Q3 2025 Earnings Call Transcript

Welcome to the Figure Technology Solutions Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Lastly, today's call is being recorded. I would now like to turn the call over to [ Craig Streem ] Investor Relations.

Thank you, Nicky. Good morning, everybody. Welcome to our third quarter 2025 earnings call. This is [ Craig Streem ] in the Investor Relations team at Figure.

Joining me on today's call are Mike Cagney, Executive Chairman and Co-Founder of figure; Michael Tannenbaum, our Chief Executive Officer; and Macrina Kgil, our Chief Financial Officer. In today's call, we will refer to certain non-GAAP measures, which are reconciled to GAAP measures in the earnings release we issued yesterday after the market closed and in the appendix to our supplemental slide presentation posted to our website. Non-GAAP measures are not intended to be a substitute for GAAP results. Certain statements made during today's call may contain forward-looking statements, which may vary materially from actual results.

Information concerning risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings and set forth on Page 3 of the earnings presentation we've posted in the IR section of our website and in the risk factors we've identified in our third quarter 10-Q filed earlier today as well as in other SEC filings. We're not undertaking any commitment to update these statements if conditions change, except as required by law. And a recording of the conversation will be made available on our website following the conclusion of today's call. Following the formal remarks, we will also open the line for questions, and I would encourage you to follow along in the posted earnings presentation as we go through our formal remarks.

And with that, I'll turn the call over to Michael Tannenbaum. Michael, please go ahead.

Thanks, Craig, and thanks to all of you who are joining us this morning. Let's begin by turning to Slide 4. As you saw in the earnings press release we issued after the close yesterday, we had a very strong third quarter with great results in all of our key performance metrics. Adjusted EBITDA, the measure that most clearly demonstrates the profitability of our business, reached $86 million in the quarter, an increase of 75% year-over-year and EBITDA margin reached 55%. Net income for the quarter was nearly $90 million, more than triple last year's quarter.

Total consumer loan marketplace volume reached almost $2.5 billion in the third quarter, representing a 70% increase year-over-year. This growth reflects continued expansion across our origination partner network and increased utilization of Figure Connect for liquidity. As more partners leverage the platform to fund and sell loans, we're seeing meaningful gains in both scale and efficiency. A standout example being first lien lending, where adoption has accelerated sharply among both new and existing partners.

Firstly, volumes nearly tripled year-over-year, making it one of our fastest-growing products this quarter. Partners are leaning into Figure Connect as a liquidity solution, enabling faster funding, improved execution and lower cost versus traditional channels. This momentum demonstrates how our marketplace model extends beyond home equity and into the broader consumer ecosystem, capturing a larger share of the housing finance value chain. We also continue to see encouraging progress from new product categories, which together contributed more than $80 million in volume in the third quarter.

These include innovative blockchain-based solutions for crypto-backed loans, loans to small and medium businesses and debt service covenant ratio, or DSCR, loans. Each of these products leverages the same origination and trading infrastructure that powers our core marketplace. This combination of core growth and product innovation reinforces the scalability of the Figure ecosystem. By expanding both vertically within home lending and horizontally across adjacent asset classes, we're creating multiple avenues for growth and ensuring that Figure remains the leading blockchain marketplace for consumer credit origination and liquidity.

Now let's turn to Slide 5. Given it's our first earnings call as a public company, I want to share a bit about our evolution and how we have succeeded in delivering against what we see as a generational capital markets opportunity. From the beginning of the company, we've had a relentless focus on innovation and technology, in particular, on the use of blockchain to drive scale, achieve competitive differentiation and disrupt incumbents. With mortgage and home equity, we identified a greenfield product set where we could improve the product experience and capital market. But our ultimate objective has always been to create a true marketplace that will connect assets with the capital markets in a capital-light manner that generates the sort of margins you see in this quarter's results.

Over time, we believe this will translate into lasting shareholder value. On Slide 6, I'll start by going back to 2018 when we became one of the first entities to originate consumer loans on blockchain. In 2020, we did the first securitization of blockchain assets. In 2023, we did the first AAA-rated securitization of blockchain assets and now our securitizations have AAA ratings from both S&P and Moody's.

To date, we've originated over $18 billion in loans on the Provenance blockchain and executed over $60 billion in blockchain transactions. We believe we are, by far, the largest player in the public blockchain real-world asset space and our lead is growing. We began as a direct-to-consumer lender using our balance sheet to originate loans. We very quickly grew to a business-to-business to consumer platform and now have nearly 250 third parties, that's up a lot from last quarter who use our technology to originate blockchain-native assets.

Originally, we used our balance sheet to bridge between our partners and the capital markets but we began to move away from that in June of 2024 with the launch of Figure Connect, where we allow our origination partners to access capital market liquidity directly. Instead of intermediating with our balance sheet, our partners sell directly to the capital markets using our marketplace. This fee-based model is more profitable for us, and in addition, does not require us to use our equity capital. We went from 0 volume in the marketplace of June of 2024 to having it comprise almost half of our total consumer loan marketplace volume in this quarter.

