Figure Technology Solutions, Inc. (FIGR) Earnings Call Transcript & Summary

Welcome to the Figure Technology Solutions Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] To get to as many questions as time permits, we kindly ask that you limit yourself to one question and one follow-up [Operator Instructions] Lastly, today's call is being recorded. I would now like to turn the call over to Bryan Michaleski, Head of Investor Relations.

Thanks, Leo. Good afternoon, and welcome to Figure's Fourth Quarter 2025 Earnings Call. My name is Bryan Michaleski, Head of Investor Relations here at Figure. Joining me on today's call are Michael Tannenbaum, our Chief Executive Officer; and Macrina Kgil, our Chief Financial Officer. Mike Cagney, our Executive Chairman and Co-Founder, regrets not being able to join us today due to prior commitment at the White House. I'd like to note that in today's call, we refer to certain non-GAAP financial measures. These measures have been reconciled to their GAAP equivalents in the earnings release we issued today as well as in the appendix to our supplemental slide presentation posted to our website. As a reminder, non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, our results we discuss today, including our net revenue and profitability, refer to their non-GAAP equivalents. I'd also highlight that certain statements 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, can cause actual results, events or circumstances to differ materially from those described in the statements. Please see the risk factors we've identified in our most recent 10-Q and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. Recording of the conversation will be made available on our website following the conclusion of today's call. And following the conclusion of our prepared remarks, we'll open the line for questions. We remind you to limit yourself to one question and one follow-up during this Q&A period. With that, I'll turn the call over to Michael Tannenbaum. Michael, please go ahead.

