Vishal Garg: on things that you use for your home. Two, you get 1% cash back. So for a customer, they're effectively getting their rate or fees bought down as a result of that 1% cash back. Three, it creates a 30-year relationship with the consumer for us versus having a one-time transaction, which means that recurring refis for that consumer, cash-out refis, will be nearly instant and creates a super-engaged customer base for which then we can market other products like what we've done with homeowners insurance, which typically comes up for renewal every year. life insurance, any of these other products that we've traditionally had, we can then have an always-on relationship with the consumer versus a once-every-three-, five-, seven-year relationship with the consumer. I think it moves into... basically better being a home finance, home operating system for the consumer rather than just a one-time home transaction system. And we think that our partners have already started asking for it. It's just another, um, really good way for a partner to service their customer and maintain that. So a number of our partners are already asking us to replicate what we're doing internally for our D2C business for that. So it gives us another feather in our cap when we go and pitch HELOCs or home equity as a service to other companies or mortgage as a service to other companies.
Owen Rickert: It's very helpful. Thank you for all the color.
Operator: Thank you for your questions. Our next question is from the line of Ramzi El-Assal with Cantor Fitzgerald. Your line is live.
Ramzi El-Assal: Hi, good morning, and thanks for taking my question. Has the more challenging macro backdrop caused any slowdown in your partnership discussions or partnership pipeline conversion?
Vishal Garg: I think it's accelerated, especially within the traditional mortgage broker and retail mortgage lender channel. A lot of people were hoping 26 was the year that they were going to thrive in. And it's looking like with the Middle East conflict, things are tougher. So more and more banks are still looking to get into the business. Of course, the Middle East conflict and higher elevated rates and oil prices has an impact on the number of customers eligible for a refi, but it has an even bigger impact on unsecured consumer credit. And so we're starting to see a lot of inbound from other fintechs, other large consumer credit companies to pivot from their traditional unsecured offerings into a secured offering like a HELOC.
Ramzi El-Assal: Okay. And could you also comment on the... lone mix between Tin Man and Direct and kind of how the changing environment might play out in terms of your target there. I think it was 60% Tin Man by the end of the year. I'm just curious if the changing backdrop here has any impact on that target.
Vishal Garg: I think we're well on our way to achieving that target.
Michelle Levine: Yeah, I think, Ranjit, you're hitting on a great point. Had we been a traditional D2C play, We would have spent money on these leads up front and not have them convert. Because we're now relying on our partnership volumes, we're somehow de-risking ourselves from that eventuality.
Ramzi El-Assal: Interesting. Thank you very much.
Operator: Thanks for your questions. Our next question is from the line of Rohit Kulkarni with Roth Capital Partners. Your line is live.
Rohit Kulkarni: Hey, thanks, guys. One kind of just comparison of unit economics to the exchange you can. Can you just flag what's the difference between a Tinman platform-generated volume versus D2C specifically, like relative kind of cat profile gain on sale and longer term? Do you see a scenario where the contribution margin for... the platform volume would actually be structurally higher than your traditional D2C business.
Vishal Garg: That's a great question. Right now, we try to price our platform partnerships so we make the same amount of contribution margin. Revenue can change, right, because different partners are asking us to do different services for them. But we try to make the same contribution margin that we do on D2C in our platform business. And so, you know, as we scale, we're hoping to make sort of, you know, around $2,000 per loan of contribution margin on mortgage and slightly less than that on HELOCs in our Tin Man AI platform business. Over time, as the sale becomes more and more software, like the Margin profile is much better on Tin Man AI platform, but right now the gains from AI are captured first in D2C, which is why you saw our continued improvement or our unit economics on the D2C business. And then we port those things that work in D2C into the Tin Man AI platform business.
Rohit Kulkarni: Okay, got you. And regarding the current macro environment and rate kind of changes in the last 45 days. Historically, what is the typical lag in consumer behavior and how that impacts your business, assuming there is a pathway towards more stable macro in the next 60, 90 days? How do you anticipate that to impact your business business and over what duration and sorry for the multi-parter here. And is that, are you assuming any improvement in macro in your 2Q guide?