Turning to Slide 7. I want to share a bit more about why blockchain is so important to our approach and how it has become the backbone of our entire strategy. We focus on 3 foundational elements of blockchain. Transactional efficiency, liquidity and lending and each of these is an essential element contributing to our ability to transform capital markets. Starting with transactional efficiency, we have found that blockchain has enabled us to save roughly 85 basis points in securitization costs by taking advantage of the immutability of putting loan attributes on blockchain, which has allowed us to reduce third-party review costs.

Moving to liquidity. We created via standardization an homogeneity in our loans. Every loan originated across our now almost 250 partners is done electronically end-to-end on the blockchain without human involvement in the data. Regardless of the partner, every loan is underwritten the same way, and all performance data is captured transparently.

We've seen the value of this approach validated recently given some of the capital markets issues and fraud highlighted by the Tricolor and First Brands situation. Earlier, I mentioned $60 billion in transaction versus $18 billion in originations, which demonstrates that through Figure Connect, we're turning homogeneity and data integrity into real tradable liquidity. That's a breakthrough for a historically illiquid asset class and is quickly becoming one of Figure's strongest moats. Finally, the last element is what we broadly characterize as lending, specifically how lean perfection and cross collateralization can provide greater economic efficiency for a variety of products.

One way we're applying this directly is through Democratized Prime where our frictionless, short-term liquidity funding marketplace is delivering financing rates below those achievable in wholesale capital markets. This not only validates DeFI's potential efficiency, but also gives us a road map to extend this to other asset classes, something Mike Cagney will discuss later on this call. Turning to Slide 8. you'll see the 2 core marketplaces that anchor the Figure ecosystem today, our consumer credit marketplace and our digital asset marketplace. These are the primary engines of our business model.

The consumer credit marketplace supports our origination partners, which include banks, credit unions and mortgage companies. Every loan they originate is fully digitally standardized and executed on chain, creating homogeneity and transparency across the ecosystem. Our digital asset marketplace provides a connection point between the capital seekers I just spoke about and the capital providers who seek to earn the best possible return. Our digital asset marketplace is a global regulated exchange built on the same blockchain rails as our consumer credit network.

Embedded within this marketplace is Democratized Prime, our decentralized short-term funding market. Democratized Prime connects lenders and borrowers directly, eliminating traditional intermediaries. And importantly, it's not isolated from the rest of the platform. It can also finance the same loans originated by our consumer credit partners.

These 2 marketplaces work together. One generates high-quality, real-world assets and the other provides the liquidity to fund them. Across both ecosystems, our revenue model is simple. We earn a fee-based take rate on ecosystem volume.

On the next slide, you can see the illustration of the life cycle of a loan within the Figure ecosystem and how we capture value at each stage. Let's use a credit union partner as an example. When their customer applies for a loan, a credit union connects directly to Figure's system through an API or web app and sends us just a few key data points. Things like income, property details and loan amount.

Within seconds, our technology determines whether that loan meets prespecified underwriting parameters. If approved, Figure's platform automatically verifies both income and property value by linking to the consumer's bank account and third-party data sources. In nearly all cases, there's no human touch. The resulting data credit score, income and property valuation are written immutably to the blockchain forming a digital audit trail that dramatically reduces quality control costs as those loans move through the capital markets.

Loans are then aggregated and financed either through warehouse lines or increasingly on Democratized Prime before being sold to loan buyers. At sale, Figure earns a roughly 3% ecosystem fee which is deducted from proceeds, meaning our partners are not out of pocket. If the loan is later securitized through our platform, we earn an additional 40 basis points. Separately, we earn a 25 basis point annual servicing fee for as long as the loan remains outstanding, which typically runs about 5 years.

Across this life cycle, automation and blockchain verification translate to meaningful cost savings in origination, diligence and secondary market execution. All efficiencies that directly strengthen the partner economics while creating recurring high-margin revenue for Figure. These improved economics for all parties involved have been a significant contributor to the growth and relationships you'll see on the next slide. Our partner network is one of Figure's most powerful differentiators.

Today, that network spans traditional banks and credit unions, more than half of the top 20 independent mortgage banks and a growing base of fintechs, solar and home improvement companies. As highlighted in our earnings release, this quarter, we onboarded one of the largest mortgage servicers in the United States to our marketplace. These partners rely on our infrastructure to originate and distribute consumer credit products more efficiently creating a nearly continuous flow of high-quality assets. Because our partners can originate, fund and sell loans seamlessly, their economics improve and our overall reach continues to expand.

As a result, over the past 5 years, partner-originated volume has grown at roughly a 74% CAGR. This network is a core part of our flywheel, broadening access to borrowers while also increasing liquidity for investors across our platform. Turning to Slide 12, expanding the supply side to meet this demand for credit is an important part of our mission to be a marketplace for these products. We are achieving this through Figure Connect, a purpose-built marketplace that enables buying and selling of standardized blockchain-native assets for all counterparties in the transaction.

