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 Holdco, Inc. and its subsidiaries prior to the completion (“Closing”) of the transactions contemplated by the Agreement and Plan of Merger, dated as of May 10, 2021, as amended, by and among Aurora Acquisition Corp., Better Holdco, Inc., and Aurora Merger Sub I, Inc. (such transactions, the “Business Combination”), and to Better Home & Finance Holding Company 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 audited consolidated financial statements as of December 31, 2023 and for the years ended December 31, 2023 and 2022, in each case, together with related notes thereto, included in our 2023 Annual Report on Form 10-K, and our condensed consolidated financial statements and related notes as of and for the quarterly period ended March 31, 2024, included elsewhere in this quarterly report on Form 10-Q. In addition to historical financial information, the following discussion and analysis may contain forward-looking statements within the meaning of federal securities laws 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 by leveraging 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 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 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. 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 (Gain on loans, net) 34 Table of Contents and Better Plus (Other revenue) for the three months ended March 31, 2024 and 2023 is as follows: Three Months Ended March 31, 2024 2023 (Amounts in thousands, except percentage amounts) Amounts Percentages Amounts Percentages Gain on loans, net $ 15,652 70 % $ 12,761 69 % Other revenue 2,817 13 % 4,944 27 % Net interest income 3,782 17 % 921 5 % Total net revenues $ 22,251 $ 18,626 Home Finance Mortgage Model—Gain on loans, net We produce a wide selection of mortgage loans and leverage our platform to quickly sell these loans and related mortgage servicing rights (“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 gain on loans, 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 and advertising relationships. Through our advertising relationships, we generate gain on loans, 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 relationships, as of March 31, 2024, this channel was primarily comprised of our integrated relationship with Ally Bank (which is our only current integrated relationship). Better Plus Model—Other revenue Better Plus revenue consists of revenue from non-mortgage product offerings including real estate services (Better Real Estate) and insurance services, which includes title insurance (Better Cover). Through Better Real Estate services, we offer settlement services during the mortgage transaction, which include wire services, document preparation, and other mortgage settlement services. As part of Better Real Estate we offer real estate services through our national network of real estate agents, primarily third-party partner real estate agents. Our technology matches prospective buyers with local agents, who help them identify houses, see houses, and navigate the purchase process. 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. 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. We also offer title insurance primarily as an agent and work with third-party providers that fulfill and underwrite the title insurance policies. International Lending Revenue—Other revenue International lending revenue consists of revenue from our international lending activities, namely in the U.K., which has expanded via acquisitions in prior years. International lending activities primarily include broker fees earned via our digital mortgage broker in the U.K. Key Business Metrics In addition to the measures presented in our condensed 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. 35 Table of Contents 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 March 31, 2024 Three Months Ended March 31, 2023 Home Finance Funded Loan Volume $ 661 $ 847 Refinance Loan Volume $ 81 $ 70 Purchase Loan Volume $ 529 $ 775 HELOC Volume $ 51 $ 2 D2C Loan Volume $ 360 $ 488 B2B Loan Volume $ 301 $ 359 Total Loans (number of loans, not millions) 1,991 2,366 Average Loan Amount ($ value, not millions) $ 332,111 $ 357,792 Gain on Sale Margin 2.37 % 1.51 % Total Market Share 0.2 % 0.3 % Better Plus Better Real Estate Transaction Volume $ 36 $ 161 Insurance Coverage Written $ 1,068 $ 1,462 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 $661 million in the three months ended March 31, 2024 decreased by approximately 22% from $847 million in the three months ended March 31, 2023. Beginning in the third quarter of 2023, we also include HELOC loans in our Funded Loan Volume. For the three months ended March 31, 2024, purchase and refinance loans comprised $610 million and HELOC loans comprised $51 million of Funded Loan Volume. 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 $81 million in the three months ended March 31, 2024 increased by approximately 16% from $70 million in the three months ended March 31, 2023. 