Vishal Garg: We're assuming no improvement in the macro in our 2Q guide. And so we're being conservative there. And we are – the typical cycle is you can start to see on refis in particular, you can see immediately within a week if a consumer comes in as a preapproval, if they're going to lock or not, or if they're hesitant. And usually when they are hesitant, we register in our – in our data, the price point at which they would transact, and then we hold them until they come back. Think of it like a limit order in stock trading. And then we see that behavior manifest itself out in refis. Purchase, as you know, is like a six-month cycle. And HELOC, depending on the use case, if it's for debt console, it can take you know, the consumer a month to decide on what debts to pay off or not, you know, what things that they care about or not. If it's, you know, more for home improvement or tuition or other things like that, they typically have a need that needs to be satisfied within a week, two weeks, three weeks.
Michelle Levine: Yeah, Rohit, I think the way to go with this is as we think about beyond the second quarter, if the environment stays where it is, we'll have increased indexation towards HELOCs and less so towards refi. And if the macro changes, then that equation will flip.
Rohit Kulkarni: I see. I got you. And then I know you reaffirmed bake even EBITDA by end of Q3. Q2 is still close to negative $13 million in EBITDA. Can you help us kind of what specifically bridges that Q2 to Q3, what are the factors under your control? And maybe just layered in the $25 million cost reduction program, how much of that is in Q2 and what other levels do you have in Q3?
Michelle Levine: Absolutely. Yeah, that's a great question. So today, our current financials excludes the UK business, which is we're considering that it's just continued ops, right? As we think about getting to our breakeven targets, our current cash OPEX is about $68 million. That's the guidance that we're giving, right? So for us to get to profitability by the end of Q3, we'll have to get to a revenue mix or a revenue component of around low to mid-70s for us to breakeven at the end of Q3.
Rohit Kulkarni: Okay. Got you. Okay. I'll go back in the queue. Thank you, guys. Thank you for your questions.
Operator: Our next question is from the line of Owen Rickert with Northland Capital Markets. Your line is live.
Owen Rickert: Hi, guys. Thanks for taking my questions here. Could you talk a bit more about how some of those newer partnerships are ramping today? Are you seeing encouraging trends in engagement or conversion rates so far, and how have those partnerships trended on a monthly basis throughout the quarter?
Vishal Garg: The newest partnership is ramping up extremely well. I mean, we literally in the month of April went from $100 million a day top of funnel to $200 million a day top of funnel. $200 million a day top of funnel just multiplied by $250 million. business days is $50 billion of pre-approval volume. And we're still just scratching the surface. Our biggest partner, Credit Karma, we have exposed in many of the products to less than 1% of their customer base. For the top five retail lender, we're just ramping up their salespeople on the HELOC product. And they have hundreds of billions of dollars of MSR on their books that we're going to be targeting. which has a very, very high conversion rate. Our top three fintech, they're scaling. They're becoming, you know, a reasonably decent size of our HELOC volume. And so you've seen like monthly HELOC volumes start to continue to trend up. A little bit of that has been them. And then we've got a couple of banks in the queue off of our chat GPT announcement that we did, I think about two months ago.
Owen Rickert: and we're hoping to get them closed and operational and live shortly yeah thank you and then on the technology side where are you seeing the biggest operational or customer facing benefits from tools like betsy tin man ai in the broader machine learning initiatives the biggest benefit is in customer
Vishal Garg: contact capability, where consumers are now able to transact with Betsy 24-7, 365. And we're increasing the exposure of Betsy branded for our partners in their funnels. So I think the biggest uplift is going to actually be when we are able to fully deploy Betsy in our partner funnels, not just in our D2C funnel.
Owen Rickert: Great. Thank you.
Operator: Thanks for your questions. Ladies and gentlemen, once again, if you would like to ask a question today, remember it is star followed by the number one on your telephone keypad. Our next question comes from the line of Kartik Mehta with North Coast Research. Your line is live.
Kartik Mehta: Hey, good morning, Vishal. You know, one thing you've talked about are partnerships, and your partnerships are growing. If in the interim, the mortgage markets stay soft, but all of a sudden we get a big bump up, you know, if the war is over and all of a sudden you get a lot of activity, how do you manage the infrastructure if a demand spikes?
Vishal Garg: We are already... getting geared up for something like that. The best thing that we can do is in the old days, we had to rely on humans to staff up and pick up the phone, work late shifts, work weekends, and now we are able to simply leverage Betsy. Betsy loan officer, Betsy loan processor, Betsy loan underwriter, and In preparation for some of that, we're actually taking off some of the gloves where Betsy was recommending a particular task or a particular path to both the consumer or an internal person, and then the internal person was sending it out. We're now just having Betsy be on autopilot after close to over a year and a half of learning data. And so I think that that's just going to crush the operating cost framework and allow us to capture all the volume as it comes in.
