents We include reconciliations of Adjusted Net Income (Loss) and Adjusted EBITDA to GAAP Net Income (Loss), their most closely comparable GAAP measure. We encourage investors and others to review our consolidated financial statements and notes thereto in their entirety included elsewhere in the Report, not to rely on any single financial measure, and to consider Adjusted Net Income (Loss) and Adjusted EBITDA only in conjunction with their respective most closely comparable GAAP financial measure. We believe these non-GAAP financial measures are useful to investors for supplemental period-to-period comparisons of our business and understanding and evaluating our operating results for the following reasons: • We use Adjusted Net Income (Loss) to assess our overall performance, without regard to items that are considered to be unique or non-recurring in nature or otherwise unrelated to our ongoing revenue-generating operations; • Adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance without regard to items such as stock-based compensation expense, depreciation and amortization expense, interest and amortization on non-funding debt, income tax expense, and costs that are unique or non-recurring in nature or otherwise unrelated to our ongoing revenue-generating operations, all of which can vary substantially from company to company depending upon their financing and capital structures; • We use Adjusted Net Income (Loss) and Adjusted EBITDA in conjunction with financial measures prepared in accordance with GAAP for planning purposes, including the preparation of our annual operating budget, as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance; and • Adjusted Net Income (Loss) and Adjusted EBITDA provide consistency and comparability with our past financial performance, facilitate period-to-period comparisons of our core operating results, and also facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. Further, although we use these non-GAAP measures to assess the financial performance of our business, these measures have limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of our financial results as reported under GAAP. Some of these limitations are, or may in the future be, as follows: • Although depreciation and amortization expense is a non-cash charge, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted Net Income (Loss) and Adjusted EBITDA exclude stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not reflect (i) interest expense, or the cash requirements necessary to service interest or principal payments on our non-funding debt, which reduces cash available to us; or (ii) tax accruals or tax payments that represent a reduction in cash available to us; and • The expenses and other items that we exclude in our calculations of Adjusted Net Income (Loss) and Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from similarly-titled non-GAAP measures when they report their operating results, and we may, in the future, exclude other significant, unusual or non-recurring expenses or other items from these financial measures. Because of these limitations, Adjusted Net Income (Loss) and Adjusted EBITDA should be considered along with other financial performance measures presented in accordance with GAAP. Adjusted Net Income (Loss) and Adjusted EBITDA We calculate Adjusted Net Income (Loss) as net income (loss) adjusted for the impact of stock-based compensation expense, change in the fair value of warrants, change in the fair value of bifurcated derivative, interest on Pre-Closing Bridge Notes, and other non-recurring or non-core operational expenses. 68 Table of Contents We calculate Adjusted EBITDA as net income (loss) adjusted for the impact of stock-based compensation expense, change in the fair value of warrants, change in the fair value of bifurcated derivative, interest on Pre-Closing Bridge Notes, and other non-recurring or non-core operational expenses, as well as interest and amortization on non-funding debt (which includes interest on Convertible Notes), depreciation and amortization expense, and income tax expense. The following table presents a reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) and Adjusted EBITDA for the periods indicated: 69 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) Adjusted Net (Loss) Income Net (loss) income $ (340,033) $ (226,612) $ (475,441) $ (625,864) Stock-based compensation expense (1) 25,044 10,973 37,398 31,021 Change in fair value of warrants (2) (861) — (861) — Change in fair value of convertible preferred stock warrants (2) — (4,202) (266) (24,613) Change in fair value of bifurcated derivative (3) 237,667 (29,089) 236,603 (306,866) Interest on Pre-Closing Bridge Notes (4) — 80,099 — 213,513 Restructuring, impairment, and other expenses (5) 679 45,781 11,798 212,490 Adjusted Net (Loss) Income $ (77,504) $ (123,050) $ (190,769) $ (500,319) Adjusted EBITDA Net (loss) income $ (340,033) $ (226,612) $ (475,441) $ (625,864) Income tax expense / (benefit) 659 (52) 2,539 1,450 Depreciation and amortization expense (6) 10,491 12,168 32,791 36,845 Stock-based compensation expense (1) 25,044 10,973 37,398 31,021 Interest and amortization on non-funding debt (7) 11,939 3,304 18,237 10,077 Interest on Pre-Closing Bridge Notes (4) — 80,099 — 213,513 Restructuring, impairment, and other expenses (5) 679 45,781 11,798 212,490 Change in fair value of warrants (2) (861) — (861) — Change in fair value of convertible preferred stock warrants (2) — (4,202) (266) (24,613) Change in fair value of bifurcated derivative (3) 237,667 (29,089) 236,603 (306,866) Adjusted EBITDA $ (54,415) $ (107,630) $ (137,202) $ (451,947) __________________ (1) Stock-based compensation represents the non-cash grant date fair value of stock-based instruments utilized to incentivize employees and consultants recognized over the applicable vesting period. This expense is a non-cash expense. We exclude this expense from our internal operating plans and measurement of financial performance (although we consider the dilutive impact to our shareholders when awarding stock-based compensation and value such awards accordingly). Tax on stock-based compensation is assessed at exercise, if applicable. (2) Change in fair value of convertible preferred stock warrants and other warrants which are made of the public and private placement warrants as well as the sponsor locked-up shares, represents the change in fair value of liability-classified warrants as presented in our Consolidated Statements of Operations and Comprehensive Loss. This charge is a non-cash charge. (3) Change in fair value of bifurcated derivative represents the change in fair value of embedded features within the Pre-Closing Bridge Notes that require bifurcation and are a separate unit of accounting. The bifurcated derivative is marked to market at each reporting date. This expense is a non-cash expense, and we believe that it does not correlate to the performance of our business during the periods presented. (4) Interest on Pre-Closing Bridge Notes represents the amortization of the discount recognized upon issuance of the Pre-Closing Bridge Notes which is amortized into interest expense under the effective interest method over the term of the Pre-Closing Bridge Notes. This expense is a non-cash expense, and we believe that it does not correlate to the performance of our business during the periods presented. (5) For the three months ended September 30, 2023, restructuring, impairment, and other expenses are comprised of $0.8 million employee related one-time termination benefits and net of a $(0.1) million gain on lease settlement. For the three months ended September 30, 2022, restructuring, impairment, and other expenses include $5.3 million employee related one-time termination benefits and $40.5 million impairments on the Company’s assets, such as the loan commitment asset, right-of-use assets, and property and equipment. For the nine months ended September 30, 2023, restructuring, impairment, and other expenses are comprised of $5.3 million real estate restructuring loss, $4.8 million impairments on the Company’s property and equipment, $2.3 million employee related one-time termination benefits, $0.4 million impairments on the Company’s right-of-use asset and net of a $(1.1) million gain on lease settlement. For the nine months ended September 30, 2022, restructuring, impairment, and other expenses include $99.3 million employee related one-time termination benefits and $113.2 million impairments on the Company’s assets, such as the loan commitment asset, right-of-use assets, and property and equipment. (6) Depreciation and amortization represents the loss in value of fixed and intangible assets through depreciation and amortization, respectively. These expenses are non-cash expenses, and we believe that they do not correlate to the performance of our business during the periods presented. (7) Interest and amortization on non-funding debt represents interest and amortization on a corporate line of credit as presented in our Consolidated Statements of Operations and Comprehensive Income (Loss). Interest and amortization on non-funding debt excludes interest income from mortgage loans held for sale and warehouse interest expense on warehouse facilities, which are both core to our operations and recorded in the “total net revenues” caption of our Consolidated Statements of Operations and Comprehensive Income (Loss). 70 Table of Contents Liquidity and Capital Resources To date, our principal sources of liquidity have been borrowings through warehouse lines of credit and corporate line of credit, cash flow from our operations, including sale of loans we produce and sell into the secondary market and interest income on loans held for sale, issuance of convertible debt, and the net proceeds we receive through private sales of our equity securities. On August 22, 2023, the Company consummated the previously announced Business Combination, pursuant to the terms of the definitive Merger Agreement, dated as of May 10, 2021, and as subsequently amended, by and among Aurora, Better Holdco, Inc., (“Better”), and Aurora Merger Sub I, Inc., formerly a wholly owned subsidiary of Aurora (“Merger Sub”). Upon completion