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 decreased by approximately 32% year-over-year to $529 million in the three months ended March 31, 2024 from $775 million in the three months ended March 31, 2023. 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. Our HELOC Loan volume increased to $51 million in the three months ended March 31, 2024 from $2 million in the three months ended March 31, 2023. 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 $360 million in the three months ended March 31, 2024 decreased by approximately 26% from $488 million in the three months ended March 31, 2023. 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 $301 million in the three months ended March 31, 2024 decreased by approximately 16% from $359 million in the three months ended March 31, 2023 . 36 Table of Contents 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 1,991 in the three months ended March 31, 2024 decreased by approximately 16% from 2,366 in the three months ended March 31, 2023. Purchase and refinance loans comprised 1,557 of the Total Loans in the three months ended March 31, 2024 and HELOC loans comprised 434. Average days loans held for sale for the three months ended March 31, 2024 and 2023, were approximately 20 and 20 , 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 we generally aim to sell loans shortly after production. Average Loan Amount represents Total Funded Loan Volume divided by number of loans funded in a period. Our Average Loan Amount decreased by approximately 7% to $332,111 in the three months ended March 31, 2024 from $357,792 in the three months ended March 31, 2023 . 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 and the three months ended March 31, 2024 . Gain on Sale Margin represents gain on loans, net, as presented on our condensed consolidated statements of operations and comprehensive income (loss), divided by Funded Loan Volume. Gain on Sale Margin increased by approximately 57% to 2.37% during the three months ended March 31, 2024 from 1.51% year-over-year from the three months ended March 31, 2023 . We saw an increase in our Gain on Sale Margin for three months ended March 31, 2024 compared to three months ended March 31, 2023, as a result of a recovery on our Loan Repurchase Reserve which positively impacted our Gain on Loans, net, as well as improved pricing on our Funded Loans. 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 March 31, 2024 remained substantially the same as 0.3% in the three months ended March 31, 2023. 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 the Company’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. Coverage Written amounts for Better Cover have been updated for all periods presented to includes both new policies and policy renewals, which in prior periods included only new policies. Description of Certain Components of Our Financial Data Components of Revenue Our sources of revenue include gain on loans, net, net interest income, and other revenue. Home Finance (Gain on Loans, Net) Gain on loans, net, includes revenue generated from our mortgage production process. The components of Gain on loans, net, are as follows: i. Gain on sale of loans, net–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. Gain on sale of loans, net includes unrealized changes in the fair value of mortgage loans held for sale (“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 37 Table of Contents of LHFS is measured based on observable market data. This also includes activity for loans originated on behalf of the integrated partnership that are subsequently purchased by us as well the portion of the sale proceeds to be received by the integrated partner. The portion of the sale proceeds that is to be allocated to the integrated partner is accrued as a reduction of gain on sale of loans, net when the loan is initially purchased by us from the integrated relationship partner. Gain on sale of loans, net also includes the changes in fair value of interest rate lock commitments (“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. ii. Integrated Partnership Fees–Includes fees that we receive for originating loans on behalf of an integrated partner, which are recognized as revenue upon the integrated partner’s funding of the loan. iii. Provision for Loan Repurchase Reserve–In connection with our sale of loans on the secondary market, we make customary representations and warranties to the relevant loan purchasers about various characteristics of each loan, such as the origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local laws. In the event of a breach of its representations and warranties, we may be required to repurchase the loan with the identified defects. The provision for loan repurchase reserve, represents the charge for these potential losses. Net Interest Income Net interest income includes interest income from LHFS calculated based on the note rate of the respective loan, interest income from short-term investments, and interest income on loans held for investment. Interest expense includes interest expense on warehouse lines of credit, interest expense on customer deposits, as well as interest expense on the Convertible Note. Better Plus, International Lending Revenue, and Other (Other Revenue) We generate other revenue through our Better Plus offerings, which includes Better Real Estate (real estate services), Better Cover (insurance), and international lending revenue. For Better Real Estate, we generate revenues from fees related to real estate agent services, mainly cooperative brokerage fees from our network of third-party real estate agents, to assist our customers in the purchase or sale of a home. 