Better Home & Finance will miss its goal of reaching adjusted EBITDA break-even by the end of September, interim CEO Daniel Lewis acknowledged during his first earnings call leading the company.
Rather than set another deadline, Lewis said Better must first show that it can consistently execute, reduce costs, and convert its enterprise pipeline into profitable production.
The reversal comes three months after Better reaffirmed that it expected to reach adjusted EBITDA break-even by the end of the third quarter.
“Regarding our previously guided goal of reaching adjusted EBITDA breakeven by September, we now expect to fall short,” Lewis said during Thursday’s call. “I do not want to anchor adjusted EBITDA breakeven expectations to a specific month, because achieving it depends on transaction volumes, revenue mix, and the timing of our cost reductions.”
The admission came three days after Better founder Vishal Garg stepped down as CEO, with Lewis taking over while the board searches for a permanent successor.
Better’s second-quarter results showed substantial production growth and a narrowing net loss. But Lewis’ remarks revealed a deeper reset: The company is moving away from complex enterprise implementations, narrowing its partnership strategy, and asking investors to look beyond raw loan volume.
“The way we want you all to start thinking about the company is less about loan volume because of the change in mix of HELOC versus first lien,” Lewis said. “We want you to think less about simply revenue growth, but look at contribution margin.”
Platform Volume Overtakes DTC
Better reported $1.67 billion in second-quarter loan volume, up 38% from $1.21 billion a year earlier, according to the company’s quarterly results. Total net revenue increased 28% to $54.7 million.
Platform volume more than doubled to $912 million and represented 55% of Better’s total, up from 36% a year earlier and 50% in the first quarter. Direct-to-consumer volume accounted for the remaining $755 million.
Better’s definition of loan volume includes loans funded by the company and loans processed through Tinman for strategic partners but funded elsewhere.
Its NEO Home Loans business increased volume by 60% year over year and continues recruiting originator teams, CFO Loveen Advani said. Better is now combining its NEO and Better Mortgage operations, a move Lewis said will create efficiencies and improve execution.
The growing platform share supports Better’s transition away from a predominantly DTC lender. But the call exposed a divide within the enterprise strategy: Partnerships that connect through Tinman’s application programming interfaces fit Better’s new model, while complicated conversions of another lender’s existing systems may not.
“When you’re thinking about ripping out existing systems and training other people’s loan officers on the use of Tinman, those are very long sales cycles,” Lewis said. “They’re very expensive in terms of customer support.”
He was even more direct about the results.
“It’s the really complicated enterprise integrations that we think so far have not yielded material results,” Lewis said. “The cost associated with them has been high.”
Better will instead prioritize consumer platforms such as Credit Karma, where it powers an AI-driven mortgage refinance experience, along with Coinbase, its NEO operation, white-label relationships, wholesale brokers, and other partners that can connect more directly with Tinman.
The shift does not mean enterprise demand has disappeared, Lewis said. It means Better is becoming more selective about which business it pursues.
“We are not simply interested in partnership announcements,” he said. “Our objective is to build an organization that consistently implements, supports, and grows them.”
Partner Growth Pushed To Q4
Better expects third-quarter loan volume of $1.375 billion to $1.525 billion, below its second-quarter result. It forecast total net revenue of $49 million to $52 million and an adjusted EBITDA loss of $15 million to $18 million.
At the midpoint, the guidance calls for $1.45 billion in volume, $50.5 million in revenue, and a $16.5 million adjusted EBITDA loss.
Management included no new partnership launches in that outlook.
“When you deal with large enterprises, you are subject to their rollout schedule, both in terms of the percentages of leads you would get, the actual launch dates, et cetera,” Lewis said. “It’s not a lack of demand at all for Tinman.”
Lewis said several HELOC partnerships have been signed but have not launched or begun producing meaningful volume. Multiple relationships are expected to start contributing in the fourth quarter.
Better’s existing enterprise production is weighted toward refinancing, leaving it exposed to elevated mortgage rates. Lewis said newer partnerships are more closely aligned with home equity, where demand is less dependent on a refinance cycle.
“The ones in the second half of the year, we think are going to start to be more meaningful because they’re the right kind of partner and it’s the right kind of product, which is our HELOC,” he said.
Better introduced a wholesale HELOC and closed-end second-lien platform last year. Lewis said the company is now preparing a broader Tinman solution for independent mortgage brokers, with that rollout expected to begin around the end of September.
“We intend to serve them, but only when we can deliver a best-in-class loan officer experience, faster funding, lower cost, and better customer outcomes,” he said.
The emphasis on readiness is notable. Better already has wholesale products, but Lewis’ remarks indicate the company still has work to do before Tinman can support the broader experience it wants to offer independent brokers.
“Our partnership support infrastructure still requires work, which reflects our direct-to-consumer heritage,” he said. “The expansion from direct-to-consumer to an enterprise model is not a simple evolution.”