Thank you, Bryan, and thanks to all of you who are joining us this afternoon. As many of you know, we previewed our results earlier this month, and what we're reporting today is consistent with that update. Rather than walking through the numbers you've already seen, I want to focus our time today on what this quarter sets up going forward. As we look ahead to 2026, there are three areas that we're focused on. First is continuing to scale our marketplace, particularly through Figure Connect and driving more volume into our capital-light exchange. Second is broadening the types of products that live inside that marketplace, especially across mortgage adjacent categories where we already have strong partner relationships. And third is expanding the broader blockchain ecosystem around that marketplace, where tokenization, decentralized finance and atomic settlement are setting the standard of how a modern capital marketplace should function. Everything we're doing across the business from product launches to partnerships ties back to those themes. They reinforce each other. And together, they move us further along the path of modernizing capital markets and bringing them on to blockchain. Let me start with the marketplace. Pillar 1, scaling the marketplace. Figure Connect is the operating system for how capital flows through our ecosystem. This past quarter, more than half of our consumer loan marketplace volume transacted through Connect for the first time ever. That milestone matters not only because of the speed at which it happened. Reminder, we launched Connect in June 2024, but also because it represents structural progress in how the business operates. The more volume that flows through Connect, the less we rely on balance sheet intermediation. The model becomes more capital-light and our margins become more durable. What's also important and often underappreciated is how difficult it is to build and scale a marketplace to this level of integration. Marketplaces are not software features, they're trust systems. They require standardized assets, consistent underwriting, clean data, transparent performance history, deep institutional relationships on both sides of the market and credibility with rating agencies and securitization buyers. They require repeat investors who trust the standardization of the asset. You cannot simply AI your way into that. What AI can do is optimize processes and fuel growth, and we are leaning into that. We've been explicit that AI is primarily about fueling growth opportunities for us and our partner ecosystem rather than simply optimizing costs. From an AI growth perspective, because our mortgage process is the fastest and lowest cost, again, as we've built our own integrated loan origination system and capital market that removes friction, it is the most optimized for AI. In fact, this month, I was visiting with a partner and they showed me a demo of an AI salesperson walking someone through their white label figure product. They said to me, we're going to divert more to Figure versus Fannie Mae because the process is so simple, it's much better suited for an AI workflow. I expect more partners to do the same in the coming months. On the cost side, two weeks ago, we launched an AI customer service agent to streamline parts of our application flow with roughly 3/4 of chat volume containment. Importantly, we can now deploy our staff to focus on either enhanced support, which expands our partner ecosystem or more growth-oriented tasks, especially as many of our unlicensed partners need our licensed staff for true sales activities. We've also embedded AI into property title review workflows and as a parallel validation step against our underwriting guidelines. These tools reduce error and enhance the quality and homogeneity of our assets. More importantly, the agents we train on these workflows can then be deployed on third-party assets, making it easier for us to bring in new asset originators into our democratized prime short-term financing marketplace, something I will cover a bit later today. But before that, I'll make one final point on AI in our business here, particularly in the context of the market thinking about which companies benefit versus our disrupted. While AI can improve underwriting models, enhance servicing workflows and further reduce costs in our origination flow, AI cannot create liquidity nor can it replicate years of standardized asset performance across cycles. As I wrote last year, you can't AI your way into AAA. Furthermore, Figure Connect works in tandem with democratized Prime, our on-chain short-term financing marketplace that provides the working capital layer to fuel additional origination. Where Connect drives long-term liquidity and asset distribution, democratized Prime provides programmable, decentralized short-term warehouse capacity. Together, they create a vertically integrated capital market stack from origination to financing to distribution. Each incremental originator and new product expands asset supply. Each additional investor, whether DeFi or traditional, improves price discovery. And every transaction enhances performance history and transparency back to that durable ecosystem and moat. This is the formula we believe that builds durable marketplaces. And once they reach the levels of scale we've achieved, they're not easily displaced. So our focus is to stick to the same formula: increase penetration, broaden liquidity and continue shifting volume into this capital-light framework. Pillar 2, product expansion. That brings me to our second pillar for 2026, expanding the types of products within our marketplace on the back of Figure's second lien HELOC success. If Connect is the engine, product expansion is the fuel. Our goal here is straightforward: extend the Figure ecosystem into mortgage adjacent verticals without changing the core architecture that makes the model work. Importantly, we're not reinventing the system every time we enter a new product. We are extending the same standardized blockchain native infrastructure into new use cases, as I shared previously, leveraging AI to make it go faster. There are