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 Better Cover, we generate revenues from agent fees on homeowners insurance policies obtained by our customers through our marketplace of third-party insurance carriers. 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. Our performance obligations for settlement services and title insurance 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. For international lending revenue, we generate revenue primarily from broker fees earned via our digital mortgage broker in the U.K. Components of Our Expenses Our expenses consist of compensation and benefits, general and administrative, technology expenses, marketing and advertising expenses, loan origination expenses, depreciation and amortization, and other expenses. 38 Table of Contents Compensation and Benefits Compensation and benefits includes salaries, wages, and incentive pay as well as stock compensation, employee health benefits, 401(k) plan benefits, and social security and unemployment taxes. Stock-based compensation includes expenses associated with restricted stock unit grants, performance stock unit grants, and stock option grants, under our stock plans. We recognize compensation expense for the stock-based payments based on the fair value of the awards on the grant date. The expense is recorded on a straight-line basis over the requisite service period. General and Administrative Expenses General and administrative expenses include rent and occupancy expenses, travel and entertainment expenses, insurance expenses, and external legal, tax and accounting services. General and administrative expenses are expensed as incurred. Technology Expenses Technology expenses consist of expenses related to vendors engaged in product management, design, development and testing of our websites and products. Technology and product development expenses are generally expensed as incurred. Marketing and Advertising Expenses Marketing and advertising expenses consist of customer acquisition expenses, brand costs, and paid marketing. 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. Marketing expenses are generally expensed as incurred. Loan Origination Expenses Loan origination expenses consist primarily of origination expenses, appraisal fees, processing expenses, underwriting, closing fees, and servicing costs. These expenses are expensed as incurred. Other Expenses Other expenses relate to other non-mortgage homeownership activities, including settlement service expenses, lead generation expenses, expenses incurred in relation to our international lending activities, and gains and losses from the warrant and equity related liabilities. 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. Other expenses are expensed as incurred. 39 Table of Contents Results of Operations The following table sets forth certain consolidated financial data for each of the periods indicated: Three Months Ended March 31, (Amounts in thousands, except per share amounts) 2024 2023 Revenues: Gain on loans, net $ 15,652 $ 12,761 Other revenue 2,817 4,944 Net interest income Interest income 8,636 6,390 Interest expense (4,854) (5,469) Net interest income 3,782 921 Total net revenues 22,251 18,626 Expenses: Compensation and benefits 38,073 38,112 General and administrative 14,047 16,762 Technology 5,458 14,446 Marketing and advertising 4,554 7,760 Loan origination expense 2,577 5,202 Depreciation and amortization 9,074 11,477 Other expenses (183) 11,065 Total expenses 73,600 104,824 Loss before income tax expense (51,349) (86,198) Income tax expense/(benefit) 143 1,424 Net loss $ (51,492) $ (87,622) Earnings (loss) per share attributable to common stockholders (Basic) $ (0.07) $ (0.29) Earnings (loss) per share attributable to common stockholders (Diluted) $ (0.07) $ (0.29) Three Months Ended March 31, 2024 as Compared to Three Months Ended March 31, 2023 Revenues The components of our revenues for the period were: Three Months Ended March 31, (Amounts in thousands) 2024 2023 Revenues: Gain on loans, net 15,652 12,761 Other revenue 2,817 4,944 Net interest income Interest income 8,636 6,390 Mortgage interest expense (4,854) (5,469) Net interest income 3,782 921 Total net revenues $ 22,251 $ 18,626 40 Table of Contents Gain on loans, net The components of our gain on loans, net for the period were: Three Months Ended March 31, (Amounts in thousands) 2024 2023 Gain on sale of loans, net $ 9,821 $ 12,524 Integrated partnership fees 2,268 2,361 Loan repurchase recovery (reserve) 3,563 (2,124) Total gain on loans, net $ 15,652 $ 12,761 Gain on sale of loans, net decreased $2.7 million or 22% to $9.8 million for the three months ended March 31, 2024 