We now have a diverse range of participants on the platform. These are high-grade institutional counterparties such as banks, asset managers and insurers looking for transparent data-rich credit exposure that settles faster and more efficiently than anything available in traditional markets. On this same note, in Q3, we added 7 new buyers to our securitization program, including a prominent sovereign wealth fund who has become a programmatic buyer, benefiting our broader ecosystem. In short, Figure Connect is transforming what used to be a fragmented and opaque process into an always-on data transparent and institutionally funded marketplace, redefining how real-world assets move throughout the capital markets.

Before concluding on Slide 13, I want to also note that in the conversations with investors, we frequently hear we have a high "do versus say ratio". This slide summarizes some of the operational proof points we have been highlighting recently. The first is expanding our consumer loan marketplace to first lien, which is up almost 3x year-over-year and is rapidly proliferating through our partner ecosystem. The second is the progress on our blockchain pillars with our blockchain native equity listing and our growth in our stablecoin yields or YLDS.

The third is the ubiquity we have been building for our YLDS stablecoin, including recent expansions into the Sui and Solana ecosystems. We are committed to continued delivery on the growth of our marketplace and our vision of bringing the capital markets on chain. So before I hand it over to Mike, I want to take a step back and put this quarter in context. What you've heard today, strong financial results, growing partner adoption and continued product innovation, all reflect the strength of Figure's platform and the durability of our business model.

We're executing with discipline, scaling a capital-light marketplace and translating technology investment into measurable financial performance. At the same time, we're still in the early stages of an even larger opportunity, which is transforming the capital markets themselves. The traction we're seeing in Democratized Prime, the expansion of YLDS and the upcoming equity initiatives underscore how blockchain is driving real change here at Figure. I'm incredibly proud of the progress our team has made and confident in the foundation we've built for sustainable long-term growth.

With that, I'll turn it over to Mike Cagney to share his perspective on the broader opportunity ahead and the next phase of innovation at Figure.

Thanks, Michael. I want to start off my remarks today by reminding the investors about the enormous opportunity we're executing into at Figure. This quarter was exceptional. We optimized for the long term in our approach to product technology investment and corresponding shareholder value.

We're transforming the capital markets with blockchain, and we see the opportunity to build a $100 billion or more market capitalization company in this field. We built our consumer loan marketplace in a series of very deliberate, methodical steps over the past 7 years. And as Michael pointed out, that's clearly paying dividends for us today. The early progress you're seeing in YLDS and Democratized Prime is just that.

It's early progress, but we're confident that over time, we will continue to build out these products and many more we've not even revealed yet. On Slide 15, Democratized Prime, our DeFi lending product is an important part of our future. And in many ways, it's the most scalable platform, the most natural place for both third-party assets and our ecosystem. Many of you heard me talk about the liability flight from banks to stablecoin, which will in turn drive demand for DeFi as alternative funding sources.

We believe Democratized Prime is well positioned to benefit from that flight. Democratized Prime competes directly with traditional capital allocators that intermediate between sources and uses of capital, directly connecting borrowers and lenders and reduces significant time and cost benefits. We stood up at a number of loan marketplaces on Democratized Prime, and importantly, the funding cost there is lower than traditional warehouse lines. We see a significant opportunity to use Democratized Prime to offer warehouse into our existing Figure Connect lending partners eliminating the 90-day diligence, minimum fees, excessive legal costs that they have to face with the banks in lieu of a lightning fast, cheaper financing solution.

The economic model of Democratized Prime is compelling as it generates incremental pure margins since it operates as a decentralized exchange-like marketplace rather than a balance sheet business. This continues our broader trend of introducing capital-light, higher-margin products that expand the ecosystem's velocity and profitability. Over time, we see Democratized Prime becoming the preferred liquidity venue not only for assets originating within our consumer credit network, but also for blockchain native real-world assets more broadly and a direct extension of the structural efficiencies we built across the Figure platform.

And as we add additional blockchain ecosystem connectivity to YLDS, like you're seeing with Sui and Solana, we have a natural platform to access to Democratized Prime for their ecosystems. On Slide 16, earlier this week, we announced a partnership with Solana to deploy our yield-bearing stable coin YLDS on the Solana blockchain, the second major blockchain partnership for YLDS after Sui and that we've announced since the IPO. This collaboration brings together Solana speed, throughput and composability with YLDS regulatory anchor design and attractive transparent returns. The step also supports our broader strategy at Figure, building modern capital markets infrastructure that bridges traditional finance and decentralized systems.

