# Better Home & Finance Holding Co: Form 10-Q for the period ended Sep 30, 2024

- Company: [Better Home & Finance Holding Co](/companies/betr.md) (CIK 1835856)
- Form: 10-Q
- Filed: 2024-11-14
- Accepted by EDGAR: Nov 14, 2024, 21:44 ET
- Period: 2024-09-30
- Accession: 0001628280-24-047936
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1835856/000162828024047936/aurcu-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1835856/000162828024047936/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $3.1m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $8.8m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $7.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $19.3m | us-gaap:ResearchAndDevelopmentExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $126.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $472.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$54.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$147.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$3.58 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$9.74 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$3.58 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$9.74 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 15,121,994 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 15,102,741 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$273.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $2.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $207.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-09-30 | $845.2m | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $844.8m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $388.0k | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 70,627 characters.

*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 September 30, 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) and Better Plus (Other revenue) and net interest income for the three and nine months ended September 30, 2024 and 2023 is as follows:

*(Amounts in thousands, except percentage amounts)*

|  | Three Months Ended September 30, 2024 Amounts | Percentages | 2023 Amounts | Percentages |
| --- | ---: | ---: | ---: | ---: |
| Gain on loans, net | $21,503 | 74% | $11,553 | 235% |
| Other revenue | 3,070 | 11% | 4,009 | 82% |
| Net interest income/(loss) | 4,421 | 16% | (10,655) | (217)% |
| Total net revenues | $28,994 |  | $4,907 |  |

*(Amounts in thousands, except percentage amounts)*

|  | Nine Months Ended September 30, 2024 Amounts | Percentages | 2023 Amounts | Percentages |
| --- | ---: | ---: | ---: | ---: |
| Gain on loans, net | $61,384 | 74% | $50,739 | 93% |
| Other revenue | 8,768 | 10% | 13,664 | 25% |
| Net interest income/ (loss) | 13,355 | 15% | (9,775) | (18)% |
| Total net revenues | $83,507 |  | $54,628 |  |

### 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 September 30, 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, primarily 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.

Key measures that we use in assessing our business include the following ($ in millions, except percentage data or as otherwise noted):

| Key Business Metric Home Finance | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Funded Loan Volume | $1,035 | $731 | $2,658 | $2,488 |
| Refinance Loan Volume | $130 | $47 | $289 | $178 |
| Purchase Loan Volume | $739 | $656 | $2,062 | $2,268 |
| HELOC Loan Volume | $166 | $28 | $307 | $41 |
| D2C Loan Volume | $776 | $384 | $1,805 | $1,392 |
| B2B Loan Volume | $259 | $346 | $853 | $1,095 |
| Total Loans (number of loans, not millions) | 3,443 | 2,067 | 8,429 | 6,936 |
| Average Loan Amount ($ value, not millions) | $300,589 | $353,547 | $315,350 | $358,660 |
| Gain on Sale Margin | 2.08% | 1.58% | 2.31% | 2.04% |
| Total Market Share | 0.2% | 0.2% | 0.2% | 0.2% |
| **Better Plus** |  |  |  |  |
| Better Real Estate Transaction Volume | $105 | $92 | $266 | $442 |
| Insurance Coverage Written | $1,068 | $1,233 | $3,300 | $3,965 |

### 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 $1,035 million in the three months ended September 30, 2024 increased by approximately 42% from $731 million in the three months ended September 30, 2023. Our Funded Loan Volume increased by approximately 7% period-over-period to $2,658 million in the nine months ended September 30, 2024 from $2,488 in the nine months ended September 30, 2023. Beginning in the third quarter of 2023, we also include HELOC and closed-end second lien loans in our Funded Loan Volume. For the three months ended September 30, 2024, purchase and refinance loans comprised $869 million and HELOC and closed-end second lien loans comprised $166 million of Funded Loan Volume. For the nine months ended September 30, 2024 purchase and refinance loans comprised $2,351 million while HELOC and closed-end second lien loans comprised $307 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 $130 million in the three months ended September 30, 2024 increased by approximately 177% from $47 million in the three months ended September 30, 2023. Our Refinance Loan Volume increased by approximately 62% year-over-year to $289 million in the nine months ended September 30, 2024 from $178 million in the nine months ended September 30, 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 increased by approximately 13% year-over-year to $739 million in the three months ended September 30, 2024 from $656 million in the three months ended September 30, 2023. Our Purchase Loan Volume decreased by approximately 9% year-over-year to $2,062 million in the nine months ended September 30, 2024 from $2,268 million in the nine months ended September 30, 2023.