compared to $12.5 million for the three months ended March 31, 2023. The decrease in gain on sale of loans, net was largely driven by the reduction of Funded Loan Volume. Integrated partnership fees decreased $0.1 million, or 4% to a gain of $2.3 million for the three months ended March 31, 2024, compared to gain of $2.4 million for the three months ended March 31, 2023. The decrease in integrated partnership fees was primarily driven by the reduction in B2B Loan Volume. Loan repurchase reserve decreased $5.7 million or 268%, to a recovery of $3.6 million for the three months ended March 31, 2024, compared to a provision of $2.1 million for the three months ended March 31, 2023. The loan repurchase reserve changed from a provision to a recovery as our estimate for potential loss exposure has decreased as we no longer have exposure to the historical periods when we had a significantly higher funded loan volume. The reduction in potential loss exposure results in a reduction in the loan repurchase reserve liability which is recognized as a recovery within gain on loans, net. Other Revenue The components of other revenue for the period were: Three Months Ended March 31, (Amounts in thousands) 2024 2023 International lending revenue $ 1,108 $ 988 Insurance Services 639 629 Real estate services 347 2,870 Other revenue 723 457 Total other revenue $ 2,817 $ 4,944 International lending revenue increased $0.1 million, or 12% to $1.1 million for the three months ended March 31, 2024 compared to $1.0 million for the three months ended March 31, 2023. The increase in international lending revenue was primarily driven by increased operations in U.K. brokerage businesses. Insurance services remained relatively flat for both the three months ended March 31, 2024 and three months ended March 31, 2023. While Insurance Coverage Written decreased due to fewer insurance transactions, increasing insurance premium costs and more competitive referral revenue sharing agreements with insurance carries resulted in increased revenue per transaction. Real estate services decreased $2.5 million, or 88% to $0.3 million for the three months ended March 31, 2024 compared to $2.9 million for the three months ended March 31, 2023. The decrease in real estate services was primarily driven by a reduction in volume of real estate transactions as well earning lower revenue per transaction for the three months ended March 31, 2024 as we no longer employed any in-house real estate agents and all activity was through our network of third party real estate agents which results in lower revenue per transaction. 41 Table of Contents Other revenue increased by $0.3 million, or 58% to $0.7 million for the three months ended March 31, 2024 compared to $0.5 million for the three months ended March 31, 2023. The increase in other revenue was primarily driven by mortgage and non-mortgage loan servicing activities in the U.S. and U.K. Net Interest Income The components of our net interest income for the period were: Three Months Ended March 31, (Amounts in thousands) 2024 2023 Mortgage interest income $ 2,964 $ 3,925 Interest Income from Investments 5,672 2,465 Warehouse interest expense (2,189) (2,779) Other interest expense (2,665) (2,690) Total net interest income $ 3,782 $ 921 Mortgage interest income decreased $0.9 million, or 24% to $3.0 million for the three months ended March 31, 2024 compared from $3.9 million of the three months ended March 31, 2023. The decrease in mortgage interest income was primarily driven by the decrease in origination volume and the mortgage 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 from investment increased $3.2 million, or 130% to $5.7 million for the three months ended March 31, 2024 compared to $2.5 million for the three months ended March 31, 2023. The increase in interest income from investment was primarily driven by increased investments in securities with maturities ranging from 90 days to 1 year, driven by our cash management strategies and increased available liquidity. Warehouse interest expense decreased $0.6 million, or 21% to $2.2 million for the three months ended March 31, 2024 compared to $2.8 million for the three months ended March 31, 2023. 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. Other interest expense remained flat at $2.7 million for the three months ended March 31, 2024 compared to $2.7 million for the three months ended March 31, 2023. Other interest expense for the three months ended March 31, 2024 is related to interest expense on our convertible notes while interest expense for the three months ended March 31, 2023 is related to interest expense on our corporate line of credit which was subsequently paid off in full in August 2023. Expenses The components of our expenses for the period were: Three Months Ended March 31, (Amounts in thousands) 2024 2023 Compensation and benefits 38,073 38,112 General and administrative 14,047 16,762 Technology 5,458 14,446 Marketing and advertising 4,554 7,760 Loan origination expense 2,577 5,202 Depreciation and amortization 9,074 11,477 Other expenses (183) 11,065 Total operating expenses $ 73,600 $ 