YLDS is not just a token, it's a regulated financial infrastructure asset designed to support fiat movement on and off chain and enable a seamless flow of yield and liquidity across our ecosystem and other LLMs. The Solana and Sui deployments extend that capability into one of the most active blockchain developer communities, opening up new rails for innovation, adoption and scale. Finally, I'm pleased to share one major strategic marker that further accelerates how we are reinventing capital markets as we continue to build out the blockchain ecosystem Michael referred to. Yesterday, we announced that we filed a confidential S-1 for the upcoming launch of a blockchain-native equity share class on Provenance blockchain.

This offering is a nondilutive secondary transaction and represents the first public equity class to exist entirely on blockchain infrastructure. We'll share more about this offering in a call with the analysts and investor community next Tuesday, November 18 after the market closes, at which time we expect our registration statement will be public. This is a watershed moment for Figure for Provenance blockchain and for capital markets more broadly, and one we believe will define how asset classes are created, financed and traded for decades to come. With that, I'll turn it over to Macrina to walk through our financial results for the quarter.

Thanks, Mike. Turning to Slide 18. Let's take a closer look at our financial performance this quarter. As a reminder, at Figure, we focus on 3 key metrics: volume, revenue and EBITDA. Starting with volume, our total ecosystem activity continues to grow rapidly.

Notably, our consumer loan marketplace volume reached a record level nearing $2.5 billion this quarter. Importantly, volume on Figure Connect made up nearly half of the total consumer loan marketplace volume as we continue on our path to building out our capital-light marketplace with limited balance sheet exposure. Moving to revenue. Adjusted net revenue reached $156 million in the quarter, an increase of 42% from the third quarter of last year.

Adjusted net revenue benefited from the higher level of ecosystem volume I just mentioned, partially offset by lower take rates from partner branded volume as we shift more volume away from Figure branded. I would remind you that Figure-branded volume generates a higher growth take rate in revenue with higher operating expenses. Overall, our partner branded volume, especially volume from Figure Connect brings us higher adjusted EBITDA margin. Turning to our profitability.

Figure achieved an adjusted EBITDA of $86 million for the quarter, up 75% year-over-year, representing an adjusted EBITDA margin of 55.4% compared to 44.9% in the prior year period. That's over a 10-point improvement in margin, driven by operational efficiency, automation and the continued shift toward our marketplace. On the expense side, we continue to demonstrate meaningful operating efficiency. Our fixed costs, which include technology and product development as well as G&A functions like finance, legal and capital markets, have remained stable from pre-IPO levels relative to our revenue growth.

The investments in technology that we've made over the last 7 years allows us to add new product verticals without significant incremental development costs. Variable costs that move with our volumes have benefited from continued reduction in funding costs in addition to automation and AI applications embedded throughout the business. Variable expenses as a percentage of adjusted net revenue declined from 36% to 28% year-over-year, highlighting the efficiency of our marketplace model and transition away from using our balance sheet. On the next slide, there are trends I want to make sure you are aware of.

As we look ahead to the remainder of '25 and early '26, it's important to note the typical seasonality in home equity loan origination volumes that we expect to see in the fourth and first quarters based on historical information from '23 and '24. According to a third-party data source, Q4 and Q1 volumes historically trended below the annual average, lower than the yearly baseline. This pattern is consistent with what we've seen historically as demand for lending tends to moderate heading into the year-end holiday period and through the winter months. We see that consumers typically defer major financial decisions such as home improvements or debt consolidation during the late fall and winter as household budgets shift toward holiday spending and travel.

That said, we believe our diversified partner base and capital-light marketplace model position Figure to navigate these dynamics effectively. Before we close, I want to highlight the 3 long-term financial goals that guide our strategy shown on the next slide. First, adjusted EBITDA margin. We are targeting annual margins above 60%, reflecting the scalability of our model as more activity moves to Figure Connect, and as Democratized Prime adoption continues to grow.

These initiatives fundamentally reduce the need for balance sheet capital, increase transaction velocity and drive a higher contribution margin with each incremental dollar of volume and balance. Our progress this year with adjusted EBITDA margin reaching nearly 55% this quarter demonstrates that level is achievable in the longer term. Second, capital light. Figure is moving to a marketplace model and as partners increasingly originate, fund and sell loans through our platform, our role becomes that of an infrastructure provider, capturing recurring marketplace economics without tying up capital.

The transition to third-party and on chain funding through Figure Connect and Democratized Prime continues to reduce the use of our own balance sheet while maintaining liquidity and flexibility across the ecosystem. And third, operating efficiency. We've maintained a disciplined cost structure with limited increases in fixed expenses even as revenue and volume have scaled substantially. Our technology investments, particularly in AI and process automation have reduced variable costs as a percentage of revenue and allowed us to support more partners, more products and more transaction volume without proportional increases in headcount or spend.

We believe we are uniquely positioned as the future of capital markets with an integrated platform that uses blockchain to originate, finance and trade real-world assets at a fraction of traditional cost. As we continue to grow our partner networks and develop our decentralized finance capabilities, we expect to deliver sustained volume growth, stable and attractive take rates and expanding operating margins over time. I'd like to thank everyone for joining us today and for your continued interest in Figure. Nicky, we're now available for questions.