**HELOC Loan Volume** represents the aggregate dollar amount of HELOC and closed-end second lien 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 the closed-end second lien product was launched towards the end of 2023, with volume becoming material in the first half of 2024. Our HELOC Loan Volume increased to $166 million in the three months ended September 30, 2024 from $28 million in the three months ended September 30, 2023. Our HELOC Loan Volume increased to $307 million in the nine months ended September 30, 2024 from $41 million in the nine months ended September 30, 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 $776 million in the three months ended September 30, 2024 increased by approximately 102% from $384 million in the three months ended September 30, 2023. Our D2C Loan Volume of $1,805 million in the nine months ended September 30, 2024 increased by approximately 30% year-over-year from $1,392 million in the nine months ended September 30, 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 $259 million in the three months ended September 30, 2024 decreased by approximately 25% from $346 million in the three months ended September 30, 2023. Our B2B Loan Volume of $853 million in the nine months ended September 30, 2024 decreased by approximately 22% year-over-year from $1,095 million in the nine months ended September 30, 2023.

**Total Loans** represents the total number of loans funded in a given period, including purchase loans, refinance loans, HELOC loans and closed-end second lien loans. Our Total Loans of 3,443 in the three months ended September 30, 2024 increased by approximately 67% from 2,067 in the three months ended September 30, 2023. Our Total Loans of 8,429 in the nine months ended September 30, 2024 increased by approximately 22% year-over-year from 6,936 in the nine months ended September 30, 2023.

Purchase and refinance loans comprised 2,196 of the Total Loans in the three months ended September 30, 2024, while HELOC and closed-end second lien loans comprised 1,247. Purchase and refinance loans comprised 5,887 of the Total Loans in the nine months ended September 30, 2024, while HELOC and closed-end second lien loans comprised 2,542.

Average days loans held for sale, excluding Company-funded LHFS and Company-funded HELOC, for the three months ended September 30, 2024 and 2023, were approximately 24 and 21, respectively. Average days loans held for sale, excluding Company-funded LHFS and Company-funded HELOC, for the nine months ended September 30, 2024 and 2023, were approximately 28 and 21, 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 Funded Loan Volume divided by Total Loans in a period. Our Average Loan Amount decreased by approximately 15% to $300,589 in the three months ended September 30, 2024 from $353,547 in the three months ended September 30, 2023 and decreased approximately 12% year-over-year to $315,350 during the nine months ended September 30, 2024 from $358,660 in the nine months ended September 30, 2023. In general, HELOC and closed-end second lien loans have lower average loan amounts than purchase or refinance loans, and therefore Average Loan Amount has decreased as a result of the growth of HELOC and closed-end second lien growth as a percentage of our fundings.

**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 50 basis points to 2.08% during the three months ended September 30, 2024 from 1.58% for the three months ended September 30, 2023. We saw an increase in our Gain on Sale Margin for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, as a result of improved pricing on loans funded. Gain on Sale Margin increased by approximately 27 basis points to 2.31% for the nine months ended September 30, 2024 from 2.04% for the nine months ended September 30, 2023 as a result of improved pricing on loans funded.

**Total Market Share** represents Funded Loan Volume in a period divided by total value of loans funded in the industry for the same period, as presented by FNMA. Our Total Market Share of 0.2% during the three months ended September 30, 2024 remained substantially the same as 0.2% in the three months ended September 30, 2023. Our Total

Market Share of 0.2% for the nine months ended September 30, 2024 remained substantially the same year-over-year from 0.2% for the nine months ended September 30, 2023. While we are leaning into growth and have seen an increase in our Total Loans and Funded Loan Volume for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, the total value of loans funded in the industry has also increased and the mortgage market remains competitive among lenders, given the interest rate environment, resulting in relatively flat market share on a percentage basis. We continue to focus on originating the most profitable business available to us and seek to avoid growing through highly unprofitable channels.

### 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. Insurance Coverage Written amounts for Better Cover have been updated for all periods presented to include 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, other revenue, and net interest income.

#### 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 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 IRLCs and forward sale commitments. IRLCs include the fair value upon purchase/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.

#### 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 recognize 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.

#### Net Interest Income

Net interest income includes interest income from LHFS, including HELOCs, calculated based on the note rate of the respective loan, interest income from short-term investments, and interest income on loans held for investment, through our U.K. operations. Interest expense includes interest expense on warehouse lines of credit, interest expense on customer deposits, through our U.K. operations, as well as interest expense on the convertible note, a senior subordinated convertible note in the aggregate principal amount of $528.6 million issued to SB Northstar LP (the “Convertible Note”).

### 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.

#### Compensation and Benefits Expenses

Compensation and benefits expenses 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. Compensation and benefits excludes amounts capitalized for internal developed software.

