Figure Technology Solutions, Inc. ($FIGR)

Hi. Good afternoon, everyone. My name is Gautam Chhugani. I cover digital assets at Bernstein. One significant shift that's happened in my space is I used to cover crypto, but native crypto has moved to what we call real-world assets. I think that's where Figure fits in. So Mike, thanks for doing this.

I mean, Figure has had a bit of a history. You've been around for a while. How has that Figure vision evolved over time? Because there's been regulatory shift, there's been technological shift. Just like take us through that.

Thanks for having me. The vision of Figure has actually been remarkably consistent since the beginning. And I think the company has been really purposeful in the way it's built out marketplaces on blockchain rails. So if you go back -- and that's been consistent through a number of different regulatory environments, a number of different crypto winters and summers and also a number of different interest rate environments. So I think Figure has been a business that's thrived through all of those things. And to go back to the vision of the company when it was founded in 2018, Figure came out of SoFi in many ways. And SoFi, when I was there, we were doing about $1.5 billion a month of volume. And like many SoFi was not a bank then. Many nonbanks, you're always thinking like how could you -- how do you find a solution for all the assets you originate. And blockchain at the time was one of the summers for blockchain back in like 2015, '16. It was hot, and it was also hot in 2013. It goes through these waves. And so blockchain became a natural way to do that, and Figure has been successful in using blockchain and other automation to take a lot of cost out of the system. We do, for example, a mortgage in $1,000 versus industry average of 12. And we have been -- that vision and that purpose of using the -- especially blockchain technology, but other automation to standardize the capital markets and modernize them, bring them on to blockchain rails has always been the goal. And I think Figure has been unique in that we've been not afraid to build out marketplaces with our own inventory. So we started by doing consumer loans ourselves until we turn that over. Today, 60% of our business in consumer loan marketplace is Figure Connect, meaning Figure is just the rails and doesn't touch the loans, doesn't touch our balance sheet. and democratize Prime, which is our short-term essentially money market or warehouse line. We started by seeding that business out with our own production of home equity and now are pulling that back and have introduced new third-party originators. Tokenized equity, as an example, we started with our own security. So I think we've not been afraid to build out a marketplace with our own capital. That was a big part of why we did an IPO and raise those money -- that money. But at the same time, our purpose has always been and our ambitions have always been much greater and to be this marketplace and to build a marketplace, it's hard to build marketplaces. There aren't that many. But when they are built, they're really durable and they're hard to disrupt.

And I talk to a lot of investors on Figure, and there are many different ways of describing the business. What's the simplest explanation of Figure's business model?

So what we're doing is building the future of the capital markets on blockchain rails. And what we specifically have done in the mortgage business, which is the majority of our revenue, is we have built a network of 380 partners that use our technology to originate assets into an embedded capital markets that works on blockchain rails. That is a much faster and cheaper process than the alternative. We are taking that technology into other consumer credit and, more broadly, asset classes outside. That's what we do.

And sort of stepping back, why is it important to tokenize credit?