104,824 Compensation and benefits expenses were $38.1 million for the three months ended March 31, 2024, remaining relatively flat in total compared with $38.1 million for the three months ended March 31, 2023. We reduced our headcount 42 Table of Contents between the two periods which lead to a decrease in compensation and benefits that was offset by an increase in stock based compensation. The increase in stock based compensation during the three months ended March 31, 2024 was due to awards that have met the liquidity event criteria with the Closing of the Business Combination in August 2023 as well as service based conditions during the three months ended March 31, 2024. General and administrative expenses were $14.0 million for the three months ended March 31, 2024, a decrease of $2.7 million or 16% as compared with $16.8 million in the three months ended March 31, 2023. The decrease in general and administrative expenses was driven primarily by decreases in rent and occupancy expenses, as we have taken measures to reduce our real estate footprint, as well as reductions in professional services. The reductions in professional services are driven by a reduction in legal expenses as we were incurring higher legal expenses leading up to the Closing of the Business Combination for the three months ended March 31, 2023 in comparison to the three months ended March 31, 2024. The decreases in general and administrative expenses were offset by increases in insurance expenses due to the Closing of the Business Combination as insurance premiums for public companies are significantly higher than those of private companies. Technology expenses were $5.5 million for the three months ended March 31, 2024, a decrease of $9.0 million or 62% as compared with $14.4 million in the three months ended March 31, 2023. The decrease in technology expenses were driven primarily by a reduction in costs associated with software vendors. This was driven by the reduced headcount, due to which we required fewer software licenses, replacement of certain vendors with more cost efficient alternatives, as well as the termination of non-critical vendors. Marketing and advertising expenses were $4.6 million for the three months ended March 31, 2024, a decrease of $3.2 million or 41% as compared with $7.8 million in the three months ended March 31, 2023. 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. Other expenses were $0.2 million for the three months ended March 31, 2024, a decrease of $11.2 million or 102%, as compared with $11.1 million in the three months ended March 31, 2023. The reduction in other expenses was primarily driven by a reduction in restructuring expenses, as for the three months ended March 31, 2023 we incurred real estate restructuring losses, gain on lease settlement, and impairments of property and equipment related to restructuring initiatives which we did not have during the three months ended March 31, 2024. The reduction in other expenses was also driven by reductions on liability classified warrants and equity related liabilities as a result of the reduced trading price of our common stock, which are recorded as gains during the three months ended March 31, 2024. During the the three months ended March 31, 2023 we recognized losses on the change in fair value of bifurcated derivative which was an embedded feature in the subordinated 0% bridge promissory notes that converted into or were exchanged for Class A common stock and Class C common stock, par value $0.0001 per share (“Class C common stock” and, together with Class A common stock and Class B common stock, the "Common Stock") upon the close of the Business Combination. Non-GAAP Financial Measures We report Adjusted Net Loss and Adjusted EBITDA, which are financial measures not prepared in accordance with generally accepted accounting principles (“non-GAAP”) 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. We include reconciliations of Adjusted Net Loss and Adjusted EBITDA to GAAP Net Income (Loss), their most closely comparable GAAP measure. We encourage investors and others to review our condensed consolidated financial statements and notes thereto in their entirety included elsewhere in this quarterly report on Form 10-Q, not to rely on any 43 Table of Contents single financial measure, and to consider Adjusted Net 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 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 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 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 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 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 Loss and Adjusted EBITDA should be considered along with other financial performance measures presented in accordance with GAAP, and not as an alternative or substitute for our financial results prepared and presented in accordance with GAAP. Adjusted Net Loss and Adjusted EBITDA We calculate Adjusted Net 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, and other non-core operational expenses. 