#### 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.

### Results of Operations

The following table sets forth certain consolidated financial data for each of the periods indicated:

*(Amounts in thousands, except per share amounts)*

| Revenues: | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Gain on loans, net | $21,503 | $11,553 | $61,384 | $50,739 |
| Other revenue | 3,070 | 4,009 | 8,768 | 13,664 |
| Net interest income |  |  |  |  |
| Interest income | 9,867 | 4,043 | 27,900 | 18,006 |
| Interest expense | (5,446) | (14,698) | (14,545) | (27,781) |
| Net interest income/(loss) | 4,421 | (10,655) | 13,355 | (9,775) |
| Total net revenues | 28,994 | 4,907 | 83,507 | 54,628 |
| Expenses: |  |  |  |  |
| Compensation and benefits | 37,752 | 84,329 | 111,079 | 156,437 |
| General and administrative | 12,611 | 14,234 | 41,813 | 43,700 |
| Technology | 7,249 | 6,349 | 19,289 | 31,959 |
| Marketing and advertising | 12,101 | 5,064 | 25,186 | 15,925 |
| Loan origination expense | 3,774 | 627 | 7,142 | 9,226 |
| Depreciation and amortization | 8,259 | 10,491 | 25,323 | 32,791 |
| Other expenses/(Income) | 1,332 | 237,043 | 270 | 247,572 |
| Total expenses | 83,078 | 358,137 | 230,102 | 537,610 |
| Loss before income tax expense | (54,084) | (353,230) | (146,595) | (482,982) |
| Income tax expense/(benefit) | 126 | 659 | 472 | 2,539 |
| Net loss | $(54,210) | $(353,889) | $(147,067) | $(485,521) |
| Earnings (loss) per share attributable to common stockholders (Basic) | $(3.58) | $(35.63) | $(9.74) | $(66.54) |
| Earnings (loss) per share attributable to common stockholders (Diluted) | $(3.58) | $(35.63) | $(9.74) | $(66.54) |

44

### Three and Nine Months Ended September 30, 2024 as Compared to Three and Nine Months Ended September 30, 2023

#### Revenues

The components of our revenues for the period were:

*(Amounts in thousands)*

| Revenues: | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 |  | 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Gain on loans, net | 21,503 | 11,553 | 61,384 |  | 50,739 |
| Other revenue | 3,070 | 4,009 | 8,768 |  | 13,664 |
| Net interest income |  |  |  |  |  |
| Interest income | 9,867 | 4,043 | 27,900 |  | 18,006 |
| Interest expense | (5,446) | (14,698) | (14,545) |  | (27,781) |
| Net interest income | 4,421 | (10,655) | 13,355 | — | (9,775) |
| Total net revenues | $28,994 | $4,907 | $83,507 |  | $54,628 |

#### Gain on loans, net

The components of our gain on loans, net for the period were:

*(Amounts in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Gain on sale of loans, net | $15,836 | $9,589 | $44,032 | $42,809 |
| Integrated partnership fees | 2,441 | 2,830 | 7,184 | 8,108 |
| Loan repurchase recovery (reserve) | 3,226 | (866) | 10,168 | (178) |
| Total gain on loans, net | $21,503 | $11,553 | $61,384 | $50,739 |

Gain on sale of loans, net increased $6.2 million or 65% to $15.8 million for the three months ended September 30, 2024 compared to $9.6 million for the three months ended September 30, 2023. The increase was largely driven by increased Funded Loan Volume and improved pricing on loans funded.

Gain on sale of loans, net increased $1.2 million or 3% to $44.0 million for the nine months ended September 30, 2024 compared to $42.8 million for the nine months ended September 30, 2023. The increase was largely driven by increased Funded Loan Volume and improved pricing on loans funded.

Integrated partnership fees decreased $0.4 million, or 14% to a gain of $2.4 million for the three months ended September 30, 2024, compared to gain of $2.8 million for the three months ended September 30, 2023. The decrease in integrated partnership fees was primarily driven by the reduction in B2B Loan Volume.

Integrated partnership fees decreased $0.9 million, or 11% to a gain of $7.2 million for the nine months ended September 30, 2024, compared to gain of $8.1 million for the nine months ended September 30, 2023. The decrease in integrated partnership fees was primarily driven by the reduction in B2B Loan Volume.

Loan repurchase reserve decreased $4.1 million or 473%, to a recovery of $3.2 million for the three months ended September 30, 2024, compared to a reserve of $0.9 million for the three months ended September 30, 2023. The loan repurchase reserve has decreased as our estimate for potential loss exposure has declined 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.

Loan repurchase reserve decreased $10.3 million or 5812%, to a recovery of $10.2 million for the nine months ended September 30, 2024, compared to a reserve of $0.2 million for the nine months ended September 30, 2023. The loan repurchase reserve has decreased as our estimate for potential loss exposure has declined 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:

*(Amounts in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| International lending revenue | $1,190 | $1,072 | $3,517 | $2,740 |
| Insurance Services | 438 | 997 | 1,614 | 2,822 |
| Real estate services | 753 | 651 | 1,753 | 6,517 |
| Other revenue | 689 | 1,289 | 1,884 | 1,585 |
| Total other revenue | $3,070 | $4,009 | $8,768 | $13,664 |

International lending revenue increased $0.1 million, or 11% to $1.2 million for the three months ended September 30, 2024 compared to $1.1 million for the three months ended September 30, 2023. The increase in international lending revenue was primarily driven by increased operations in the U.K. brokerage businesses.

International lending revenue increased $0.8 million, or 28% to $3.5 million for the nine months ended September 30, 2024 compared to $2.7 million for the nine months ended September 30, 2023. The increase in international lending revenue was primarily driven by increased operations in the U.K. brokerage businesses.