When you use -- I think tokenization has been -- and Figure has been really fortunate, like tokenization 2 years ago for sure and probably even 18 months ago was not a term in the lexicon. And if you -- and we see this a lot with our bank partners, today at a bank Board meeting, there's conversations about tokenized deposits or stablecoins. There's conversations about tokenized assets in a way that you would have been laughed out of a Board meeting previously if you had brought that up. And now people are asking at the Board meeting, what's our strategy? So clearly, that's changed. Why is it important in credit? Well, credit actually has the biggest -- is the biggest beneficiary of at least the 3 main reasons why we use blockchain. Those reasons are for transactional efficiency, for liquidity efficiency and then for like what I would broadly call lean perfection. So -- and I'll go through all 3. So transactional is in our case, the third-party diligence expenses that we cut out of the process. Going back to SoFi, which I mentioned, there'd be 100% third-party loan review due diligence on every loan that we sold. Every single loan will be checked, the attributes of that loan will be checked and then someone would sit there at the company and dispute any findings that, that third-party diligence provider found. And that's how loans trade. That's obviously inefficient. And so what Figure does is we take the attributes of the loan upfront and move them on chain. And so they are immutably there and people don't need to check. Now -- and I think I want to be clear on this, as Figure has become more ubiquitous and the standard through which many mortgages and other asset classes trade, there are people that aren't necessarily checking every single loan on blockchain and confirming they know that, that process is done. And just like people aren't -- when they hear a FICO score, right, of 740, they know what that means. They aren't necessarily checking all of the variables that go into making that score, they kind of understand. So people understand what Figure stands for and they see the attributes they need to see and there's just a lot more liquidity and standard in what we do as a result. So that's the transactional benefits. I think those are pretty well understood. The next are the liquidity benefits, right? And liquidity is the biggest thing that people miss about tokenization. They think that just because you tokenize something that makes it liquid, and that's not how it works, right? But -- what we've identified is that things like mortgages and consumer credit have much more in common than they do not in common. And therefore, if we can standardize the rails through which they are originated and standardize the rails through which they're bought and sold, we can create liquidity. And I think Fannie Mae is the best reference point for a ecosystem or marketplace that creates liquidity. I think Visa and Mastercard are examples of something that creates liquidity. But Fannie Mae is a more direct comparison. And so with Fannie Mae, nobody asks, well, which person originated this Fannie Mae loan. They just say, is this loan a Fannie Mae loan, right? And a lot of people get this wrong and they assume that, that has to do with the government guarantee. It doesn't. right? Credit risk is not the #1 risk in mortgage. People in mortgage are focused on interest rate risk, they're focused on prepayment risk. Credit risk is generally not that relevant because housing is strong and at least in the Figure case, our average loan-to-value after our loan is 60% to 65%. So there's 30% to 35% equity in the home in our loans. And so people are not actually worried about credit risk. They're worried about liquidity and interest rate risk. And what Figure is doing is the same thing that Fannie Mae did, except we are Fannie Mae plus ICE plus a portion of Tradeweb, all kind of one technology and capital market stack together. And when we bring this automated technology and capital market together, we, of course, lower cost and time savings, but we also make it so there's liquidity, right? And I was having a conversation recently with a very large mortgage company, one of the largest in the country, and they said, one of the things we track is the percentage of volume that we do not on Fannie Mae, not to the agencies. And the reason they track that is because they're worried about liquidity. And so another conversation I've been having today on this liquidity point is like, do you think Fannie Mae is more valuable than any of the mortgage companies it serves. If Fannie Mae were a public company, would it be a bigger company than Rocket Mortgage, of course, it would, right? And that's because what they do, the standardization that they bring is extremely valuable. It's not just about that government guarantee. And so that liquidity is what we seek to bring to consumer asset classes, not only mortgage, not only the areas of mortgage that Fannie Mae doesn't cover, but we also 20% of our business directly compete with Fannie Mae, but also to other asset classes, auto, small business, all the things we've been talking about, because if Fannie Mae were a public company with a pure mandate of profit, they probably would be expanding what they do to other asset classes. They just don't because they're sort of government today, public tomorrow, who knows. And then, so that's number two, that's liquidity. So first transaction, number two liquidity. And number three is the lean perfection. And this gets to a conversation we had about token equity as well. But what's really important when you are a lender, the #1 way that people lose money in lending today and in the past year has been fraud, right? If you look at Tricolor, look at First Brands, you look at MFS, the places that people have lost hundreds of millions of dollars has been on fraud. And so in the warehouse lending markets in the asset-backed markets, people are really concerned with double pledging and they're concerned with double sales. And the way that the loan markets work today is when you are pledging loans or buying and selling loans, you're just accepting a spreadsheet and hoping that someone didn't sell those loans to someone else. And sometimes it turns out they did. You do that on blockchain, you prevent that from happening because -- and you get this lean perfection, right? It's why we are so focused on care about the provenance of the loan. And we -- and that lean perfection is really important in lending that you can look through and be sure that you actually have ownership over that asset and that no one else has ownership over that asset. And that's the third way that we use blockchain. And all of those things together create an opportunity in consumer credit to do something different to lower cost, bring liquidity and ultimately build -- bring the value propositions and the value back to the originators and the investors and sort of reduce the value capture in the middle.

And sort of this gets me to one of your significant businesses, which is HELOCs. -- you have almost like a 5% market share of HELOCs. And so the business model you talk about sort of is a testament to the market share -- the share that you've gained in the market. How do you sort of articulate the value proposition to the partners who've done well, thanks to the Figure technology stack? And then on the other hand, with the investors. Just like explain the proposition to the 2 sides of the marketplace.

I will do that. First, I'm going to push back on something you said, which we don't track our market share in.

Yes, probably.

Because -- and there's a reason for that. And it's just true. like I literally do -- there's no document or presentation. There's lots of documents and presentations at Figure. None of them is like what's our market share of HELOC today. Reason is...

It is significant.