of the Business Combination on August 22, 2023, or the Closing, Aurora changed its corporate name to Better Home & Finance Holding Company, and its Class A Common shares began trading on the Nasdaq Global Market under the ticker symbol “BETR” on August 24, 2023. In addition, on the same day, Better Home & Finance’s warrants began trading on the Nasdaq Capital Market under the ticker symbol “BETRW.” Gross proceeds from the Business Combination totaled approximately $567.0 million, which included funds held in Aurora’s trust account of $21.4 million, the purchase for $17.0 million by the Sponsor of 1.7 million shares of Better Home & Finance Class A common stock, and $528.6 million from an affiliate of SoftBank, SB Northstar, in return for issuance by Better Home & Finance of the Convertible Note. Borrowings under our warehouse lines of credit (as described further below) are used to produce loans. As of September 30, 2023, we had 3 different warehouse lines of credit in different amounts and with various maturities, with an aggregate available amount of $424.0 million. Future Capital Requirements and Ability to Continue As a Going Concern As a result of our financial condition, we have received a report from our independent registered public accounting firm for the financial statements for the year ended December 31, 2022, that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. Management believes this uncertainty has been alleviated as of September 30, 2023 with the Closing of the Business Combination, and receipt of the proceeds. Upon consummation of the Business Combination, we have become a publicly listed company, which has given us the ability to draw on additional funding, including the Convertible Notes, which has provided us with increased financial flexibility to execute our strategic objectives, including developing our platform and continuing to improve our technology and making strategic investments in complementary businesses, technologies or other assets. We believe that the impact on our liquidity and cash flows resulting from the receipt of the proceeds from the Convertible Note is sufficient to enable us to meet our obligations for at least twelve months from the date the condensed consolidated financial statements were issued and alleviate the conditions that initially raised substantial doubt about our ability to continue as a going concern. Our ability to generate cash from operations, however, is subject to our performance, general economic conditions, industry trends and other factors. We may continue to incur net losses in future periods due to fluctuations and increases in interest rates and continued investments that we intend to make in our business (including investments to expand our product offerings). To the extent that funds from the Business Combination, including the drawdown of the Convertible Notes, combined with existing cash, cash equivalents, short-term investments and assets and operating cash flow, are insufficient to fund our future activities and requirements, we would need to raise additional funds through public or private equity or debt financing. If we issue equity securities in order to raise additional funds, substantial dilution to existing stockholders may occur. Warehouse Lines of Credit We fund substantially all of the loans we close on a short-term basis primarily through our warehouse lines of credit and from our operations. Loan production activities generally require short-term liquidity in excess of amounts generated by our operations. The loans we produce are financed through several warehouse lines of credit. Our borrowings are in turn generally repaid with the proceeds we receive from loan sales. Our warehouse lines of credit are primarily in the form of master repurchase agreements and loan participation agreements. Loans financed under these facilities are generally financed at approximately 95% to 100% of the principal balance of the loan (although certain types of loans are financed at lower percentages of the principal balance of the loan), which requires us to fund the balance from cash generated from our operations. Once closed, the underlying residential loan that is held for sale is pledged as collateral for the borrowing or advance that was made under our warehouse lines of credit. In most cases, the loans will remain in one of the warehouse lines of credit for only a short time, generally less than one month, until the loans are sold. During the time the loans are held for sale, we earn interest income from the borrower 71 Table of Contents on the underlying loan. This income is partially offset by the interest and fees we pay due to borrowings from the warehouse lines of credit. As of September 30, 2023 and December 31, 2022, we had the following outstanding warehouse lines of credit: (Amounts in thousands) Maturity Facility Size Amount Outstanding September 30, 2023 Amount Outstanding December 31, 2022 Funding Facility 1 (1) October 31, 2023 100,000 — 89,673 Funding Facility 2 (2) August 4, 2023 — - 9,845 Funding Facility 3 (3) December 8, 2023 149,000 73,536 44,531 Funding