[Operator Instructions] Our first question is coming from Dan Dolev with Mizuho.

Amazing quarter. I mean you're really crushing it. You obviously crushed all of our expectations. So maybe a question for you, Michael and Mike, what is either of you most excited about in the business right now? Because there seems to be so many moving parts and so many great things. Kind of I think investors want to know what's the most exciting thing for you guys. And great results again.

Thanks, Dan. I'll start, and then I'll let Mike add what he's most excited about. For me, it's very simple. Our existing and future customers are coming to us rather than us going to them, asking us how they can use our blockchain tech to improve their business, which I think is definitely exciting.

I spend a lot of my time on partner acquisition and growth. And when I joined this company, blockchain for most of our partners was very much in the background. I've referred to it kind of similar to cloud technology where it just works. But increasingly, I see that our origination partners want to have conversations about our blockchain ecosystem more directly.

They're considering YLDS, our stablecoin and Demo Prime in addition to our tokenized loans, and they see the connection between these things. So that go-to-market and sort of that dynamic is very exciting. Mike, I would be interested to hear from you.

So I think you know my -- what I'm most excited about. I think the press release yesterday announcing that we're issuing equity native to public blockchain is a huge transformational opportunity. It's an opportunity to build an entirely new capital market ecosystem. And then unfortunately, I can't spend a ton of time talking about that today, but we're going to spend a lot of time talking about that next Tuesday.

But I think that's a real leap of us demonstrating that the value proposition that Michael articulated earlier in the call, the transactional efficiency, the liquidity and the capital financing DeFI aspects of blockchain are applicable not just to the credit asset class, which I think we've clearly demonstrated, but to other asset classes as well and equity being the next one on the agenda for us.

Our next question is coming from James Yaro with Goldman Sachs.

Also congrats on the IPO as well as on the strong results coming out of the gate here. I'd love to just touch on your product road map. What's the order of prioritization of your products from here? And then maybe if you could comment on the TAM and profitability of those top few products?

And what do you see as being meaningful to results among these new products over the next, let's say, 2 to 3 years?

Thanks, James. That's a good question. I'll start by saying that we have a huge $185 billion plus market opportunity in front of us. We see all consumer credit and asset classes, as Mike just mentioned, beyond consumer credit as addressable.

From the core standpoint of our HELOC product, we're executing into $35 trillion of home equity. And there is just a huge amount of runway in that product. Importantly, though, as you heard us mention in the prepared remarks, we've seen a lot of traction as well in the first lien aspect of the business, which is a -- which is the largest consumer credit asset class. And so that is something that we're pushing really hard, and we'll continue to do so in the coming quarters.

In terms of the blockchain ecosystem pillars, namely Democratized Prime and YLDS, we're also making significant progress and really excited in the coming months to share some ways that we're going to be bringing more liquidity and ubiquity to those products, particularly some of the liquidity you see in other blockchain ecosystems, bringing that into our Demo Prime marketplace. So Mike, I don't know if you want to elaborate on that a bit.

No, I think we're going to continue to invest in Demo Prime. It's a core aspect of what we're trying to deliver on in terms of capital market disruption. Then as I mentioned in Dan's comment or question, the application of equity native chain is really an extension of the existing infrastructure that we have. Obviously, it's an extremely novel transaction, but it's one that's tapping into again, the transactional efficiency, liquidity and financing benefits we've demonstrated on the credit side.

So we really look at this as just an extension, but an important part of the road map.

Yes, I'd like to add because it's -- could I just -- we called it Democratized Prime, which I think that name Democratized Prime is a reference to prime brokerage. So it really connects kind of all the pieces of our ecosystem, right? The cross-collateralization you could get across crypto, tokenized loans, tokenized equity. And so that name was very intentional, and you'll be hearing more about that in the future.

Next?

Super helpful. Maybe if you could just perhaps touch on the Figure Connect outlook. 46% of your volume on our estimates came from Connect this past quarter, which was better than at least we had anticipated. How do you think about the -- what that could comprise and over what time frame?

Sure. James, thank you for being on the call. How we think about Connect is we've made progress. We opened up Connect in June of 2024. Within 2025, we are already reaching very close to 50% of Connect volume across our overall consumer loan marketplace volume. We do think that in the mid- to near term, 60% of Connect volume is quite doable, and we're working hard with our partners to get there. .

Our next question is coming from Patrick Moley with Piper Sandler.

Congrats on the IPO. So you saw really impressive partner growth in the quarter. So I was hoping you could elaborate on that. Can you help us get a better sense for the composition of those new partners in terms of size and the types of loans you'd expect them to be originating.

And then how should we think about the time that it's going to take for those new partners to reach what you'd expect to be kind of a realistic run rate from them?