three important examples of this. First, adding third-party volume, meaning volume not originated by our loan origination system. One of the most powerful evolutions of our model is the ability to bring externally originated assets onto our capital markets rails. For example, we just signed a major partnership with Agora Data to bring auto finance assets into Democratized Prime. Agora is a fintech platform that provides analytics, capital markets access and loan performance data solutions to auto finance lenders, helping them originate, fund and manage auto loans more efficiently and profitably. With our partnership, which is expected to bring tens of millions of dollars of auto finance to Democratized Prime and Connect in just the next few months, we are expanding distribution without owning the front end or powering the LOS. What matters is that the loan ultimately flows into a standardized marketplace with transparent underwriting, blockchain registry, preventing double pledging and both institutional and DeFi liquidity. By integrating with third-party originators, we dramatically expand addressable supply without material costs. We effectively turn our marketplace into a capital markets highway, one that can accept assets from multiple on-ramps. That increases network, liquidity and importantly, further strengthens Democratized Prime and Figure Connect. For the auto loan space, the road ahead is paved on chain. Second, SMB loans. SMB is another clear example of how we extend the Figure ecosystem without changing the core architecture. Many small business owners are asset rich, but liquidity constrained and oftentimes, that core asset is their home. According to the Consumer Finance Bureau, more than 2/3 of business owners also own their homes. At the same time, many entrepreneurs are boxed out of traditional capital sources. They may lack sufficient time in business. They may not meet minimum revenue thresholds and may not fit conventional underwriting boxes. As a result, they often turn to higher cost capital products because they believe those are their only options. We intend to be a big part of changing that. Given the substantial portion of these operators that own a home and have strong personal credit profiles, we can service these borrowers where most others can't or won't. In Q4, partners on our SMB platform did over $46 million of loans, twice as much as the prior period. In this spirit, we are very excited to announce that Figure is finalizing a strategic partnership with Newtek, a highly established and trusted leader in the small business financial services space. In the near term, we're excited to support Newtek in delivering Figure's HELOC for small business to Newtek's deep network of loyal business owners through our partner-branded channel. Over time, we see this evolving into a fully embedded small business lending, banking and money movement partnership anchored by our SEC registered stablecoin, YLDS, Y-L-D-S. This partnership reflects our shared commitment to serving small businesses and highlights how Figure's full ecosystem can power transformative long-term growth. Lastly, I'll touch on a product category that, while not new, has been increasing in importance for us, first lien mortgage. As of Q4, first lien represents roughly 19% of our originations, up from 12% just a year ago. That change in mix reflects both growing partner adoption and increasing investor comfort with the asset. The opportunity here is significant. First lien is a multitrillion dollar market and represents the majority of our partners' existing volume. Our existing partners do over $300 billion of first lien. If we want our marketplace to be the winner in all of housing finance, we have to participate meaningfully in that market, and that's exactly what we're doing. Over the past several quarters, first lien has moved from being an extension of HELOC to becoming a central driver of growth. That momentum gives us confidence that 2026 will be the year of the first lien for Figure. Chinese New Year was last week, that ran in the year of the horse. This is now the year of the first lien. What differentiates our approach is the low cost and speed that we can offer our origination partners. Repetition does not spoil the prayer. We do a mortgage in less than $1,000 and in five days versus industry average of $11,045. Our first lien HELOC offers everything a mortgage does, but with the full redraw functionality and sits in the first position. That structure provides flexibility and unlocks a strong competitive differentiation against the GSE-driven conventional mortgage alternative. Today, when partners originate first lien mortgages, they are often routed into a Fannie Mae or Freddie Mac channel by default. By offering an alternative with faster cycle times and lower costs, we provide a different path and one that integrates directly into our capital markets rails. The result is that mortgage partners no longer view us as their HELOC outlet. They're increasingly coming to us as a comprehensive mortgage platform. Pillar 3, blockchain ecosystem expansion. The third pillar for 2026 is expanding our blockchain ecosystem. This is where our long-term differentiation becomes most visible. From the beginning, we've said blockchain is core to our strategy. It's the critical infrastructure layer that allows us to modernize capital markets. Over the last several years, we've proven this thesis in private credit. We've shown that tokenized real-world assets can originate, trade and securitize efficiently on public blockchain. We've demonstrated that transparency and immutability reduce friction, and we've built liquidity around standardized on-chain assets. And we're extending that infrastructure even further with the recent developments here. I'll start with an update on Democratized Prime, our decentralized finance marketplace that competes with traditional warehouse lines and prime brokerage, but in a structurally different way. Instead of relying on bilateral agreements, legal complexity and bank intermediation, assets can be pledged, financed and settled directly on chain with programmable collateral