Insurance services revenue decreased $0.6 million, or 56% to $0.4 million for the three months ended September 30, 2024 compared to $1.0 million for the three months ended September 30, 2023. The decrease in insurance services revenue was primarily driven by a decrease in Insurance Coverage Written due to fewer insurance transactions, as well as lower revenue generated on each insurance transaction.

Insurance services decreased $1.2 million, or 43% to $1.6 million for the nine months ended September 30, 2024 compared to $2.8 million for the nine months ended September 30, 2023. The decrease in insurance services revenue was primarily driven by a decrease in Insurance Coverage Written due to fewer insurance transactions, as well as lower revenue generated on each insurance transaction.

Real estate services increased $0.1 million, or 16% to $0.8 million for the three months ended September 30, 2024 compared to $0.7 million for the three months ended September 30, 2023. The increase in real estate services revenue was primarily driven by an increase in Better Real Estate Transaction Volume .

Real estate services decreased $4.8 million, or 73% to $1.8 million for the nine months ended September 30, 2024 compared to $6.5 million for the nine months ended September 30, 2023. The decrease in real estate services was primarily driven by a reduction in Better Real Estate Transaction Volume as well as earning lower revenue per transaction for the nine months ended September 30, 2023 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.

Other revenue decreased by $0.6 million, or 47% to $0.7 million for the three months ended September 30, 2024 compared to $1.3 million for the three months ended September 30, 2023. The change in other revenue was driven by changes in mortgage and non-mortgage loan servicing activities in the U.S. and U.K. as well as other miscellaneous income.

Other revenue increased by $0.3 million, or 19% to $1.9 million for the nine months ended September 30, 2024 compared to $1.6 million for the nine months ended September 30, 2023. The change in other revenue was driven by changes in mortgage and non-mortgage loan servicing activities in the U.S. and U.K. as well as other miscellaneous income.

#### Net Interest Income

The components of our net interest income for the period were:

*(Amounts in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Mortgage interest income | $5,400 | $3,577 | $12,832 | $12,305 |
| Interest Income from Investments | 4,467 | 466 | 15,068 | 5,701 |
| Warehouse interest expense | (3,815) | (2,758) | (8,582) | (9,544) |
| Other interest expense | (1,631) | (11,940) | (5,963) | (18,237) |
| Total net interest income/(loss) | $4,421 | $(10,655) | $13,355 | $(9,775) |

Mortgage interest income increased $1.8 million, or 51% to $5.4 million for the three months ended September 30, 2024 compared from $3.6 million of the three months ended September 30, 2023. The increase in Mortgage interest income was driven by increased Funded Loan Volume and Total Loans originated.

Mortgage interest income increased $0.5 million, or 4% to $12.8 million for the nine months ended September 30, 2024 compared from $12.3 million of the nine months ended September 30, 2023. The increase in Mortgage interest income was driven by increased Funded Loan Volume and Total Loans originated.

Interest income from investments increased $4.0 million, or 859% to $4.5 million for the three months ended September 30, 2024 compared to $0.5 million for the three months ended September 30, 2023. The increase in interest income from investments was primarily driven by increased investments in 2024 in securities with maturities ranging from 90 days to 1 year, driven by our cash management strategies and increased available liquidity resulting from the capital raised in August 2023 through the closing of the Business Combination.

Interest income from investments increased $9.4 million, or 164% to $15.1 million for the nine months ended September 30, 2024 compared to $5.7 million for the nine months ended September 30, 2023. The increase in interest income from investment was primarily driven by increased investments in 2024 in securities with maturities ranging from 90 days to 1 year, driven by our cash management strategies and increased available liquidity resulting from the capital raised in August 2023 through the closing of the Business Combination.

Warehouse interest expense increased $1.1 million, or 38% to $3.8 million for the three months ended September 30, 2024 compared to $2.8 million for the three months ended September 30, 2023. The increase in warehouse interest expense was primarily driven by carrying a higher average warehouse balance over the three months ended September 30, 2024 compared to three months ended September 30, 2023 as a result of an increase in loans funded over the same period.

Warehouse interest expense decreased $1.0 million, or 10% to $8.6 million for the nine months ended September 30, 2024 compared to $9.5 million for the nine months ended September 30, 2023. The decrease in warehouse interest expense was primarily driven by carrying a lower average warehouse balance over the nine months ended September 30, 2024 compared to nine months ended September 30, 2023. The decrease for the nine month period was driven by lower funded loan volume in the first and second quarters of 2024 in comparison to the first and second quarters of 2023.

Other interest expense decreased $10.3 million, or 86% to $1.6 million for the three months ended September 30, 2024 compared to $11.9 million for the three months ended September 30, 2023. Other interest expense for the three months ended September 30, 2024 is related to interest expense on the Convertible Note, which is at a lower interest rate, while interest expense for the three months ended September 30, 2023 is related to interest expense on our corporate line of credit, which was at a higher interest rate and was subsequently paid off in full in August 2023.