Yes. The partner growth was really impressive. I think the biggest aspect of partner growth for the quarter was growth in the SMB segment. That's because there -- it's completely greenfield, and we actually saw not only tailwinds because of the government shutdown and the small business administration being closed, but also just broad recognition of the opportunity and what we're doing and the applicability into the SMB use case.

That was coupled with a product improvement that we released that allowed us to underwrite small and medium business bank accounts. But more broadly, we are constantly onboarding a range of partners that range in size. And I think one of the nice things that add stability to our business is that we bring on people that can get up and running in as fast as 2 weeks. And then we bring on enterprise parties that are doing more of a years long in some cases, sales cycle and implementation, and we have all of that capability in-house.

This quarter, you saw us add a major servicer, one of the largest, if not the largest in the United States. We also added an extremely large independent mortgage bank. And we also added one of the players that has done a partnership with Robinhood and so we do expect to see some volume from there as well. And so we're continuing to add a diversified group of partners and that range in size and now also end market with the SMB additions.

Our next question is coming from Ryan Tomasello with KBW.

Congrats on the strong quarter out of the gate. I wanted to ask about Democratize Prime and YLDS. If you could just discuss the strategies you're leaning into to drive adoption there. I think one of the opportunities, it sounds like you've alluded to in the past is given the ecosystem you have, the possibility of promoting some incentives to existing origination partners as well as the underlying consumer borrowers to jump-start usage of those products.

So if you can just elaborate on what the strategy is there?

Sure. I'll start, and I'll let Mike add as he's very close to Democratized Prime. In terms of the marketplace, where we're focused today is on the funding side. We originate, as you can see from the results this quarter, a very large number of tokenized loans each month.

And ultimately, we see Democratized Prime as serving not only those loans but third-party loans as well. So it's a really massive opportunity. It's, frankly, the most scalable in many ways because of our ability to work and support with third-party assets. And so now our focus is on building out the funding side where we want to make sure that there is sufficient liquidity for these assets because when you're building out a marketplace, which is something that Figure has a lot of success in doing, you need to kind of control one side of the marketplace and then add others.

And so we have the asset side down, and we're looking to increase funding. Mike, anything you would add there?

Yes. I think as it relates to YLDS, the announcement with Sui and Solana are important in terms of the direction we're taking with YLDS. YLDS started as a Provenance security and Provenance doesn't have the builder community that both Sui and Solana have. And so bringing a security into those ecosystems where you have a fiat on/off ramp and a yielding stablecoin for purposes of payments, cross-border remit, collateral, we think is a significant opportunity, and we expect to get significant acceleration off of that.

We're also making headway with YLDS in terms of collateral on exchanges. I think you'll see some announcements from us as we go into the second half -- or at the end of this year as it relates to that and that's natural. We would expect that YLDS would be a superior collateral type versus USDC because of the yielding nature for it. On Democratized Prime, as Michael said, we have the ability to put billions of dollars of assets on there.

What we're looking at now is the funding side, and we're doing this in lockstep fashion. So we can't drop $1 billion of assets and then expect the capital to show up. Conversely, we can't drop $1 billion of capital unless we're ready to put the assets to work. What we're very focused on in terms of the capital side is replicating what Athena and others have done in liquid staking protocols where we have an underlying yielding asset.

In this case, a home equity line of credit or lending against such asset as the yield-generating feature for that as opposed to something Athena does, which is the drop between the spot and forward market and the yield that's there, which is extremely volatile as the market is seeing today. And so we expect that we have an enormous opportunity to drive asset generation through that yielding liquid staking protocol construct. And we believe that's going to add a significant amount of dollars in Democratized Prime.

Great. Appreciate all that color. And then in terms of the value proposition of tokenization, you've clearly demonstrated that within the consumer credit asset class thus far. But if you're able to give us just your general thoughts on what you see that value proposition being for tokenized equities given the stronger liquidity and transparency in that asset class at least relative to consumer credit.

So what are the additional benefits you see being unlocked from tokenization there?

Well, without getting too much into the structure because most of that's going to be covered on next Tuesday's call, and I do encourage everyone to join because I think it's very innovative, and we'll give a lot more detail. But I think one of the focuses and you've heard both Mike and I talk about this is a lot of the existing market today is focused on kind of tokenizing but not necessarily adjusting the full blockchain infrastructure behind that tokenization and what we're about to unveil will be a little bit more fundamental. So that's, I think, hopefully enough to make you interested in joining next Tuesday.

I can add to that a little bit in a more general construct. I think that a lot of our peers are discussing tokenization of equities and what they're doing is promoting the idea of taking a DTCC security and doing a blockchain representation of that. And the value prop they allude to is 24/7 trading. And I don't think 24/7 trading is that appealing to the broader market.

And I don't think the market makers want to make market 24/7. And so I think it's a little bit of a red herring in terms of why there's value here. If you go back to the 3 value props of blockchain that Michael talked through earlier, there's transactional efficiency, and there's some transactional benefit you get with a blockchain native equity. The transfer agent costs, for example, is lower, but it's not enough to move the needle. There's a liquidity benefit at the margin in that you do have 24 hours -- 24/7 trading.