management. This is not theoretical anymore. We're seeing real traction. Democratized Prime delivered outstanding results with nearly 10x quarter-over-quarter growth, expanding from $20 million to over $200 billion in matched offers. We now have more than 1,000 active participants on the platform, demonstrating strong market demand for decentralized warehouse financing, and we've almost doubled again this number since the beginning of the year. We successfully launched our real-world asset consortium partnership this quarter, extending Democratized Prime access into the Solana ecosystem. The cross-chain expansion allows DeFi participants to access U.S. real estate-backed YLDS, which is quite different from -- versus the speculative assets typically seen in DeFi. We brought institutional assets to a broader participant base. Reminder that Democratized Prime adds an important COG into our flywheel by providing critical working capital for loan origination for our partners while generating fee income for Figure. It is also the most natural way that third-party assets enter our ecosystem because it's easier to offer short-term financing than permanent capital. We see democratized Prime with an upsell of Figure Connect as the baseline go-to-market approach for third-party assets and the aforementioned Agora Data auto finance partnership is a consummate example. Next, I'll touch on YLDS, the settlement layer of our ecosystem. YLDS is not just a stablecoin. What makes it differentiated is that it's regulated, yield-bearing and natively integrated into our capital markets infrastructure. It can settle loans, it can finance assets, it can move across chains. And over time, it can serve as a bridge between traditional financial institutions and on-chain markets. As the oil of the machine, YLDS growth directly correlates with increased activity across our lending marketplace and Democratized Prime platform. You see this reflected in the results this quarter and to date, with yields in circulation nearing $0.5 billion, increasing by over 20x since the end of the third quarter. We expect YLDS adoption to continue to accelerate on this exponential curve as more partners recognize the efficiency benefits of blockchain-based atomic settlement and as regulatory clarity continues to favor compliant stablecoin structures over less regulated alternatives. As mentioned previously, Newtek, as one example, is exploring funding loans and yields, thereby reducing the interest burden for borrowers and settlement expenses for itself. And finally, last week, we demonstrated something that underscores the broader opportunity in front of us. We became the first public company to launch a blockchain native share class of our own security. listed on an exchange, we purpose-built to enable others to participate in the same model. The equity marketplace is called OPEN, On-Chain Public Equity Network. This isn't a tokenized wrapper of a DTCC security or a synthetic representation of legacy infrastructure. We issued equity that is native to the blockchain from day one with its registry, trading venue, settlement layer, custody model and financing rails fully integrated on chain. Let me explain why this is important. First, we rebuilt the transactional structure. Trades occur 24/7 on our ATS with atomic settlement. Investors can self-custody through wallet connectivity. Ownership is recorded directly on chain through an integrated transfer agent model that reduces friction, cost and restores direct control to the shareholders and issuers. Second, and most economically meaningful is holders realize the benefits of true ownership and self-custody through financing and DeFi integration. Equity on open is programmable collateral. Shareholders can borrow against it at up to 80% loan to value. They can cross-collateralize with other on-chain assets inside Democratized Prime. They can lend their shares directly through transparent limit order books, retaining stock loan economics rather than seeding them to opaque prime broker structures. This is a structural shift and who captures value in equity markets. And third, this is the beginning of issuers forming direct relationships with their shareholder base. On-chain, issuers can access their shareholders directly for communication, rewards, governance without intermediaries like brokerages or proxy advisers. Shareholder communication is increasingly important to issuers, especially as a broader segment of retail enters the public markets. OPEN offers important keys for issuers to navigate this dynamic. When you step back and look at what we've accomplished this year, the through line is clear. 2025 was about proving that this model works operationally and financially and about establishing real first-mover advantages in building out marketplace infrastructure. 2026 is about compounding that momentum. We believe we're still early in the transition towards more efficient on-chain capital markets, where we are operating with increased scale. Before we move on, I want to briefly address a recent security incident. To be clear, this was not a blockchain or protocol-related event. This incident involved a targeting phishing attack that affected our loan inquiry records and a limited number of customer accounts in our loan products. There was no compromise of our blockchain infrastructure or core transaction processing systems. The impact of information includes names, loan account numbers, addresses and dates of birth as well as social security numbers for approximately 12,400 individuals. We have begun notifying individuals and are offering appropriate support. We moved quickly to contain the incident and implemented additional safeguards, including enhanced authentication controls, expanded employee training and further monitoring to reduce the likelihood of similar events in the future. We take information security extremely seriously, and we will continue investing in our controls and processes. At this time, the incident is not expected to have a material impact on our financial results. I'll now turn the call over to Macrina to walk you through our financial results for the quarter.