Other interest expense decreased $12.3 million, or 67% to $6.0 million for the nine months ended September 30, 2024 compared to $18.2 million for the nine months ended September 30, 2023. Other interest expense for the nine months ended September 30, 2024 is related to interest expense on the Convertible Note, which is at a lower interest rate, while interest expense for the nine months ended September 30, 2023 is related to interest expense on our corporate line of credit, which was at a higher interest rate and was subsequently paid off in full in August 2023.

#### Expenses

The components of our expenses for the period were:

*(Amounts in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Compensation and benefits | 37,752 | 84,329 | 111,079 | 156,437 |
| General and administrative | 12,611 | 14,234 | 41,813 | 43,700 |
| Technology | 7,249 | 6,349 | 19,289 | 31,959 |
| Marketing and advertising | 12,101 | 5,064 | 25,186 | 15,925 |
| Loan origination expense | 3,774 | 627 | 7,142 | 9,226 |
| Depreciation and amortization | 8,259 | 10,491 | 25,323 | 32,791 |
| Other expenses/(Income) | 1,332 | 237,043 | 270 | 247,572 |
| Total operating expenses | $83,078 | $358,137 | $230,102 | $537,610 |

Compensation and benefits expenses were $37.8 million for the three months ended September 30, 2024, a decrease of $46.6 million or (55)% as compared with $84.3 million for the three months ended September 30, 2023. We reduced our headcount between the two periods, which lead to a decrease in compensation and benefits. Further, we had a significantly higher stock based compensation expense during three months ended September 30, 2023 of $39.4 million compared to $5.5 million during three months ended September 30, 2024, which was due to awards that had met the liquidity event criteria with the Closing of the Business Combination in August 2023 as well as service based conditions during that period.

Compensation and benefits expenses were $111.1 million for the nine months ended September 30, 2024, a decrease of $45.4 million or (29)% as compared with $156.4 million for the nine months ended September 30, 2023. We reduced our headcount between the two periods, which lead to a decrease in compensation and benefits. Further, we had a significantly higher stock based compensation expense during nine months ended September 30, 2023 of $47.9 million compared to $21.8 million during the nine months ended September 30, 2024, which was primarily due to awards that had met the liquidity event criteria with the Closing of the Business Combination in August 2023 as well as service based conditions during that period.

General and administrative expenses were $12.6 million for the three months ended September 30, 2024, a decrease of $1.6 million or 11% as compared with $14.2 million in the three months ended September 30, 2023. The decrease in general and administrative expenses was driven primarily by decreases in expenses which were incurred in the prior period due to the Closing of the Business Combination which drove an increase in professional services and other related fees. This decrease was offset by increased operating expenses associated with maintaining public company infrastructure for the three months ended September 30, 2024.

General and administrative expenses were $41.8 million for the nine months ended September 30, 2024, a decrease of $1.9 million or 4% as compared with $43.7 million in the nine months ended September 30, 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 decreases in professional services as we were incurring higher legal and professional expenses leading up to the Closing of the Business Combination for the nine months ended September 30, 2023 in comparison to the nine months ended September 30, 2024. This decrease was offset by increased operating expenses associated with maintaining public company infrastructure for the nine months ended September 30, 2024.

Technology expenses were $7.2 million for the three months ended September 30, 2024, an increase of $0.9 million or 14% as compared with $6.3 million in the three months ended September 30, 2023. The increase in technology expenses was driven primarily by an increase in costs associated with software vendors required to run our systems infrastructure compared to the prior period.

Technology expenses were $19.3 million for the nine months ended September 30, 2024, a decrease of $12.7 million or 40% as compared with $32.0 million in the nine months ended September 30, 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, which occurred in early 2023.

Marketing and advertising expenses were $12.1 million for the three months ended September 30, 2024, an increase of $7.0 million or 139% as compared with $5.1 million in the three months ended September 30, 2023. The increase is due to a focus on growth to drive volume which started at the end of the first quarter in 2024. Marketing and advertising is composed of performance advertising and pilot marketing, which performance advertising scales with volume through existing channels while pilot marketing is market spend to test new channels along with testing brand marketing, which generally costs more upfront.

Marketing and advertising expenses were $25.2 million for the nine months ended September 30, 2024, an increase of $9.3 million or 58% as compared with $15.9 million in the nine months ended September 30, 2023. The increase is due to a focus on growth to drive volume which started at the end of the first quarter in 2024. Marketing and advertising is composed of performance advertising and pilot marketing, which performance advertising scales with volume through existing channels while pilot marketing is market spend to test new channels along with testing brand marketing, which generally costs more upfront.

Loan origination expenses were $3.8 million for the three months ended September 30, 2024, an increase of $3.1 million or 502%, as compared with $0.6 million in the three months ended September 30, 2023. The increase in loan origination expenses was driven by increased Funded Loan Volume, as well as the absence of certain one-time expense reversals associated with loan origination vendors present in the three months ended September 30, 2023.