It's just not relevant because at the end of the day. One, there's $35 trillion of home equity outstanding and anybody who has access to that home equity is better off using their home or their home equity than borrowing in any other way because it's always going to be the cheapest way you can borrow. That's one. And two, 20% of what we do is first lien. And therefore, a huge amount of what we do is not related to the narrow concept of home equity. So I do not think that, that metric is relevant, but I'm fine for you to cite it because I can't control you. But to your question of, why do originators use us and why do investors use us? The value proposition to the originator is -- there are some things that are consistent and there are some things that are specific. At the high level, we're doing a mortgage in $1,000 cost to originate versus industry average of $12. There's a bunch of reasons why we can do that, but they all kind of boil down to the fact that we've built a technology that comes with an embedded capital market. So we're a combination of Ellie Mae plus Fannie Mae, and as I mentioned, a little piece of what Tradeweb does. And we bring all that in one system. And because they all work together, there's significantly less costs than the alternative. And those costs aren't going away with AI, right? Reminder, loans once we're done with pen and paper, we've added tons of software to the process. Costs have not come down. So just adding token spend also into that mix digitizing a bad process didn't improve anything and AI in a bad process won't improve anything either. And so we're representing a new way and new approach. And that low cost and high speed is a big reason why people are selecting Figure. There are some nuances, right? There's different types of companies that we serve. We serve sort of probably in largest in dollars, independent mortgage banks that are like addicted to Fannie Mae liquidity and don't have their own balance sheet, and they're a natural fit for us because we're also bringing liquidity -- there are regional banks we just signed up Flagstar as part of our Q1 earnings. We announced that I know everybody is listening intently to that earnings call. And what you heard was us talk about Flagstar. And that was a big win for us because that's a real regional bank that has chosen to use our technology and our capital market. Even though banks have a balance sheet, they still access Fannie Mae. They still don't want to hold loans at relatively low interest rates for 30 years, again, because the #1 risk is interest rate risk. And we also serve fintechs and fintechs that use us at home improvement companies, people like Lowe's Home Improvement, not a big retailer, pool financing companies, all these people -- we're actually competing more with home improvement financing in that business. And again, we're offering a lower cost and a more efficient process. And so these are all people that would normally have not -- those types of people wouldn't have considered themselves in the mortgage business, certainly not Lowe's, but they're using us because we've made it so fast and easy. So there are some things that are consistent around cost and speed, but then other things that are nuanced by the type of partner. And then on the investor side, the other side of the marketplace, we're bringing a level of consistency and scale to the market that makes us a much more attractive place for someone to invest. We have AAA rating from S&P and Moody's on the securitizations. We were the first to securitize blockchain assets. We were the first to get them rated. We were the first to get them AAA rated and the first to get them AAA rated by a major S&P and Moody's or Fitch, which doesn't rate us, but could. And as a result, there's a lot of consistency. And so buyers are looking for risk-adjusted return. They're looking for yield. Even in a world of kind of some of the disruption we've seen with like Blue Owl and those people, that's sort of happening over here. But what it's actually doing is increasing demand for Figure loans because we're not software, not exposed to that. And we have a ton of real money accounts, insurance companies, pension funds that are buying these assets to offset liabilities that they have. And that's a big trend in the market not going away as sort of lending has moved off bank balance sheets. And so as a result, there's just -- there's a tremendous demand for yield, and we create that attractive yield, and we're also increasingly doing that on chain. We announced over the weekend that now, at least on the Ethereum blockchain, there are loans being financed. Figure loans being financed cheaper than they are in any warehouse line. Like is that forever? Is that like whatever, right? Point is like that's happening now. It's a real thing. And it certainly wasn't happening a month ago and it definitely wasn't happening a year ago. So it kind of shows you where the world is going. As more and more liabilities move into stablecoin, which is obviously happening, you all know the success of Circle. And I think one of the reasons why a lot of people put us in the Circle category is that we are another company that uses blockchain to do something, to do activity on chain rather than just buy and sell crypto. And so one of the -- but as Circle and its ilk grow, more and more liabilities are moving to stablecoin, which means they're moving out of the banking system, just like assets have been moving out of the banking system. And as they do that, people who are in stablecoin will want access to yield and Figure is the natural place for people to get that yield, and that's what's happening on Ethereum today. And Figure in the past 9 months has done a really nice job of expanding what we do to serve other blockchain ecosystems. So we were built on Providence, but increasingly, we have expanded what we do to serve the Solana ecosystem and the Ethereum ecosystem, which allows -- it really allows us to focus on what we do best, which is tokenizing assets and then bringing those assets and the yield that those assets bring to people that are in tokenized liabilities wherever they are.

The other question I often get from investors is you have these partners, 380-plus partners right now. How significant it is, or how involved it is to like on-ramp these partners, right? Someone could come into the space and say, I'm going to go to the same originators and can they sort of replicate the Figure model easily. Just talk us through how involved is this partner onboarding process.