Thank you, Michael. I'll walk through our results, touching on our growth, scale, profitability and balance sheet for the quarter. Starting with growth, we reported exceptional consumer loan marketplace volume this quarter, reaching $2.7 billion, an increase of 131% year-over-year, primarily driven by new partner expansion with 307 partners and continued growth in volume from nascent products such as SMB loans and DSCR loans. As a reminder, the winter months from November to February represent seasonally low levels of activity for home-based lending. Despite this, we reported sequential quarterly growth in our consumer loan marketplace volume with contribution from new partners and newer product categories offsetting the seasonal headwinds. Democratized Prime ended the quarter with a balance of $206 million and YLDS ended at $328 million, reflecting continued adoption following Prime's expansion on to Solana and our broader RWA consortium initiatives adding momentum for these products. Shifting to scale. We reported adjusted net revenue of $158 million, an increase of 106% year-over-year. Adjusted net revenue benefited from the higher consumer loan marketplace volume and by servicing and interest income, which are asset balance-based revenue lines. Year-over-year adjusted net revenue directly correlated to consumer loan marketplace volume grew 130%, while servicing and interest income combined grew by 47%. Net take rate was 3.8% this quarter, 40 basis points higher year-over-year with better gain on sale execution as the primary driver of increase. Last year, we had very little Connect volume in Q4. This year, 54% of our volume comes from Connect, where we primarily earn a net take rate on volume traded. Compared to the prior quarter, net take rates were lower from a decline in gain on sale premium, in line with broader market execution, which was wider from increase in deal flow during Q4 of '25. Secondarily, we saw net take rate was slightly lower quarter-over-quarter due to business mix. For example, as we introduce first lien securitizations to credit buyers, premium on the loans, what we call gain on sale is more attractive to the buyers, which means it's lower for Figure. Another would be as we scale with larger Connect partners who bring more volume to our marketplace, they benefit from lower ecosystem fees due to the sliding scale rate we offer for higher volumes. It's important to note, we manage the business to optimize for marketplace volume growth and long-term profitability rather than to maximize our net take rates for each quarter. This approach aligns with the broader strategy Michael outlined today. As to our near- to medium-term outlook on net take rate, we believe the range will be between 3.5% to 4%, which takes into account factors such as product mix, marketplace participation and capital market conditions. That range may fluctuate quarter-to-quarter, but our focus remains on scaling long-term marketplace margin durability and capital efficiency, not short-term pricing optimization at the expense of marketplace slowdown. Turning now to profitability. GAAP net income for the quarter was $15 million, representing a margin of 9.4% compared to 7% in Q4 of last year. GAAP net income was impacted by higher overall share-based compensation expenses in the quarter, which were primarily driven by onetime fully vested grants to third-party advisers and for certain of our restricted stock units that incurred accelerated recognition of expense to earlier years within the vesting period. We expect stock-based compensation to normalize around $21 million over the next few quarters. Adjusted EBITDA was $81.3 million, up approximately 426% year-over-year, and adjusted EBITDA margin expanded to 51.6% compared to 20.2% in the prior year period. This quarter, we recognized additional public company-related costs of $2 million, and we expect this trend to continue into 2026. Our medium-term goal for adjusted EBITDA margin is to be above 60%, and our progress this quarter can be explained as follows: First, we are growing volume and assets in Figure Connect and democratized Prime that reduce balance sheet usage and improve contribution margins as more volume moves into our capital-light marketplace. Second, we are seeing our contribution margin from partner-branded volume continue to be around 80% as we have built out the core infrastructure that powers Figure Connect and our partner-branded initiatives. And third, we continue to execute on operating leverage across both fixed and variable expense categories, where our volume increased 131% and our operating expenses, excluding share-based compensation, increased 13% over the same period. I'll move on to our balance sheet and liquidity. We ended the quarter with approximately $1.2 billion in cash and cash equivalents. Loans held for sale was approximately $404 million at the end of the year, an increase of $15 million this quarter. As a reminder, our loans held for sale balance typically reflect the periodic timing of loan sale and securitization programs as we generally hold on to loans for a few weeks. As we scale democratized prime and supply figured loans for collateral to meet the demand, we may extend the time we hold certain loans on our balance sheet. This could increase the balance sheet in future periods, while our loans represent available land supply for this product. As more third-party lending supply comes on to the platform like Agora that Michael mentioned earlier, we expect loans held-for-sale balances to normalize back to historical trends. In addition to our strong operating results, I'd like to highlight our announcement today that our Board has authorized a $200 million share repurchase program. We are taking this step as a reflection of the strength of our balance sheet, the durability of our operating profile and our confidence in the long-term opportunity in front of us. I'd note this program does not obligate us to acquire any specific amount of shares, and it will be executed in a disciplined manner, consistent with our liquidity position and strategic priorities. We expect to maintain substantial financial flexibility to continue investing in marketplace expansion, product innovation and growth across our businesses. In summary, Q4 demonstrated strong volume growth, significant operating leverage and continued migration toward a capital-light marketplace model. As we enter into 2026, we remain focused on margin durability, balance sheet efficiency and further scaling our marketplace as the primary drivers of long-term profitability. With that, I'd like to thank everyone for joining us today and for your continued interest in Figure. Leo, we're now available for questions.

