Mortgage lender struggles with profitability despite increased demand for home equity products
Better Home & Finance Holding Company has announced strong revenue growth in its first quarter 2024 financial results, but profitability continues to be a challenge.
The company reported a 26% increase in revenue, reaching $22 million, compared to $18 million in the previous quarter. However, the net loss remained flat at $51 million.
The growth was primarily driven by increased demand for home equity products like HELOCs and cash out refinances, as well as improved conversion of purchase customers. The company recently launched a new fully digital home equity loan, allowing qualified homebuyers to access up to 90% of their home equity as cash.
“We are pleased to announce strong first quarter sequential funded loan volume and revenue growth, which we believe sets the stage for the continued growth we expect through the rest of 2024,” Better CEO Vishal Garg said in a Press release.
Better’s funded loan volume for the quarter was $661 million, up 25% from Q4 2023, spread across 1,991 total loans. Purchase loan volume grew by 12% quarter-over-quarter, accounting for 80% of funded loan volume. Refinance loan volume saw a 232% jump, comprising 12% of funded loan volume, while HELOC loan volume grew by 54%.
Despite these gains, Better continues to grapple with profitability. Adjusted EBITDA loss widened to $31 million, up from $27 million in the fourth quarter of 2023. The company ended Q1 2024 with $509 million in cash, restricted cash, and short-term investments.
Chief financial officer Kevin Ryan said the company was “laser-focused” on cost management and achieving profitability.
“Total expenses were down by approximately 30% year-over-year in the first quarter, while growing revenue year-over-year,” he said. “Going forward, we continue to thoughtfully lean into certain growth expenses to drive increased market share and efficiency, which will be balanced by continued cost discipline to target reaching profitability in the medium term.”
In a move to boost efficiency and growth, Better hired mortgage industry veteran Chad Smith as president and chief operating officer of Better Mortgage Corporation. Additionally, the company shifted from fixed compensation plans to commission-based compensation plans for loan officers, which has shown promising early results in productivity and customer conversion.
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“While we believe it is likely the purchase and refinance markets may continue to remain challenging in the near term, we are seeing increased demand from homeowners looking to tap into their home equity, as well as from new homebuyers looking to make a move this purchase season,” Garg said. “We expect these green shoot opportunities to help us achieve our growth goals for the year.”
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