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 the subordinated 0% 44 Table of Contents bridge promissory notes that converted into or were exchanged for our Class A common stock and our Class C common stock (such notes, “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 the Convertible Note), depreciation and amortization expense, and income tax expense. The following table presents a reconciliation of Net Income (Loss) to Adjusted Net Loss and Adjusted EBITDA for the periods indicated: Three Months Ended March 31, (Amounts in thousands) 2024 2023 Adjusted Net Loss Net (loss) income $ (51,492) $ (87,622) Stock-based compensation expense (1) 8,760 4,408 Change in fair value of warrants and equity related liabilities (2) (823) — Change in fair value of convertible preferred stock warrants (2) — (553) Change in fair value of bifurcated derivative (3) — 1,887 Restructuring, impairment, and other expenses (4) 721 9,137 Adjusted Net Loss $ (42,834) $ (72,743) Adjusted EBITDA Net (loss) income $ (51,492) $ (87,622) Income tax expense / (benefit) 143 1,424 Depreciation and amortization expense (5) 9,074 11,477 Stock-based compensation expense (1) 8,760 4,408 Interest and amortization on non-funding debt (6) 2,664 2,690 Restructuring, impairment, and other expenses (4) 721 9,137 Change in fair value of warrants and equity related liabilities (2) (823) — Change in fair value of convertible preferred stock warrants (2) — (553) Change in fair value of bifurcated derivative (3) — 1,887 Adjusted EBITDA $ (30,953) $ (57,152) __________________ (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 stockholders when awarding stock-based compensation and value such awards accordingly). (2) Change in fair value of convertible preferred stock warrants and other warrants, which comprise the Public Warrants and Private 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) Restructuring, impairment, and other expenses are primarily comprised of employee one-time termination benefits, real estate restructuring losses, and impairment of property and equipment. For further details, please refer to Note 4 to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q. (5) 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. (6) Interest and amortization on non-funding debt represents interest and amortization on a corporate line of credit as well as the Convertible Note, both of which are included within net interest income in our Consolidated Statements of Operations and Comprehensive Loss. Liquidity and Capital Resources 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 government-sponsored enterprises (“GSEs”). As of March 31, 2024, we had three warehouse lines of credit in different amounts and with various maturities, with an aggregate available amount of $425.0 million. 45 Table of Contents Warehouse Lines of Credit As of March 31, 2024 and December 31, 2023, we had the following outstanding warehouse lines of credit: (Amounts in thousands) Maturity Facility Size Amount Outstanding March 31, 2024 Amount Outstanding December 31, 2023 Funding Facility 1 (1) July 31, 2024 100,000 40,266 61,709 Funding Facility 2 (2) December 6, 2024 150,000 61,673 40,088 Funding Facility 3 (3) August 2, 2024 175,000 24,222 24,421 Total warehouse lines of credit $ 425,000 $ 126,161 $ 126,218 __________________ (1) Interest charged under the facility is at the 30-day term SOFR plus 2.125%. Cash collateral deposit of $15.0 million is maintained and included in restricted cash. (2) Interest charged under the facility is at the one month SOFR plus 2.10% - 2.25% . Cash collateral deposit of $3.8 million is maintained and included in restricted cash. (3) 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 March 31, 2024. Nasdaq Compliance Requirements On April 9, 2024, we received formal notice that Nasdaq granted our request for an additional 180-day period, or until October 7, 2024, (the “Extension Notice”) to evidence compliance with the $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to the Bid Price Rule. If at any time before October 7, 2024, the bid price of the our Class A common stock closes at $1.00 per share or more for a minimum of ten consecutive business days, Nasdaq will provide us with written confirmation of compliance with the Bid Price Rule. If we fail to regain compliance with the Bid Price Rule during the additional compliance period, then Nasdaq will notify us of its determination to delist the Class A common stock, at which point we would have an opportunity to appeal the delisting determination to a Nasdaq Hearings Panel (the “Panel”). A timely request for a hearing will stay any suspension or delisting action pending the issuance of the Panel’s decision. The Extension Notice has no effect at this time on the listing of our Class A common stock, which will continue to trade on The Nasdaq Capital Market under the symbol “BETR.” We intend to continue to actively monitor the listing of our Class A common stock and, as appropriate, will consider available options to resolve any deficiencies and regain compliance, including seeking stockholder approval at our annual meeting of stockholders to declare and effect one or more reverse stock splits. There can be