Loan origination expenses were $7.1 million for the nine months ended September 30, 2024, and decrease of $2.1 million or 23%, as compared with $9.2 million in the nine months ended September 30, 2023. The decrease in loan origination expenses was driven by a reduction in costs associated with loan origination vendors, as well as improved technology efficiency that reduced the reliance on certain loan origination vendors.

Other expenses/(income) was an expense of $1.3 million for the three months ended September 30, 2024, a decrease of $235.7 million or 99%, as compared with expenses of $237.0 million in the three months ended September 30, 2023. The decrease in other expenses was primarily driven by a loss of $237.7 million on the fair value of the embedded derivative included within the Pre-Closing Bridge Notes which converted to common stock in connection with the Closing of the Business Combination during three months ended September 30, 2023.

Other expenses/(income) was an expense of $0.3 million for the nine months ended September 30, 2024, a decrease of $247.3 million or 100%, as compared with expenses of $247.6 million in the nine months ended September 30, 2023. The decrease in other expenses was primarily driven by a loss of $236.6 million on the fair value of the embedded derivative included within the Pre-Closing Bridge Notes which converted to common stock in connection with the Closing of the Business Combination during three months ended September 30, 2023.

### 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 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 Convertible Note, 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 and equity related liabilities, change in fair value of convertible preferred stock warrants, change in fair value of bifurcated derivative, and restructuring, impairment, and other 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 and equity related liabilities, change in fair value of convertible preferred stock warrants, change in the fair value of bifurcated derivative, and restructuring, impairment, and other 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:

*(Amounts in thousands)*

| Adjusted Net Loss | Three Months Ended September 30, 2024 |  | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net income (loss) | $(54,210) |  | $(353,889) | $(147,067) | $(485,521) |
| Stock-based compensation expense (1) | 5,487 |  | 39,417 | 21,812 | 47,879 |
| Change in fair value of warrants and equity related liabilities (2) | (206) |  | (861) | (927) | (861) |
| Change in fair value of convertible preferred stock warrants (2) | — |  | — | — | (266) |
| Change in fair value of bifurcated derivative (3) | — |  | 237,667 | — | 236,603 |
| Restructuring, impairment, and other expenses (4) | 43 |  | 679 | 948 | 11,508 |
| **Adjusted Net Loss** | $(48,886) |  | $(76,987) | $(125,234) | $(190,658) |
| **Adjusted EBITDA** |  |  |  |  |  |
| Net income (loss) | $(54,210) |  | $(353,889) | $(147,067) | $(485,521) |
| Income tax expense / (benefit) | 126 |  | 659 | 472 | 2,539 |
| Depreciation and amortization expense (5) | 8,259 |  | 10,492 | 25,323 | 32,791 |
| Stock-based compensation expense (1) | 5,487 |  | 39,417 | 21,812 | 47,879 |
| Interest and amortization on non-funding debt (6) | 1,631 |  | 11,939 | 5,962 | 18,237 |
| Restructuring, impairment, and other expenses (4) | 43 |  | 679 | 948 | 11,508 |
| Change in fair value of warrants and equity related liabilities (2) | (206) |  | (861) | (927) | (861) |
| Change in fair value of convertible preferred stock warrants (2) | — |  | — | — | (266) |
| Change in fair value of bifurcated derivative (3) | — |  | 237,667 | — | 236,603 |
| **Adjusted EBITDA** | $(38,870) | $— | $(53,897) | $(93,477) | $(137,091) |

(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 warrants and equity related liabilities 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. Change in fair value of convertible preferred stock warrants represents change in fair value of liability-classified warrants as related to our convertible preferred stock before the completion of the Business Combination. These charges are 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, excluding HELOCs, 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 September 30, 2024, we had three warehouse lines of credit in different amounts and with various maturities, with an aggregate available amount of $425.0 million.

### Warehouse Lines of Credit

As of September 30, 2024 and December 31, 2023, we had the following outstanding warehouse lines of credit:

*(Amounts in thousands)*

|  | Maturity | Facility Size | Amount Outstanding September 30, 2024 | Amount Outstanding December 31, 2023 |
| --- | --- | ---: | ---: | ---: |
| Funding Facility 1 (1) | September 30, 2024 | 100,000 | — | 61,709 |
| Funding Facility 2 (2) | December 6, 2024 | 150,000 | 72,379 | 40,088 |
| Funding Facility 3 (3) | August 1, 2025 | 175,000 | 62,102 | 24,421 |
| Total warehouse lines of credit |  | $425,000 | $134,481 | $126,218 |

**(1)** Interest charged under the facility is at the 30-day term SOFR plus 2.125%. Cash collateral deposit of $15 million is maintained and included in restricted cash. Subsequent to September 30, 2024, the Company extended the maturity to September 30, 2025.

(2) Interest charged under the facility is at the 30-day term 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 30-day term SOFR plus 1.75% - 3.75%. There is no cash collateral deposit maintained as of September 30, 2024.

### Nasdaq Compliance Requirements

On Friday, August 16, 2024, we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation, effecting the 1-for-50 reverse stock split of the Company’s common stock (the “Reverse Stock Split”) for the primary purpose of increasing the per share trading price of the Company’s Class A common stock to enable us to regain compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market (the “Nasdaq”). Our Class A common stock began trading on a split-adjusted basis on the Nasdaq upon the market open on Monday, August 19, 2024.