Kartik Mehta: Hey, Vishal, in a couple of partnerships, you're not the only mortgage provider, but it seems as though you have a competitive advantage because of your technology. Have you seen your partners or talked to your partners about comparing your ability to serve their customers versus others that might be on the platform? And if so, what type of advantage is that giving you?
Vishal Garg: Our partners typically see an improvement of two X relative to the incumbent in terms of both productivity and customer served. So that's really the promise that we make to them is we're going to help you double revenue and we're going to help you cut your cost structure by 30 to 50%. And you'll make four, five, six times more money. And that's how it's playing out for our existing partners. That's why there's a wait list of people to get on the Tin Man AI platform, the ChatGPT Enterprise Edition. We're continuing to work through that. And the value prop to the partners is high. But as you know, the mortgage industry is an industry that the internet basically forgot. And so we have lots and lots and lots of mortgage people who are still operating on really old, antiquated systems. And what we're also finding is that their staff are used to just those systems. So frequently we go in and they tell us that, hey, you know, we'll keep this staff and then the rest of them, you know, why don't you like adapt them to the new system? And what they find eventually is that we have to do it all for them. So I think that is also, you know, upside in the margin profile that we land with a particular product or a particular implementation and then we expand from there.
Kartik Mehta: Perfect. Thank you very much. Appreciate it.
Operator: Thanks for your questions. Our next question is from the line of Brendan McCarthy with Sidoti. Your line is live.
Brendan McCarthy: Great. Good morning, everyone. Appreciate you taking my questions here. Just wanted to ask a quick question on Birmingham Bank, the UK-based bank. I know you classified it as discontinued operations, sell for sale. Can you give us any detail on when we might expect a sale regarding timing? Can you give us any color on potential capital release from that sale or perhaps sale proceeds?
Michelle Levine: Yeah. So, Brendan, this is Levine. We're in an active sale process. We've had an investment bank to lead that. We're in active discussions with potential buyers, right? That's all I want to disclose at this time, given that we're in active discussions. Even if you do sign, there's a regulatory approval process in the UK, which is going to take about two to four months. So think of the impact in Q4.
Brendan McCarthy: Understood. Thanks for that, Levine. Looking at the Coinbase partnership with the crypto-backed mortgage product, can you kind of walk us through the economics of that, you know, the revenue profile there and perhaps the launch timeline when we might see an impact in the P&O?
Vishal Garg: The currently publicly stated launch timeline is sometime in late Q2. The revenue profile from that product is starting to manifest itself. Obviously, we have more pricing power in that product than we do in your traditional, you know, direct-to-consumer product. And so, you should start to see, like, NEO-like margins on that product.
Brendan McCarthy: Got it. That's helpful. Thanks, Michelle. Last question, just back to the Q3 breakeven guide for adjusted EBITDA. Just to clarify, I know you mentioned you're assuming a pretty stable environment as it relates to the macro, but is there any risk to achieving that breakeven if, you know, rates move meaningfully higher or maybe the Middle East conflict is more prolonged than expected?
Vishal Garg: We're going to have to cut costs deeper. I think we're pretty committed to that number.
Brendan McCarthy: Understood. Thanks, everybody. That's all for me.
Operator: Thank you for your questions. And, ladies and gentlemen, that will conclude our Q&A session for today. Vishal, I'd like to turn it back over to you for any closing comments. Thank you.
Vishal Garg: Thanks, everyone. Q1 was a really good quarter for us. We signed a bunch of really big deals, and we executed on our plan, and we beat guidance. I know it's disappointing for the Q2 guidance for us to not get to the billion-dollar mark of loan originations that we had planned to in May, but we're going to make up for that in the context of cost-cutting, deeper change to a HELOC product, which Doesn't have a $350,000 balance, has a $100,000 balance, but makes basically the same amount of revenue. And, you know, using that to continue to drive revenue growth and a path towards profitability, which is what we're expecting in our Q2 guidance. And we're confirming again that we will achieve by the end of Q3 2026. So thank you all for continuing to have an interest in believing in better. And we appreciate you all. Thank you, everybody. Have a great day.