[Operator Instructions] Again we kindly ask that you limit yourself to one question and one follow-up. [Operator Instructions] Our first question is coming from Dan Dolev with Mizuho.

Michael, Macrina, really, really nice results, very impressive as always. I wanted to ask you about the Agora partnership. It looks like a very, very exciting development here, third-party originated auto loans. Can you maybe frame the opportunity here and how much upside this should be adding to Figure over time? Because this seems like a phenomenal business in our view.

Thank you, Dan. Agora, in many ways, is like Figure. They're innovative. They've got a huge partner network. In their case, it's dealers, and they have a really successful capital markets franchise. They're also really big believers in blockchain. And so for them, standardizing the capital market infrastructure is going to help them grow faster. In terms of the opportunity set, it's really threefold. One, it's an entrance into the massive auto finance sector with about $1.5 trillion outstanding. It's also a huge opportunity for us from a democratized Prime perspective because we're bringing third-party assets onto the platform, which is how we monetize democratized Prime. And then lastly, it's also a connect upsell opportunity because as Agora standardizes its assets on to Figure, we will have the exposure to our buyers who will then be able to participate in Figure Connect and transact in permanent acquisition of loans rather than just temporary financing on democratized Prime. So a really massive opportunity across all of our capital-light products.

We'll now move on to Patrick Moley with Piper Sandler.

So I wanted to talk about loan origination partner adds. You've almost doubled it in the last six months, up 25% sequentially in the fourth quarter. So I was hoping you could maybe pull back the curtain and help us get a better sense for where those partner adds are coming from, the nature of those partners. And then given the accelerated pace of growth we've seen there recently, could this be a leading indicator of an acceleration in loan origination volumes in 2026?

We're firing on all cylinders in terms of partner acquisition. We have three primary motions that are all working really well. We have the license approach, which is split into a focus on independent mortgage banks and then separately, depositories, which includes banks and credit unions, and we see significant traction in both of those. And then we also have the non-licensed approach where we have the SMB channel we talked about doubled quarter-over-quarter, and we're seeing activity in fintech and broader real estate. I haven't spent as much time talking about residential transition loans and DSCR, but that whole ecosystem and market of investors, people that fix and flip loans and properties is a really massive opportunity. It's considered broadly non-QM and the Figure product is a perfect fit for that space. And so a lot of our non-licensed activity is partnering with those types. And so to directly answer your question, I do think it is indicative of a really strong pace of consumer loan marketplace volume growth that we continue to see into 2026.

We'll now move on to Ryan Tomasello with KBW.

I echo the congrats on the strong execution and the initiatives. I wanted to double-click on the Agora partnership, specifically on the monetization. I think we know that the Democratized Prime fee rate is roughly 50 bps. So that's pretty clear. But in terms of upfront tokenization fees, what the Figure Connect monetization looks like relative to first-party assets, anything to help size that math would be helpful.

I'll start, and I'll turn it over to Macrina. From a monetization standpoint, I think the important point is that this is pure margin. we're not incurring the expenses to originate the asset, maintain the LOS. It's really about leveraging our capital market infrastructure. And I'd also say that 50 basis points is the estimate that we've shared for assets. But as we enter into different conversations and asset classes, we see generally upside towards that number. Without being specific about this transaction, I do think that you'll see as we add additional third-party assets, the contribution dollars and basis points of margin from Demo Prime to go up. Macrina, what would you add?

Thanks, Ryan, for asking the question. I would also add, Michael mentioned earlier that this will be going into Figure Connect as we see more standardization in the loan product for auto. And so we do anticipate this impacting the overall volume coming into Figure Connect, which is great. And then additionally, as securitization for this type of auto loans are developed, we'd also be getting the securitization sponsor fee. Just keep in mind, I did allude to a net take rate range of 3.5% to -- that is taking into account these auto loan types because these are shorter duration, and so they will likely command a lower take rate rather than the HELOCs, which have a longer duration. And so we are thinking ahead to think of different types of asset classes being added and being helpful to us in the overall volume coming into our marketplace.

We'll now move on to Rob Wildhack of Autonomous Research.

Just sticking with the take rate. I think previously, you were suggesting the take rate to be stable around 4%. And now you're saying more like 3.5% to 4%. So can you just unpack what's changed structurally there in the last couple of months?

Sure. In 2025, our main products were really the second lien HELOCs as part of our overall ecosystem. As we move into 2026 and we add different types of products, the product mix is changing into auto and more first lien coming across. And so auto, I gave the example earlier, these are shorter-term loans, and they're going to have a different type of profile and different types of buyers that come into Connect Marketplace. So we do anticipate the take rates really coming down for the shorter duration products. And it's going to depend on really the product mix going forward. And at the end of the day, we really want to be able to continue to grow our marketplace. The goal for us has always been to add different types of assets coming into our marketplace, not just be one HELOC second lien. And so first lien products or auto or any different types of loans in the future will have an impact on take rate.

Okay. And I guess the take rate is going to be that much lower going forward, but you're still targeting 60% margins. How do you bridge the gap there? Is that just more volume or lower cost in the longer term?

I'll start. And Michael, if you want to add anything, please go ahead. I think the important part is, as I mentioned in my prepared remarks, our contribution margin has been around the 80%. It's not that we're going to be spending additional expenses. As we mentioned for Agora, it's not that we're going to be adding more different types of LOS systems and having to spend. And so we do anticipate the contribution margin still to be higher than that 60% mark in the future with different types of assets.