Effective August 16, 2024, as a result of the Reverse Stock Split, every 50 shares of the our issued and outstanding common stock was converted into one issued and outstanding share of Class A common stock, Class B common stock and Class C common stock, as applicable, without any change to the par value per share, the voting rights of the common stock, any stockholder’s percentage interest in the Company’s equity or any other aspect of the common stock.

As previously reported, on October 12, 2023, the Company was notified by the Listing Qualifications Staff (the “Staff”) of Nasdaq that the Company’s common stock failed to maintain a minimum bid price of $1.00 over the previous 30 consecutive business days as required by the Listing Rules of Nasdaq. If the Class A common stock is no longer listed on Nasdaq, or another national securities exchange, such delisting would constitute a fundamental change under the indenture for the Convertible Note that would require us to redeem the Convertible Note prior to maturity for an amount in cash equal to the principal amount of the Convertible Note plus accrued and unpaid interest to the redemption date.

On September 3, 2024, the Company received a letter from Nasdaq notifying us that the Staff has determined that for the last 10 consecutive business days, from August 19, 2024, to August 30, 2024, the closing bid price of the our common stock has been at $1.00 per share or greater, and accordingly, we have regained compliance with Listing Rule 5550(a)(2) and the matter is now closed.

### Cash Flows

The following table summarizes our cash flows for the periods presented:

*(in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash (used in) provided by operating activities | $(273,945) | $(79,416) |
| Net cash (used in) provided by investing activities | $(111,825) | $(42,066) |
| Net cash provided by (used in) financing activities | $93,108 | $330,929 |

52

### Nine Months Ended September 30, 2024 as Compared to Nine Months Ended September 30, 2023

#### Operating Activities

Net cash used by operating activities was $274 million for the nine months ended September 30, 2024, an increase of $195 million, or 245%, compared to net cash used by operating activities of $79 million for the nine months ended September 30, 2023. The increase in net cash used by operating activities was primarily due to originations of mortgage loans held for sale in excess of proceeds from sale of mortgage loans held for sale as the Company originated more loans towards the end of the current period. Also contributing to the increase in cash used by operating activities were net losses over the period.

#### Investing Activities

Net cash used in investing activities was $112 million for the nine months ended September 30, 2024, an increase of $70 million, or 166%, compared to net cash used in investing activities of $42 million for the nine months ended September 30, 2023. The increase in cash used in investing activities primarily consists of purchases of short-term investments in excess of maturities of short-term investments as well as originations of loans held for investment during the second and third quarters of 2024, namely through our U.K. operations. Loans held for investment are funded from our cash on hand.

#### Financing Activities

Net cash provided by financing activities was $93.1 million for the nine months ended September 30, 2024, a decrease of $238 million, or 72%, compared to net cash provided by financing activities of $331 million for the nine months ended September 30, 2023. The decrease in cash provided by financing activities was primarily driven by the Closing of the Business Combination during the nine months ended September 30, 2023 which led to a cash increase of $422 million mainly from the issuance of the Convertible Note, issuance of common stock, and proceeds of the Business Combination, offset by the repayment of the Corporate Line of Credit. During the nine months ended September 30, 2024, our cash provided by financing activities was mainly driven by an increase in customer deposits, namely through our U.K. operations.

### 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 as of and during the three and nine months ended September 30, 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;
- 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 our 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 our Class A common stock and Warrants; 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. 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.

## Market risk

As filed, 212 characters.

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.

## Controls and procedures

As filed, 5,486 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of September 30, 2024, our disclosure controls and procedures were not effective because of the previously disclosed material weaknesses in our internal control over financial reporting described below.

Notwithstanding the material weaknesses in our internal control over financial reporting, we have concluded that the consolidated financial statements included in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

### Previously Reported Material Weaknesses in Internal Control over Financial Reporting

As reported in Part II, Item 9A. “Controls and Procedures” of our 2023 Annual Report on Form 10-K, we previously identified the following material weaknesses in our internal control over financial reporting, which were not fully remediated as of December 31, 2023:

- The Company determined that certain actions taken by our CEO failed to set a tone at the top that supported a strong culture of internal controls based on the criteria established by the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”), which requires the Company to demonstrate a commitment to integrity and ethical values, and for management to establish structures, reporting lines, and appropriate authorities and responsibilities.
- The Company did not maintain an effective control environment nor did it implement proper control activities required by the COSO Framework due to the limited number of accounting personnel with relevant experience and sufficient capacity.
- The Company previously identified a material error in a valuation provided by a third-party due to the limited number of accounting personnel with relevant experience and sufficient capacity to review the valuation.