Yeah. The people in our space with the exception of a few partners are often using multiple liquidity technology vendors, right? If you were to go to any of our standard partner, let's just say, let's just -- we talked about Flagstar Bank. Like, if you go to what they're doing, they sell loans to Fannie Mae, they sell loans to a bunch of different people, right? And they also are using a bunch of different third-party software. So that's the landscape that we compete in already. There's already a lot of people doing what we do. And this actually came up in one of the conversations today, which is pretty much anyone else who had built what Figure has built would just use that to kind of originate for themselves. We did something very different, and we said, well, we're going to turn this into a marketplace. We launched Figure Connect in June 2024. So it didn't exist. And now by May 2026, so less than 2 years later, it's over 60% of our volume. So 0 to 60 like a car in 23 months. And the reason why we were able to do that is because we've taken something really valuable and turned it over to the partners and allowed them to benefit from this. And that's hard to do. That's part of building a marketplace. And we don't really see, at least today, anyone capitalized or incentivized or with the technology to go and do something like that. That's not -- there's no one -- everyone is sort of solving kind of myopically their near-term thing. And so we don't have any competitors that are doing this exact thing. And if they were to try to do this exact thing, well, they would have to start where we were 8 years ago and get those ratings, get people to trust their blockchain technology, get people to trust their process and also compete with the $1.4 billion growing 130% year-over-year business that we're building that we're running quite aggressively. And so obviously, this is America, people can do that and compete, but I think it will be hard.

And obviously, we started talking about HELOCs, but there's a lot more coming. So there have been new loan categories that Figure has been working on. There's been small business, auto. First lien has been a growing category within sort of HELOCs. How do you see that sort of transition over the next couple of years?

So the first lien business, meaning not a loan on top of another loan, but just what people traditionally think of as mortgage is a 25x larger business than the second lien market that you mentioned, market share. And as a result, we see a lot of -- it's $2 trillion outstanding in a bad year. And we think that over time, all of that's addressable. But our ambitions, as I mentioned, are greater than that. And we think that the future of the capital markets is a tokenized future, and that's going to be one where all of the asset classes are moving to chain. And we're using our -- a short-term financing marketplace democratize prime, which is essentially a warehouse line or commercial paper market that's kind of standardized and available to all without complex third-party diligence and legal documentation. We're using that as a way to get into other asset classes and start to build volume there and then expand kind of the same marketplace style approach and products that we offer in those markets as well.

How big -- I mean, when you compare the sort of newer products, small businesses, I mean, what's the kind of scale that one could imagine, especially for products beyond mortgage?

Well, mortgage is the largest consumer credit class and mortgage, but at the same time, mortgages is a lower rate, and it's also the longest. So when you talk about dollars outstanding or dollars of origination, like mortgages tend to be bigger and outstanding for longer. So I look at an asset class like small business as a really big opportunity for Figure for a variety of reasons. One, and we talked about this in our Q1 call, $60 million of volume in Q1 was done through SMB partners. So that's home equity volume originated by people that are SMB lenders using our product to replace what would otherwise be business loans, right, whether that be SBA or non-SBA loans. And what that means is we're building out a network of SMB origination partners in addition to mortgage partners. And those SMB origination partners are -- have other loans that they would like to use other Figure products for like Democratized Prime, like our securitization product, like DART, or Digital Asset Registry Technology, right? They want those products. They want that standardization. They want that automation. And that's why Credibly, which is, call it, a mid-market fintech that does business loans has already signed up to use Democratized Prime as a replacement for their warehouse line, right, which I believe today is a -- I guess, I can't probably say who does it, but it's not Bernstein. It's not stocked. So don't worry. So they have a warehouse line and they're looking to use us instead or as a supplement. And over time, as I talked about, the cost of financing is coming down. They want to basically outsource their capital markets to what we do. And they are looking to pair and their loans with other SMB loans and build a securitization help build liquidity, right? The same thing that we did in mortgage, we want to do an SMB. And I think because you have kind of a lot of similar dynamics, aggressive salespeople, you have sort of this quasi-government entity, in this case, the Small Business Administration, providing some level of standardization, but not enough. I think that this is a market that's -- and we already have relationships in this space. I think you'll see a lot of activity from us in that space that's sort of happening away from what's going on in mortgage, but also fueling our growth and expansion.

And just broadening the ecosystem that Figure is building, there's democratized prime, there's your yield stablecoin. Can you just like paint the picture for us, like how do each of these parts of the ecosystem sort of stack up?