HELOCs Carry More Revenue Per Loan
Better’s product mix changed substantially during the quarter.
Purchase volume increased 3% year over year to $824 million and accounted for 49% of production. Refinance volume rose 239% to $549 million, or 33% of the total.
HELOC and closed-end second-lien volume increased 23% year over year and 45% from the first quarter to $294 million. Home equity represented 18% of total volume, up from 12% in the previous quarter.
Although HELOCs have lower average balances than first mortgages, Advani said they generate higher average revenue per loan and therefore have a disproportionate effect on revenue.
Better expects the HELOC share of production to increase again during the third quarter, even though its guidance assumes that all of that business will come through DTC.
“We’ve factored in no HELOC partnerships in our 3Q guide,” Advani said. “It’s purely D2C.”
Lewis said Better does not need lower rates to create demand for the product.
“We already have a compelling HELOC product,” he said. “What we need is thoughtful distribution and continued improvement in customer acquisition costs, not additional demand or a different macro environment.”
For originators, Better’s home equity strategy represents the most immediate test of its new direction. Better is increasingly positioning Tinman as infrastructure that brokers, originators, and enterprise lenders can use to manufacture loans more efficiently.
Reported Loss Received A One-Time Benefit
Better posted a $30.6 million net loss, compared with a $36.3 million loss a year earlier.
Its adjusted EBITDA loss improved to $14 million from $22.9 million. However, the second-quarter result included a one-time $6.5 million release of a TRID reserve related to loans originated before June 2022.
Without that benefit, Better’s adjusted EBITDA loss would have been approximately $20.5 million, wider than the $18.8 million loss reported in the first quarter.
Advani said operating expenses, excluding the reserve effect, were approximately $75 million during the second quarter. The midpoint of Better’s third-quarter guidance assumes roughly $67 million, implying about $8 million in sequential savings.
“We started our cost cuts later in the quarter,” Advani said. “We couldn’t get the impact of the majority of them in Q2.”
Better now expects annualized cost reductions to exceed $45 million by year-end, up from its original $25 million target. Lewis said the reductions represent meaningful progress “but are not where we intend to stop.”
The company is targeting incremental contribution margins of 20% to 25% across its products and channels, Advani said. That focus explains why management is discouraging investors from judging Better solely on volume.
Lewis said contribution margin after marketing expenses and platform fees is the more appropriate measure than whether Better is “buying business in the marketing DTC channel.”
From ‘Founder Mode’ To Enterprise Execution
Lewis described Garg’s departure as the dividing line between two stages of Better’s development.
“The board concluded that we are really in a transitional phase between a founder mode-based company, which is creativity and many different projects, versus an enterprise stage of executing against very select ideas that have a demonstrated product-market fit,” Lewis said.
That explanation connects the CEO change with Better’s increased cost-reduction target, consolidation of NEO and Better Mortgage, narrower partnership criteria, and decision to stop attaching break-even expectations to a particular month.
Lewis has worked alongside Better’s management for approximately three months. He said his initial assignment was to strengthen execution and operational efficiency, but his responsibilities later grew to include enterprise partnerships and daily operations.
The board has retained a search firm and remains committed to finding a permanent CEO, Lewis said. He added that he has been given full authority to execute the company’s strategic plan while serving on an interim basis.
Asked whether Better was considering a sale or another transaction, Lewis said, “There’s no formal strategic alternatives process at this time.”
The company is separately pursuing the sale of Birmingham Bank, its U.K. subsidiary, through a process led by FT Partners.
Better ended the quarter with approximately $102 million in cash and cash equivalents and $10 million in restricted cash. Its $850 million in warehouse capacity follows two facility increases announced within one week in the spring.
Advani called the increased warehouse commitments “a strong vote of confidence” from Better’s funding partners.
Better Still Has To Win Industry Trust
Lewis’ plan creates a challenge that cannot be solved solely by engineering.
Better is asking independent brokers, mortgage companies, and originators to become customers after spending much of its history positioning technology as a way to reduce the industry’s dependence on them.
Roger Moore, president and founder of Loan Pronto, questioned whether Better can overcome that history.
“Technology matters. Better has undoubtedly built some impressive technology,” Moore wrote in a LinkedIn post following Garg’s departure. “But this industry also runs on trust, relationships, and reputation.”
Moore said Better “spent years dropping grenades on the very industry it now wants as its customer.”
NEO’s 60% volume growth gives Better evidence that Tinman can work within an originator-led model. But Lewis acknowledged that Better’s support systems have not yet fully caught up with its enterprise ambitions.
Better has volume, products, and partner interest. What it has not yet shown is that it can turn those assets into sustained profitability.
“Our objective is to establish credibility through execution,” Lewis said. “We will report our progress each quarter and let the results speak for themselves.”