It might also be worth adding, first lien, 19% this quarter, 12% last quarter, same period -- and excuse me, last year same period. And so when you think about first lien, in particular, those are larger loans. And as a result, Take rate happens to be lower basis points on loan amount, but the dollars that we earn and the profit dollars are actually higher because the unit costs are the same for us to do so. So I wouldn't look at take rate as an input metric or any decline in take rate as saying anything about maybe partners in a more competitive environment or renegotiating take rate, nothing like that. It's simply product mix. The 12% versus 19% is pretty material. And we're actually leaning into that. We want more of these larger first lien loans. We started doing the smallest loans available, call it, $100,000. And as we work our way up, remember, disruption starts at the bottom. We're doing a loan at $1,000 versus industry average of $11. And so we're able to continue to work our way up towards our partners' volume, doing larger and larger loans being more and more competitive with Fannie Mae, that take rate may not be 4%, but the unit economics of that loan is going to be better just given the size. And so we are classically disrupting that market. And as I mentioned in my remarks, our existing partner base does $300 billion of first lien production annually, more than that, conservative number, and we're adding partners all the time. So this is definitely a positive. I just want to make sure that's clear.

It is. Yes, if I could -- just one clarification because I think growing in first lien has been a priority for the company for some time, but the take rate outlook is softer. So is that just a function of even more first lien loans that you're expecting or even larger dollar first lien loans than you were expecting a couple of months ago?

Yes. I mean if you think about it, right, we're growing 100% year-over-year, and we moved from 12% to 19%. So I don't think at the time of the IPO, we expected first lien to have as much traction as we do. And so many of our conversations today with partners are about first lien because at the end of the day, that's the biggest part of their business. And if we want to be as helpful and as disruptive as we can to the status quo, we're moving into that market. Our product is getting pulled in that direction.

We'll move now to James Yaro with Goldman Sachs.

I just wanted to touch on the ramp-up in volumes for new originating partners. Is there a rule of thumb you could lay out for us for how long partners take before they're fully scaled up and originating volumes on your platform? Maybe could you comment on the composition of year-on-year growth in origination volume between new partners versus existing partners?

James, our sales team would say it's three months because that's how the compensation structures work. But in general, that's roughly what we see. There's going to be different dynamics. Our partner base is diverse. Some are licensed, some are not licensed, some use an API, some are bigger. and they take more time. So some of the partners we announced last quarter, even some of the larger ones, they're still not fully ramped because especially as we expand into that first lien ecosystem and as we do things like DSCR and SMB loans and add things like yields, right, all of these opportunities are a big reason why upsell is such a large part of our go-to-market motion. And so for us, we continue to see new products being added. But in terms of the core first and second lien HELOC, that's going to be about three months.

And just to add to what Michael had mentioned as well, I would say that our partner count is getting up to 307. It's not that new partners are the ones that are contributing the most to this. We also have existing partners who continue to grow within our ecosystem as they move on to Connect. And we also see that new partners are joining us as figure acting as an intermediary or going on directly to connect. And some of them are taking a lot of the share within Q4, which is great. And these are newer partners that have joined in the second half.

Excellent. Just a quick ticky-tacky one for you, Macrina. Any ability for you to comment a little bit on the seasonality in the first quarter? You touched a little bit on the seasonality in fourth, but maybe you could just comment a little bit around the first quarter as well.

Sure. It's -- we are still in the deep throes of winter months in New York as well. It's very cold. And so what we do see is that from November to February, those tend to be the months where we see less volume than the rest of the year. And so we're just exiting out of that and going into March. And so we do anticipate higher growth in March as it was in the historical trends.

[Operator Instructions] We'll now move on to [ Randy Binner with Texas Capital ].

I was just hoping you could update on the securitization process, how that's going for the HELOC loan products? And then I guess, like for these newer products, if there'd be a longer period of time where you gather loans before you'd be able to place those in the securitizations as well?

