Better still in the red but sees green shoots in retail

Better Home & Finance is offering numerous reasons to believe better days are ahead despite its struggle to reach profitability.

The digital lender Tuesday morning disclosed a $51 million net loss in the first quarter, in line with net losses of $59.2 million and $50 million in the prior and year ago periods, respectively. Since going public 21 months ago, the company has yet to post a quarterly profit.

Depending on the mortgage market, Better could achieve profitability in the second half of 2026, Chief Financial Officer Kevin Ryan said in an interview. During Tuesday morning's earnings call, founder and CEO Vishal Garg suggested loan origination expenses would rise as the lender leans into growth, but eventually it could lead to greater operating leverage. 

Executives are bullish on the company's artificial intelligence prowess, including its Tinman platform and voice assistant Betsy, and its new retail effort, to lead them into the black. 

The mostly direct-to-consumer lender recorded $868 million in funded loan volume in the first quarter, up 31% from the year ago period. Home equity mortgages accounted for $157 million, or 18% of that volume. In the final months of 2024, the mortgage shop closed $936 million across 3,300 originations. 

Neo Home Loans update

Also within that first quarter period was $163 million of funded loan volume from Better's Neo Home Loans retail team, which began originating loans in January. The company expects Neo to approach $450 million in origination volume this spring.

Ryan in an interview said Neo loan officers quickly grasped the Tinman platform and were more productive on it in a short learning period than they were when using Encompass and other loan origination systems.

"That gives us a lot of confidence that the technology is real," said Ryan. 

Neo is the subject of a theft of trade secrets complaint between Better and Luminate Home Loans; the complaint is pending in a California federal court. 

Tinman, Betsy and lowering the cost per loan

Better in its earnings report also announced an agreement for an unnamed bank, a former Encompass customer, to use Tinman for its mortgage operations including wholesale and non qualified mortgage originations. 

Garg during the call emphasized the success of Tinman and Betsy, revisiting Better's goal to get loan production costs down to $1,500 per origination, or around six times cheaper than the industry average. 

"You can't deploy an AI agent on any of these old, broken systems," said Garg, referring to other industry technologies. "So I think it's sort of like a seminal 1995 to 1999 moment, where now AI is a thing, and none of these systems are AI-equipped."

The lender reported $33 million in revenue for the first quarter, for a 50% year-over-year increase and 32% gain over the prior quarter. In the recent period however, Better's expenses approached $83 million. 

Better's restructured financing

Tuesday's results came a few weeks after Better restructured a $530 million convertible note arrangement with financier Softbank, the Japanese conglomerate. The transaction is expected to create approximately $200 million of positive, pre-tax equity value for the company, it said. 

"It just gives partners confidence that when they're entering in a partnership, it's going to be a long-term partnership with a company that's got the financial stability to see through what's been a very difficult cycle for everybody," said Ryan. 

The company's stock was trading at $14.08 a share around 1 p.m. Eastern Tuesday, a penny higher than its opening.