no assurance that we will be able to maintain compliance with other Nasdaq listing obligations. Failure to maintain other Nasdaq listing requirements could result in the delisting of the Class A common stock from Nasdaq. Cash Flows The following table summarizes our cash flows for the periods presented: Three Months Ended March 31, (in thousands) 2024 2023 Net cash (used in) provided by operating activities $ (42,806) $ (162,759) Net cash (used in) provided by investing activities $ (33,386) $ (6,047) Net cash provided by (used in) financing activities $ (1,148) $ 73,796 Three Months Ended March 31, 2024 as Compared to Three Months Ended March 31, 2023 Operating Activities Net cash used by operating activities was $43 million for the three months ended March 31, 2024, a decrease of $120 million, or 74%, compared to net cash used by operating activities of $163 million for the three months ended March 31, 2023. The reduction in net cash used by operating activities was primarily due to the reduction in net losses period over 46 Table of Contents period as a result of the Company’s restructuring program as well as a reduction in cash used from originations of LHFS in excess of proceeds from the sale of LHFS. The remaining proceeds from operating activities consisted of changes in operating assets and liabilities as well as adjustments to reconcile net loss to net cash used by operating activities. Investing Activities Net cash used in investing activities was $33 million for the three months ended March 31, 2024, an increase of $27 million, or 452%, compared to net cash used in investing activities of $6 million for the three months ended March 31, 2023. The increase in cash used in investing activities primarily consist of purchases of short-term investments in excess of maturities of short-term investments. During the three months ended March 31, 2024, the Company made some additional investments in short-term securities with maturities ranging from 90 days to 1 year. Financing Activities Net cash used by financing activities was $1.1 million for the three months ended March 31, 2024, a decrease of $75 million, or 102%, compared to net cash provided by financing activities of $74 million for the three months ended March 31, 2023. The decrease in cash provided by financing activities was primarily driven by a reduction net borrowings (repayments) on warehouse lines of credit. We fund our LHFS through borrowings on our warehouse lines of credit and for three months ended March 31, 2023 as our originations of LHFS exceeded proceeds from the sale of LHFS, within operating activities, our borrowings also exceeded repayments on warehouse lines of credit as those borrowings were used to fund originations. For the three months ended March 31, 2024, our borrowings and repayments on warehouse lines of credit remained relatively in line with one another as the originations of LHFS above in operating activities include increased originations of HELOCs which are funded by our cash until sold 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 There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2024, 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, 2023, which are included in our 2023 Annual Report on Form 10-K. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that reflect future plans, business strategy, estimates, beliefs and expected performance. 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, we disclaim 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: • Factors relating to our business, operations and financial performance, including: • Our ability to operate under and maintain or improve our business model; 47 Table of Contents • 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; • 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; • Our ability to successfully manage our international and banking operations • Our ability to maintain and improve morale and workplace culture and respond effectively to the effects of negative media coverage; and • Our ability to maintain, protect, assert and enhance our intellectual property rights. • Factors relating to our capital structure, governance and the market for our securities, including: • The existence of multiple classes of common stock, which is comprised of our Class A common stock, our Class B common stock and our Class C common stock, and its impact on the liquidity and value of the Class A common stock; • The limited experience of our directors and management team in overseeing a public company; • Our ability to maintain the listing of the Class A common stock and Public Warrants on the Nasdaq Capital Market; • 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 liquidity and trading of Class A common stock and Warrants; and • Other factors detailed under Part II, Item 1A. “ Risk Factors ”. 48 Table of Contents 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. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those described in these forward-looking statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and are not required to provide the information otherwise required under this item.