Figure Technology Solutions, Inc. Class A Common Stock 2026 Q2 Earnings Call

Good morning, and welcome to Figure's second quarter 2026 earnings call. My name is Brian Mikulesky, Head of Investor Relations here at Figure. Joining me on today's call are Michael Tannenbaum, Chief Executive Officer, and Macrina Kgil, our Chief Financial Officer. Before we get started, I would like to note that in today's call, we will refer to certain non-GAAP measures. These measures have been reconciled to their GAAP equivalents in the earnings release we issued earlier this morning, as well as in Appendix, the supplemental slide presentation posted to our website. As a reminder, non-GAAP measures are not intended to be a substitute for GAAP results. I will also highlight that certain comments made during today's call may be considered forward-looking statements under federal securities law.

The company cautions you that forward-looking statements involve substantial risks and uncertainties, and a number of factors, many of which are beyond the company's control, could cause actual results, events, or circumstances to differ materially from those described in these statements. Please note the risk factors we have identified in our most recent Form 10-Q and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. A recording of this conversation will be made available on our website following the conclusion of this call. Following the conclusion of the prepared remarks, we will open the line for questions. With that, I will turn the call over to Michael Tannenbaum. Michael, please go ahead. Thank you, Brian.

Good morning, everyone, and thank you for joining today's call. Figure delivered another great quarter as more and more partners see our vision for bringing the capital markets on chain. As previewed in July, Figure generated $4.3 billion of consumer loan marketplace volume, beating the top end of our guidance by 4%, with 132% year-over-year growth. This was our strongest ever quarter, and we have seen continued strength in Q3, with application volumes on our platform surpassing $1 billion per week for the first time in early July. The continued rapid growth extends to our origination partner ecosystem as well. We now have 489 partners on our platform, up 102 from last quarter, with growth across all segments, including Independent Mortgage Banks, servicers, depositories, and Fintech SMB. Importantly, recently closed partners are ramping faster than we traditionally see.

Aided by our investments in AI-enabled onboarding processes, thereby proving the scalability of our model and the value we drive for partners. Overall, our flywheel is spinning faster and our blockchain-based infrastructure and marketplace advantages are compounding. Prospects are hearing about the benefits of our disruptive capital marketplace and our liquidity that is soon approaching what they get from the likes of Fannie Mae. The volume is improving our execution and pricing, adding loan buyers, and in turn, attracting more prospects. The investor side of the marketplace is also building momentum with large demand. Our recent pre-funded securitization is a great example, where investors committed to purchase the bonds on our platform before loans were originated, a testament to their confidence in the standardized nature of Figure production.

Investors continue to join the platform and appreciate our strong credit quality, the transparency and speed of our investor reporting, and the reduced third-party diligence costs characteristic of our platform. Not only do we have nearly 100% revenue growth, but we are accomplishing this with over 50% EBITDA margins. Our EBITDA margins were strong at 55% this quarter, reflecting the growth of the capital-light Figure Connect marketplace and our ongoing commitment to capital discipline. We are continuing to make progress towards our medium-term goal of 60% margins through the growth of Connect and the operating leverage inherent in our business model. This growth and margin profile puts us at a rule of 150 in the rule of 40 investor framework.

This quarter marked two years since the June 24 launch of our tokenized loan marketplace, Figure Connect, which now represents 65% of our consumer loan marketplace volume, up from 56% last quarter. This is very material growth, especially considering that aggregate volume is growing 130%+. That zero to 65 in just 2.0 years. Turns out, when you build a better highway on chain, capital moves at high speed. As a result, more of our growing volumes are generated off balance sheet, again, demonstrating the momentum of our partner flywheel. Growth in Connect has been broad-based, with both new partner additions and expanding wallet share with existing partners. In terms of new partners, our trend has been increasingly aggressive. At the time of our IPO, we had around 250 partners, which then was roughly three years after being in the B2B business.