Facility 4 (4) August 3, 2024 175,000 — — Total warehouse lines of credit $ 424,000 $ 73,536 $ 144,049 __________________ (1) Interest charged under the facility is the greater of i) a) thirty day term SOFR plus three and one-eighth percent for each repurchase and non-qualifying mortgage loans, and b) interest rate charged on the note (“Note Rate”) minus one and one-half percent and ii) a) thirty day term SOFR plus two and one-eight percent for each mortgage loans that is not a non-qualifying or a repurchase mortgage loan, and b) the Note Rate minus one and one-eighth percent. Cash collateral deposit of $15.0 million is maintained and included in restricted cash. Subsequent to September 30, 2023, the facility matured on October 31, 2023 and the Company extended the maturity to November 30, 2023 (2) Interest charged under the facility is at the one month SOFR plus 1.77%. There is no cash collateral deposit maintained as of September 30, 2023. The facility matured on August 4, 2023 and the Company did not extend beyond maturity. (3) Interest charged under the facility is at the one month SOFR plus 1.60% - 2.25%. Cash collateral deposit of $3.8 million is maintained and included in restricted cash. The Company extended the maturity from September 8, 2023 to December 8, 2023 during the three months ended September 30, 2023. (4) Interest charged under the facility is at the one month SOFR plus 1.75% - 3.75%. There is no cash collateral deposit maintained as of September 30, 2023. The amount of financing advanced on each individual loan under our warehouse lines of credit, as determined by agreed-upon advance rates, may be less than the stated advance rate depending, in part, on the market value of the loans securing the financings. Each of our warehouse lines of credit allows the bank providing the funds to evaluate the market value of the loans that are serving as collateral for the borrowings or advances being made and to satisfy certain covenants, including providing information and documentation relating to the underlying loans. If the bank determines that the value of the collateral has decreased or if other conditions are not satisfied, the bank can require us to provide additional collateral or reduce the amount outstanding with respect to those loans (e.g., initiate a margin call). Our inability or unwillingness to satisfy the request could result in the termination of the facilities and possible default under our other warehouse lines of credit. In addition, a large unanticipated margin call could have a material adverse effect on our liquidity. Our warehouse lines of credit also generally require us to comply with certain operating and financial covenants, and the availability of funds under these facilities is subject to, among other conditions, our continued compliance with these covenants. These financial covenants include, but are not limited to, maintaining (1) a certain minimum tangible net worth and adjusted tangible net worth, (2) minimum liquidity, (3) a maximum ratio of total liabilities or total debt to adjusted tangible net worth, (4) pre-tax net income requirements and (5) minimum cash deposits in certain deposit accounts. A breach of these covenants can result in an event of default under these facilities and as such allows the lenders to pursue certain remedies. In addition, each of these facilities includes cross default or cross acceleration provisions that could result in all facilities terminating if an event of default or acceleration of maturity occurs under any facility. As a result of our operating losses and enhanced financial requirements, we amended our warehouse lines to align in both capacity and financial requirements. We may need to request an amendment, forbearance, or a waiver in 2024 in order to remain compliant with the financial covenants of our warehouse lenders. Our lenders are not required to grant us any such amendment, extension, forbearance or waiver and may determine not to do so. As of the date hereof, following certain amendments, we are in full compliance with all financial covenants under these agreements. Although these financial covenants limit our liquidity through minimum cash and tangible net worth requirements, we believe that these covenants currently provide us with sufficient flexibility to operate our business and obtain the financing necessary for that purpose. 