### Remediation of Previously Reported Material Weaknesses

With oversight from the audit committee of the Company’s board of directors and input from the Company’s board of directors, management is in the process of designing and implementing changes in processes and controls to remediate the material weaknesses described above. The measures we have taken and plan to take to remediate the identified material weakness and further evolving our accounting processes include:

- An independent management and ethics committee has been established to evaluate the control environment including review of ethical concerns, whistleblower concerns, and related party arrangements with periodic reporting to the Company’s board of directors.
- Company-wide training associated with ethics and compliance has been implemented.
- Management positions have been created to monitor the company’s culture and oversee operations.
- We have developed an organizational structure and specific roles within accounting designed to ensure specific and relevant expertise is in place to address pervasive concerns associated with deficiencies to the internal control over financial reporting environment and also to provide oversight and expertise for complex accounting transactions where the work of third party expertise is included in the control processes. Three experienced accounting personnel were onboarded in 2023 and the first two quarters of 2024 who have evaluated and redesigned processes and procedures designed to achieve effective internal controls.

We may modify our remediation plan and may implement additional measures as we continue to review, optimize and enhance our financial reporting controls and procedures in the ordinary course. We will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are designed and operating effectively.

### Changes in Internal Control over Financial Reporting

Other than as described above, during the most recently completed fiscal quarter, there has been no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 5,335 characters.

We are subject to various risks and uncertainties in the course of our business. For a discussion of these risks, please see the section entitled “Risk Factors” in our Annual Report on Form 10-K, filed with the SEC on April 8, 2024. Other than as stated below, there have been no material changes to the risk factors disclosed therein.

***Our CEO is involved in litigation that could have a material adverse effect on our revenues, financial condition, cash flows and results of operations.***

Vishal Garg, our CEO, is or has been involved in litigation related to prior business activities that includes at least one allegation about Better. In one action, the plaintiff alleged, among other things, that our CEO breached his fiduciary duties to another company he co-founded prior to Better, misappropriated intellectual property and trade secrets, converted corporate funds, and failed to file corporate tax returns. Mr. Garg’s motion for partial summary judgment in that action was granted on April 13, 2023, resulting in the dismissal of certain breach of fiduciary duty claims, among others, including claims that he misappropriated intellectual property and trade secrets for use in his other companies. That dismissal is being appealed, and there is no assurance that the decision to dismiss these claims will be upheld. The remaining claims in that action went to trial in May 2024 and, on May 17, 2024, the jury found Mr. Garg liable for breach of fiduciary duty and conversion. It awarded the plaintiff, Education Investment Finance Corporation, $4.5 million in compensatory damages and $1 million in punitive damages. Mr. Garg is seeking to overturn the verdict, as well as appealing it. In another action, plaintiff-investors in a prior business venture alleged that they did not receive required accounting documentation, that our CEO misappropriated funds that should have been distributed to the plaintiff-investors, and that such funds could have been invested in Better. These litigations could divert Mr. Garg’s attention from our business regardless of the outcome of such litigations.

There has been and will likely continue to be publicity regarding the litigations discussed above, which could negatively affect our reputation. If we were to become involved in the litigations against Mr. Garg, our involvement could impose a significant cost and divert resources and the attention of Mr. Garg and other members of our executive management from our business, regardless of the outcome of such litigations. Such costs, together with the outcome of the actions if resolved unfavorably, could materially and adversely affect our business, financial condition, and results of operations. Further, depending upon the outcome of these litigations, our licenses, which are necessary to conduct our business, could be materially and adversely affected.

***The ultimate effect of the Reverse Stock Split on the market price of our Common Stock cannot be predicted with any certainty and may decrease the liquidity of our Common Stock and magnify any decrease in our overall market capitalization.***

The ultimate effect of the Reverse Stock Split on the market price of our Common Stock cannot be predicted with any certainty, and we cannot assure you that the Reverse Stock Split will result in any or all of the expected benefits. While the Reverse Stock Split increased the per share trading price of the Company’s Class A common stock to enable the Company to regain compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, we can provide no assurances that the Reverse Stock Split will result in any permanent or sustained increase in the market price of our Class A common stock. The market price of our Class A common stock depends on multiple factors, many of which are unrelated to the number of shares outstanding, including our business and financial performance, general market conditions and prospects for future success, any of which could have a counteracting effect to the Reverse Stock Split on the per share price.

In addition, the Reverse Stock Split also reduced the total number of outstanding shares of our Common Stock, which may lead to reduced trading for our Common Stock. As a result of a lower number of shares outstanding, the market for our Common Stock may also become more volatile. The Reverse Stock Split will also increase the number of stockholders who own “odd lots” of less than 100 shares of Common Stock. A purchase or sale of less than 100 shares of Common Stock (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own fewer than 100 shares of our Common Stock following the Reverse Stock Split may be required to pay higher transaction costs if they sell their shares of our Common Stock.

Finally, the decline in the per share price of our Common Stock and the decline in our overall market capitalization may be greater following the Reverse Stock Split than would have occurred in the absence of a Reverse Stock Split. Any reduction in our market capitalization may be magnified as a result of the smaller number of total shares of the Company’s Common Stock outstanding following the Reverse Stock Split.

Filed Nov 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-047936. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.