Sure. Randy, it's Macrina. So what we are seeing in Q3, Q4, Q1, just a reminder for this group, we earned our AAA on our securitization from S&P and Moody's over the summer, and that has greatly helped us in terms of higher gain on sale premium that we are realizing for Q3 and Q4. So you are seeing that in the trends compared to 2024, which has been very helpful for us. As you allude to in terms of newer products, first lien, we did our second securitization actually in Q4. The first one we did in Q3 for the first time. And so it does take some months to be able to gather the new products before we can move on from a whole loan direct from Connect sale to a securitization vehicle. So how we think about it is, usually, we want to be able to have size of about several hundred million for each of the securitization products. So the new products that we talked about that are less than $100 million for this quarter, it's going to take some seasoning over the next few quarters before we can enter the market.

Okay. So that -- those loans held on the balance sheet will just be higher, but that's the reason why -- and so that's all helpful. Just on auto, is...

Randy, sorry to interrupt. On the -- on these types of loans, we actually just sell them through whole loans. So Connect is really a whole loan marketplace where sellers come into the marketplace to be able to sell different types of loans. So they are being sold directly on Connect. Securitization is a different vehicle where Figure has stood up a shelf, worked with the rating agencies, and we collect a sponsor fee on those types of vehicles. And so it does take time, actually a few quarters and more size for these loans to go through a securitization, but that's additive to us in terms of take rate.

Okay. Understood. The last follow-up is just on the auto product. Is that going to be direct? Or is that -- would some of that be held for securitizations over time?

So I just want to make sure that we're 100% clear. So with auto, Agora already has their own securitization shelf. And so what they're looking to do with Figure is to standardize that approach on our blockchain rails, take advantage of, for example, our registry and the fact that we prevent things like double pledging as you saw in the Tricolor bankruptcy, those types of things and get better execution over time by introducing also competition into the financing, both on the democratized prime marketplace as well as in Connect. But we won't be taking those loans onto our balance sheet. Similarly, when we talk about, for example, DSCR loans, those loans today aren't living on our balance sheet. In fact, they are living on one of the originating partners' balance sheets. And then what we do is we work with the rating agencies and those partners over time to build out a shelf that then our partners can contribute into. And so as Macrina mentioned, when the securitization ultimately happens, it's a fee-based event for us. We take a securitization fee as part of that transaction, but it's the contributors who own the assets that contribute those assets into the securitization.

[Operator Instructions] We'll move now to Kyle Peterson with Needham.

I wanted to start out, particularly on private credit and it's been pretty topical of late. I think there's been some jitters about it. I know at least a decent chunk of some of the whole loan and securitization buyers kind of are private capital and private credit investors. But has there been any change in whether it's kind of tone or activity or anything like that in buyer appetite in the last couple of months as some of these concerns have creeped up. I know it seems like it's more kind of isolated commercial credits, but I just wanted to see if there's any change in sentiment or contagion concern with your partners.

Kyle, thanks for the question. So -- what we have seen in the market at the end of the day is that we actually haven't seen any change in the demand for Figure loans. And that's because we're in the market very often. People understand our product. We are in the market with securitization vehicles as often as well. And so as you alluded to, the private capital -- private credit capital jitters that you're seeing is really on the commercial loans rather than these residential mortgage type of loans. So we aren't actually seeing that. With that said, though, as a reminder, we -- our loans actually get originated within nine days on average, as fast as five days. So if we do see anything, it's going to take a long time for other loan originators to shift to meet the appetite. We have a very short time, and we're able to change trends as needed as quickly to accommodate the market. But that isn't something that we see today.

Okay. That's really good to hear. And then I guess just a follow-up. I wanted to touch on the crypto-backed loans. I know that's, I guess, smaller kind of ancillary product now, but how has that product performed? I know there's been some recent volatility in crypto prices, but has the credit performance and collateral held up on par with your underwriting standards? Or I guess just how has that book performed over the last few months as there's been a little more volatility in crypto prices?

It's a dream asset class from the perspective of the investor or owner of the loan because you have the ability to liquidate that asset basically at any time because of the way the Bitcoin market works. And so even though there's been volatility, we've actually had a really easy time liquidating in the event we drop below LTV thresholds. So we've been handling that nicely. It's -- there's been zero losses in crypto-backed loans to date. And in general, while you note there is an environment that people are spending more time on private credit, we're seeing across all of our products, securitization execution at all-time tights, including even earlier this month. So definitely, there is some distinction across asset classes and across issuers. And so we feel really good about the position that Figure is in.

Thank you. This concludes today's Figure Technology Solutions Fourth Quarter and Full Year 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.