But again, I think we were looking to lift FTX out of bankruptcy. They had a U.S. equity [ perp ] business that traded 24/7. And that's all that mattered, that business would have been flying and it was and it was going sideways. I think the real value in putting equity on blockchain is the DeFI construct, the ability to cross collateralize your stock with other assets like Bitcoin, like Figure loans, for example, and build unique borrowing pools through processes like Democratized Prime, where you access leverage in a way that traditional prime brokerage can't service. And even more importantly, the ability to lend that stock out.

So rather than the opaque locate market we have today, where the prime broker earns the benefit when the security goes on special and pays an extraordinary yield, you have a straight-up limit order book, a limit order book where you put the stock out for loan and you decide what you want to get paid for it. And that's enough that should drive anyone on the buy side to want to own the blockchain version of that security. There's considerations about liquidity and how do you keep the price in lockstep. Again, Michael alluded, we'll talk to that in depth next Tuesday, in particular, how we're doing this for our issuance.

But I think this is the future of how capital markets, equity capital markets are going to work. And just as we did with lending, where we pioneered it with our own product, we think we'll do the same thing here on equity.

We will move next with Rob Wildhack with Autonomous Research.

Just a quick one to start. I appreciate the comments on seasonality. Do you think we should expect the quarter-over-quarter cadence in 2025 to reflect what happened in 2024? Or are there any differences that we should be aware of this year? And then same question heading into 2026.

Rob, this is Macrina. So as you saw our Q3 was outsized growth compared to last year, and we have been trending really well with our IPO and all of the efforts with partners. I do expect some level of seasonality in Q4 and also into Q1, but I do want to balance out that we have been having great success with our partners. We're seeing a lot of interest.

So for us, it's more of a balanced approach.

Okay. And then bigger picture, you guys have really emphasized the lower cost to originate and faster time to close as big advantages. I think this quarter, we've seen or heard several other fintechs either growing in or expanding their own HELOC businesses, some even with automated appraisals, income verification, things like that. So I was hoping you could talk a bit more about the sources of your advantage like how much of the better Figure process comes from the blockchain-based infrastructure versus maybe more traditional tech improvements?

Because I think the extent to which it's the former could matter a lot for your defensibility there.

The thing to remember about what we do is we've built an alternative capital market that has deep liquidity ratings, tokenization and it brings -- we use blockchain as a tool to bring the transparency and to bring the immutability of the data. And for example, as we mentioned, highlighted this quarter with Tricolor, the lean perfection. And so having that data and the ability to track the true provenance of the loan is critical to building out that capital market. And so we're doing something very different than everybody else in the space.

And HELOC is just kind of a primitive to that marketplace. And the reason is because we've built an alternative capital market on blockchain rails. And to be very specific, when we make a change to our technology, it's integrated into the capital market. So what we do is if we decide to push an automation like we did with small business bank account, it's our capital market and technology that are working together, and it's that point of integration between those 2 that unlocks the really high margins that you see this quarter, the capital-light marketplace and the growth that you're seeing.

Our next question comes from Dan Fannon with Jefferies.

I wanted to discuss the outlook for the non-HELOC loan growth. I think it was roughly $80 million in the quarter. Can you talk about how you see that progressing as the products expand? And which of the products you mentioned in the release were really -- was there an outsized driver of those loans?

We're seeing significant growth in first lien, as we mentioned, 3x year-over-year. And that is the primary focus for figure of the new products that you've heard us mention because of the, frankly, market size and opportunity for our partners -- existing partners to grow. That said, the SMB and crypto backed loans are also extremely important to the growth story, HELOC loans has been grown as well around the 3x year-over-year number. And what we're seeing is just the beginning of that marketplace as we expect to pursue the same B2B2C approach that we did in the mortgage market.

And so today, that's mainly direct to consumer. And then in SMB, as we add more and more partners and build that go-to-market engine, we do expect to see significant growth there as well.

Great. And as a follow-up, you mentioned the government shutdown as being a catalyst for some SMBs joining. Can you talk about just the outlook for new origination partners given the strength we saw in the adds in the third quarter and maybe how you're seeing those conversations in the outlook in terms of potential additions over the next several quarters.

Yes. So the opportunity is definitely much broader than that specific shutdown. But the parallel is interesting because in mortgage, you have Fannie Mae; in small and medium business, you have the SBA, and we are an alternative blockchain-based capital market to both. And so we think this is a huge opportunity to bring that transparency.

Again, back to the earlier question, what makes us different, right? It's the combined technology with the blockchain transparent capital market. And that is a solution that is relevant not only for mortgage, not only for SMB, but for tons of asset classes. But SMB is where we are being pulled.

And I think that the current market environment there is just adding further tailwinds.

[Operator Instructions] We will move next with Craig Siegenthaler with Bank of America.