72 Table of Contents Corporate Line of Credit Historically, our principal source of non-funding debt was our Corporate Line of Credit. As of September 30, 2023 and December 31, 2022, we had an outstanding principal balance of none and $146.4 million, respectively, under our Corporate Line of Credit, which are recorded net of the unamortized portion of the warrant discount and debt issuance costs. We had none and $2.0 million of unamortized warrant issuance related discount and debt issuance costs as of September 30, 2023 and December 31, 2022, respectively. Warrant issuance related discounts and debt issuance costs are recorded as a discount to the outstanding borrowings on the line of credit and are amortized into interest and amortization on non-funding debt within the statements of operations and comprehensive loss over the term of the Corporate Line of Credit using the effective interest method. In July 2023, the Company made principal payments of $12.9 million on the Corporate Line of Credit. In August 2023, the Company repaid the remaining principal balance on its Corporate Line of Credit of $110.7 million before the closing of the Business Combination. The August 2023 repayment of $110.7 million consisted of $98.4 million that was remitted directly to the Lender from the sale of pledged Company funded LHFS, a security deposit of $7.0 million that was in escrow, and an additional cash payment of $5.4 million. As the Company repaid the Corporate Line of Credit in full earlier than what was contractually required, the Company paid a make-whole amount that represents minimum interest for the Lender of $4.5 million. Through the repayment of the Corporate Line of Credit, the facility was terminated and may no longer be utilized for borrowings. Pre-Closing Bridge Notes In connection with the consummation of the Business Combination, the Pre-Closing Bridge Notes held by SB Northstar in an aggregate principal amount of $650.0 million automatically converted into Better Home & Finance Class C common stock at a conversion price of $10.00 per share (the “Bridge Note Conversion”). In connection with the Bridge Note Conversion, the Company issued an aggregate 65.0 million shares of Better Home & Finance Class C common stock to a trust designated by SB Northstar. In addition, pursuant to the Second Novator Letter Agreement and Novator Exchange Agreement, the Pre-Closing Bridge Notes held by the Sponsor in an aggregate principal amount of $100.0 million were exchanged for 40.0 million shares of Better Home & Finance Class A common stock. Issuance of Convertible Notes In August 2023, we issued to SB Northstar senior subordinated convertible notes in the aggregate principal amount of $528.6 million (the “Convertible Notes”) pursuant to an Indenture, dated as of August 22, 2023 (the “Indenture”). The Convertible Notes bear 1% interest per annum and mature on August 22, 2028, unless earlier converted or redeemed. The Convertible Notes are convertible, at the option of SB Northstar, into shares of the Company’s Class A common stock, with an initial conversion rate per $1,000 principal amount of Convertible Notes equal to (a) $1,000 divided by (b) a dollar amount equal to 115% of the First Anniversary VWAP (as defined in the Indenture), subject to adjustments as described therein. The Indenture provides that the First Anniversary VWAP may be no less than $8.00 and no greater than $12.00, subject to adjustments as described therein. The Convertible Notes may be redeemed at the option of the Company at a redemption price of 115% of par plus accrued interest in cash, at any time on or before the 30th trading day prior to the maturity date of the Convertible Notes if the last reported sale price of the Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during the 30 trading day period ending on, and including, the trading day immediately preceding the date of notice of optional redemption. The Convertible Notes permit the Company to designate up to $150 million of indebtedness that is senior to the Convertible Notes, in addition to certain other customary exceptions. In addition, the Indenture requires that if a domestic subsidiary of the Company guarantees other senior indebtedness of the Company, such subsidiary would also be required to guarantee the notes, subject to certain exceptions for non-profit subsidiaries and regulated mortgage origination subsidiaries. 73 Table of Contents Cash Flows The following table summarizes our cash flows for the periods presented: Nine Months Ended September 30, (in thousands) 2023 2022 Net cash (used in) provided by operating activities $ (76,167) $ 978,790 Net cash (used in) provided by investing activities $ (41,992) $ (30,226) Net cash provided by (used in) financing activities $ 327,671 $ (1,499,194) Nine Months Ended September 30, 2023 as Compared to Nine Months Ended September 30, 2022 Operating Activities Net cash used by operating activities was $76 million for the nine months ended September 30, 2023, a decrease of $1,055 million, or 108%, compared to net cash provided by operating activities of $979 million for the nine months ended September 30, 2022. Cash used by operating activities primarily consisted of net losses and changes in operating assets and liabilities. Cash used by operating activities was offset by adjustments for non-cash items such as, changes in fair value of bifurcated derivative, stock-based compensation, depreciation and amortization, and proceeds from sales of LHFS in excess of originations of LHFS. The net cash provided by operating activities in the nine months ended September 30, 2022, primarily reflects the proceeds from sales of mortgage loans in excess of new originations offset by net losses. Investing Activities Net cash used in investing activities was $42 million for the nine months ended September 30, 2023, an increase of $12 million, or 39%, compared to net cash used in investing activities of $30 million for the nine months ended September 30, 2022. The increase in cash used in investing activities primarily consist of the acquisition of businesses and net purchase of short-term investments. The increase in cash used in investing activities was offset by a reduction in cash used for additions to our internal use software when compared to the nine months ended September 30, 2022 as we have looked to reduce cash burn we have also reduced certain investments in internal use software not deemed critical. Financing Activities Net cash provided by financing activities was $328 million for the nine months ended September 30, 2023, an increase of $1,827 million, or 122%, compared to net cash used by financing activities of $1,499 million for the nine months ended September 30, 2022. The increase in cash provided by financing activities was primarily driven the consummation of the Business Combination which resulted in cash proceeds of $568 million from the issuance of post-closing convertible notes, exercise of preferred stock warrants, proceeds from the Business Combination, and proceeds from the issuance of common stock, offset by the full repayment of our Corporate Line of Credit as well as repayments on our warehouse lines of credit in excess of borrowings on our warehouse lines of credit. Cash used in investing activities during the nine months ended September 30, 2022 was primarily driven by repayments on our warehouse lines of credit in excess of borrowings on our warehouse lines of credit which was significantly higher during the nine months ended September 30, 2022 as the volume of loans sold was much higher during that period when compared to the nine months ended September 30, 2023. Material Cash Requirements Corporate Line of Credit As of June 30, 2023 we had an outstanding balance, net of debt issuance costs, of $118.6 million. In July 2023, we made additional principal payments of $12.9 million on the Corporate Line of Credit and in August 2023, we paid off the remaining principal balance on the 2023 Credit Facility of $110.7 million. Operating lease commitments While we have many small offices across the country for licensing purposes, we lease significant office space under operating leases with various expiration dates through June 2030 in New York, California, North Carolina, India, and in the U.K. For the three months ended September 30, 2023 and 2022, our operating lease costs were $1.8 million and $9.9 74 Table of Contents million, respectively. For the nine months ended September 30, 2023 and 2022, our operating lease costs were $5.6 million and $16.7 million, respectively. Due to our reduced headcount, we also began to reduce our real estate footprint. We have impaired right-of-use assets related to office space that is no longer in use or has been completely abandoned. Leases where we are unable to terminate or amend the lease with the landlord remain on the balance sheet under operating lease liabilities. In February 2023, we entered into a lease amendment with a landlord to surrender an office floor and reassign the lease to a third party. We had a right-of-use asset and operating lease liability of $13.0 million related to the office space and as part of the amendment we paid $4.7 million in cash to the third party. The amendment relieves us of the primary obligation under the original lease and is considered a termination of the original lease and as such the related right-of-use asset and lease liability are no longer on our balance sheet as of September 30, 2023. As of September 30, 2023 and December 31, 2022, we had lease liabilities of $33.3 million and $60.0 million, respectively. Other Cash Requirements We also have contractual obligations that are short-term, including: Repurchase and indemnification obligations In the ordinary course of business, we are exposed to liability under representations and warranties made to purchasers of loans or MSRs. Under certain circumstances, we may be required to repurchase loans, replace the loan with a substitute loan and/or indemnify secondary market purchasers of such loans for losses incurred. We also may be subject to claims by purchasers for repayment of all or a portion of the premium we receive from such purchaser on the sale of certain loans or MSRs if such loans or MSRs are repaid in their entirety within a specified time period after the sale of the loan. Interest rate lock commitments and forward sale commitments We enter into IRLCs to produce loans at specified interest rates and within a specified period of time with potential borrowers who have applied for a loan and meet certain credit and underwriting criteria. IRLCs are binding agreements to lend to a customer at a specified interest rate within a specified period of time as long as there is no violation of conditions established in the contract. In addition, we enter into forward sales commitment contracts to sell existing LHFS or loans committed but yet to be funded into the secondary market at a specified price on or before a specified date. These contracts are loan sale agreements in which we commit to deliver a mortgage loan of a specified principal amount and quality to a loan purchaser. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as defined in Item 303 of Regulation S-K that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. Critical Accounting Policies and Estimates Other than those noted below, there have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2023, as compared to the critical accounting policies and estimates disclosed in the audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2022, which are included our Registration Statement on Form S-1 (Registration No. 333-274947) filed with the SEC on October 12, 2023. Emerging Growth Company Status and Smaller Reporting Company Status Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, the 75 Table of Contents consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The Company’s consolidated revenues were below $1.235 billion for the year ended December 31, 2022. As a result, the Company qualifies as an emerging growth company and is eligible for relief from regulatory requirements provided to emerging growth companies. We are also a smaller reporting company, as defined in the Exchange Act. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to continue taking advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. In addition, for so long as the Company continues to qualify as a non-accelerated filer, it will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This quarterly report on Form 10-Q includes “forward-looking statements” within the meaning of federal securities laws. These statements include, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations. These statements constitute forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this quarterly report on Form 10-Q, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, the Company disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this quarterly report on Form 10-Q. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Forward-looking statements in this quarterly report on Form 10-Q and the associated risks, uncertainties, assumptions and other important factors may include, but are not limited to: • Our ability to operate under and maintain or improve our business model; • The effect of interest rates on our business, results of operations, and financial condition; • Our ability to expand our customer base, grow market share in our existing markets and enter into new markets; • Our ability to respond to general economic conditions, particularly elevated interest rates and lower home sales and refinancing activity; • Our ability to restore our growth and our expectations regarding the development and long-term expansion of our business; • Our ability to comply with laws and regulations related to the operation of our business, including any changes to such laws and regulations; • Our ability to achieve and maintain profitability in the future; • Our ability and requirements to raise additional financing in the future; • Our estimates regarding expenses, future revenue, capital and additional financing requirements; • Our ability to maintain, expand and be successful in our strategic relationships with third parties; • Our ability to remediate existing material weaknesses and implement and maintain an effective system of internal controls over financial reporting; • Our ability to develop new products, features and functionality that meet market needs and achieve market acceptance; 76 Table of Contents • Our ability to retain, identify and hire individuals for the roles we seek to fill and staff our operations appropriately; • The involvement of our CEO in litigation related to prior business activities, our business activities and associated negative media coverage; • Our ability to recruit and retain additional directors, members of senior management and other team members, including our ability in general, and our CEO’s ability in particular, to maintain an experienced executive team in operating as a public company; • Our ability to maintain and improve morale and workplace culture and respond effectively to the effects of negative media coverage; • Our ability to maintain, protect, assert and enhance our intellectual property rights; • Our ability to maintain the listing of the Better Home & Finance Class A common stock and warrants on the Nasdaq Global Market and the Nasdaq Capital Market, respectively; • The liquidity and trading of Better Home & Finance Class A common stock and warrants; • Our ability to maintain certain lines of credit and obtain future financing on commercially favorable terms to fund loans and otherwise operate our business; • The limited experience of our directors and management team in overseeing a public company; and • Other factors detailed under Part II, Item 1A. “ Risk Factors ”. The forward-looking statements contained in this quarterly report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. Item 3. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information otherwise required under this item.