Recent quarters have been 307, then 387, and now 489 this quarter. One new partner in Q2 onboarded straight to Figure Connect and has already become the largest or second-largest partner we have, depending on the month. Importantly, most whale-sized new partners are going direct to Connect, which means lots of incremental volume is skipping the Figure as intermediary phase. This gives us an updated line of sight to predict that Figure Connect is likely to approach 70% of volume in the medium term rather than our previous estimate of 60%. Each point of mix shift to Connect reduces balance sheet usage, increases fee-based economics, and builds towards our medium-term 60% EBITDA margin goal. We have said before that we are a company that does what we say. We do not just whale watch. We bring the whales, and we bring them into Figure Connect day one.

Take rate for the quarter was 3.6%, towards the low end of our guided range. We know take rate is an area of focus for investors, so I'd like to dedicate some time to addressing the contributing factors. For Figure, take rate is an output of our strategic focus on accelerating our growth flywheel rather than a metric we manage to. The results I've just shared in terms of volumes, partner network expansion, migration of channel mix towards Figure Connect, and our adjusted EBITDA performance all demonstrate strong execution towards that objective. The take rate performance reflects this in a few ways. First, Figure Connect has the lowest take rate of our three channels, although with strong contribution margin and the least capital intensity.

We now have our largest partners going direct to Figure Connect, which is a favorable dynamic to our business, although at the trade-off of take rate, and was not a dynamic we anticipated to accelerate this quickly when we gave the initial take rate range. Second, interest rates rose meaningfully in the quarter, which hurts our gain on sale and therefore impacts take rate. Third, we've previously mentioned that first lien loans typically have a lower take rate, and this quarter, we saw a 3x growth year-over-year in first lien volume, although at a flattish mix quarter-over-quarter. As we expand our first lien origination volumes, it's likely to be a modest headwind to this metric over time.

As we're nearly midway through Q3 today, our expectation is that the combination of these dynamics will keep the take rate at the bottom end of the guided range in the current quarter. Stepping back, when we set pricing with our customers, we focus on contribution margin, which includes operations and support costs, and therefore better reflects our total earnings power for each dollar of marketplace revenue. This strategy is working, and this is the first quarter in which ecosystem fees are the largest line item on our P&L. This is consistent with our strategic focus on increasing our scale and the network effects from our flywheel, including adding asset classes to our marketplace. To that point, as Kiavi closes later this year, this will add a new dynamic to take rate.

We're taking a closer look at this with the goal of giving you a better-aligned way to measure our success as we build out the platform with a focus on unit economic margins. More to come on that. Figure Connect's growth is also leading to growth in Democratized Prime. These are two complementary layers of the same capital market stack, designed to serve our partners at every stage of their financing journey. First, Figure Connect fast-tracks our ability to launch new asset classes, adding auto, small business, and third-party home equity alongside our core HELOC product, without needing to build the origination engine ourselves. This expands our platform breadth, adds diversification, and attracts deeper capital supply. Second, that increased supply systematically drives down borrowing costs across the platform.

Origination partners can leverage Democratized Prime as a flexible, modern warehouse facility to aggregate loans, benefiting from streamlined onboarding, significantly reduced operational friction, and rates that are closely competitive with legacy warehouse alternatives. Ultimately, growth in Figure Connect fuels growth in Democratized Prime, making it a key value proposition for the broader Connect ecosystem. Given the growth and maturity of these dynamics, we are moving quickly to launch the next phase of this initiative, which includes long-term capital takeout via whole loan sales and securitizations for non-Figure assets. Similarly, every partner we acquire is an upsell opportunity as we add more products like residential transition loans and DSCR with Kiavi. Our Kiavi acquisition will only serve to strengthen partner interest as their market-leading RTL technology was previously not available as a private label marketplace offering, and many prospects have therefore expressed excitement.

We have started to receive key regulatory approvals for the transaction and anticipate closing by the end of this year. This was a very attractive transaction with an under four-year unlevered payback period and adds 40% to our volume as well as $100 million of EBITDA. This was a great opportunity to use an inorganic approach to make our flywheel spin faster. The opportunity with Kiavi reflects an important point about Fintech and the broader problem Figure is solving. The residential transition loans are not agency eligible and therefore, companies like Kiavi use their advantages, underwriting, technology, and brand to benefit themselves. But that approach can only go so far. That is why we are so excited about our acquisition because we can use their market-leading technology to develop liquidity and standardization for the space.