So a follow-up on Dan's first question. On the first lien growth, is that a first lien HELOC? Or is that a first lien primary? And then I wanted to get an update on your appetite to expand outside of HELOC because I saw you referenced debt service covenant ratio loans in your prepared remarks.

I think that's a pretty small TAM, but I'm wondering what about resident transition loans, auto loans and also primary first liens, non HELOCs. Could we see Figure move into some of these other potentially larger TAM segments in the future?

Yes. So I'll start on the first lien question. And it is a first lien HELOC. We distinguish that because the use case is very different.

Oftentimes, when people think about a HELOC, they think about a mortgage on top of an existing first whereas the first lien HELOC that we originate via our partners is used to pay off an existing loan, often because the rate is higher than the prevailing rate. And it's also -- so it's a true replacement for a cash out refinance or a rate and term refinance to use traditional mortgage parlance. There's also 40% of homeowners that own their home free and clear, and so don't have an existing lien. So that's the first lien opportunity.

And where we really see growth in there, just to be even more specific, is among especially small balance first lien because the cost to originate for Figure is $1,000, whereas industry average is $1,200. And so if you look at a, say, $200,000 mortgage that's a really material savings, and that's why we are seeing partner adoption. In fact, we are seeing some partners adopt first lien that don't use our HELOC products. So it's really massive growth. I do want to correct the record on the TAM of DSCR.

That actually is one of the largest, if not the largest components of non-QM. I believe there's over $20 billion annual securitization of DSCR. But I will just use this opportunity to remind everyone that the capital market that we're building, and I think the SMB use case represents this the best is one that transcends any one specific asset class. We really see this as the beginning.

Our ambitions are much broader than just mortgage or HELOC. And so you'll see more next week in the coming quarters, but we're definitely really excited about the business that we're building and its broad reach into the U.S. capital markets.

For a follow-up again on HELOC. I wanted to hear a little more details on your value proposition for large banks especially large banks that originate and hold HELOCs on their balance sheet, they might not receive the full value of the Figure Connect value proposition. And also with large banks, is it a headwind that you're really only offering capabilities in one lending segment because they might want solutions across all the consumer loan classes that they play in.

So this actually gets to kind of what I was saying I'm most excited about, and I think it would be good for Mike to expand here as well because there's this broad thesis that we have at Figure which is that you're going to have liabilities moving into stablecoin, which are tokenized liabilities, and therefore, assets themselves will need to be funded with those. And so if you think about the broad capital market as one where assets have been moving out of the banking system for the last 20 to 30 years, that will continue and accelerate with stable coin. And so for a large bank, actually, what's happening is they're going to want to tokenize their assets to access those viabilities that are tokenized and Democratized Prime is actually a perfect way to do so.

And so this is part of our broader macro thesis and it's being borne out in the conversations we're having, Mike is having, the sales team is having. I don't know if you'd add anything there, Mike.

Yes. I mean I think that we got an interesting perspective in late '22, early '23, when we had some liability flight out of the banking system and the regionals and the super regionals were especially impacted by that. They were all selling assets at fire sale prices that had a cascading series of events that ultimately led to bank failure and the need for the FDIC and the treasury to step in with some extraordinary measures to stabilize the market. And the treasury is today talking about $2 trillion going to a stablecoin or $6 trillion going into stablecoin.

And they're not talking about where that's coming from, which is clearly demand deposits. And we're in a discussion with a lot of banks, a lot of regional and super regionals about this across 2 factors. One is to Michael's point, the ability to originate blockchain-native assets and access that DeFI ecosystem, which paradoxically is just the reallocation of that capital pulled out of the demand deposit put into stablecoin and then reapplied in DeFi to generate yield. And we think there's an enormous opportunity and low balance first lien is a great use case for us to bring to those banks because they don't do that loan today.

So it's a greenfield opportunity for them and an ability for them to get a front row seat as to how blockchain works. The second thing that we're doing where we're getting traction is around the ability to use yields defensively, where when JPMorgan comes with JP coin and tries to approach those deposits, the bank can offer up a yielding alternative where with YLDS we, just like any Genius Act coin we can hold treasuries and bank deposits, we have the ability to hold bank deposits back to that bank. So if a regional bank customer buys YLDS, and it comes through that regional bank, we can hold that deposit back at the bank balance sheet, therefore, not keeping the liability within the bank itself.

And we think both of those are significant opportunities for us, especially as we're getting the Genius Act coming online, you're starting to see more noise out of Chase. I think Chase is going to make very aggressive moves here at the expense of regional and super regionals. And I think we're well positioned to bring both some defensive and certainly in certain circumstances, offensive capabilities into those banks, with the combination of on-chain asset origination and access to DeFi through Democratized Prime but also YLDS as a defensive measure for -- or an alternative to a nonyielding stablecoin.

And this concludes today's Figure Technology Solutions Third Quarter 2025 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.