Yes. The way that -- I think the most valuable -- the originator relationships are the hardest thing to get. And so from the perspective of an originator, they're using our -- most of those people are mortgage, but they're not all, right? Some are small business, as we talked about. One is auto. And these people are looking at Figure's portfolio of products as ways to solve capital markets problems that they have, monetize their business, monetize their customers, et cetera. And people are doing that and largely accessing our capital markets and our liquidity when they do so. And we have a bunch of products that offer that. Figure Connect, as we talked about, the origination system, which comes with Figure Connect and increasingly Democratized Prime, which provides short-term capital as they aggregate loans because loans are not sold one by one, they're sold in bulk and you need -- often you need financing to aggregate loans. And even the biggest -- even Affirm, even like the biggest fintech, anybody, even banks don't want to necessarily hold these loans on their balance sheet for long periods of time. So everybody needs financing. That's why there's trillions of dollars in the money markets and the commercial paper markets, right? And so we're disrupting that, prime brokerage, all those types of things. And the point is that -- so that's kind of the short-term aggregation phase is supported by Democratized Prime. And then yields are stablecoin is kind of the oil of the capital markets. And the loans are settled in that. They're serviced by that. When people are -- like one of the reasons why yields grew a lot week-over-week for those of you who are tracking it, which may be no one. But the yields grew a lot recently because as we opened up the auto asset, when people are on Democratized Prime, when people are looking to lend onto that platform, they are -- their resting bid is in yields. So rather than having dead cash, we offer people the ability to buy stablecoin and bid on lending to our assets. And while they hang out in yields while they wait, which is better than hanging out in cash that doesn't earn anything. And so yields is sort of better money is how we talk about it. And it's -- and so people are increasingly in our marketplace being paid in yields. And I'd just say yield just grows as a result of our overall marketplace. But it's a relatively small contributor to the P&L.

And when do we sort of -- and maybe this is potentially a more long-term scenario, but when do we go from a marketplace where you tokenize and there's sort of private investors buying the tokens versus going to almost like an exchange where people are -- it's a vibrant exchange where people are buying and selling tokens, they're borrowing against it using democratized prime. They're settling it using yield stablecoin what would take you from where you are today to kind of like an exchange for tokenized assets?

Well, I think for loans, right, there may not be demand to trade loans in that way. And I don't think that in any way diminishes what Figure does. I think that there are -- because -- but also remember, loans are -- especially mortgage loans are outstanding for 30 years. So it's really about when I do want to make a trade, which may be in bulk is that liquidity.

Some of the investors hold these token. So they could like, oh, I want liquidity, I'm going to come to Democratized Prime.

Right. So the fact that there's liquidity matters a lot, but I don't think that we need to gamify debt or to make people all of a sudden want to trade loans all the time for Figure to be successful. I'm not -- nor did you imply that, but I just want to clarify that. However, I think one of the most interesting things about blockchain is this concept of collateral that you get with lean perfection. So this gets after our -- this gets to our ambitions in the prime broker space, which is why we're talking about tokenized equity and why we're talking about Democratized Prime because there's a lot of money in the short-term financing marketplace. And today, if you want to like from a prime broker, if you're a hedge fund and you want to a margin a stock, you maybe use that margin to buy the same stock or maybe another stock, maybe, right? But Archegos, that sort of meltdown was, I think, an example of where that can go wrong, and also gets to kind of the values of blockchain and ownership and looking through and lien perfection. But point being is that there's not this level of cross-collateralization and margining that there maybe should be because of the way the systems work and frankly, the lack of something like blockchain that prevent you looking through from one asset class to another. That's not the way that things have to be. And so Figure is imagining a future where someone could institutionally or retail, right, borrow against one asset class to then buy another asset class and have more fungibility and liquidity in the prime brokerage space -- and I think that is getting to a version of what you're saying without necessarily having to change behavior and saying people all of a sudden want to buy and sell mortgages the way they buy and sell equities. So probably just given that loans don't have the upside of equity and have more downside, that's unlikely, I think, from a behavior standpoint.

And on the other side, obviously, you can create yield products, right? So as you're integrating with the digital wallets, I mean, how is that sort of yield -- that spectrum of yield products evolving?

It's evolving in a number of ways. I think third-party ecosystems that are on chain, so let's say, like the exchanges of the world and the wallets of the world. So without like naming specific names, your Bullish's, eToro's, Coinbase, whoever, Kraken, right? They're all -- their customers are all looking for a yield. How are those customers going to get yield? Figure assets is a natural place, right? And that actually doesn't include just the Western-oriented ones. That would include the Korean and Hong Kong exchanges as well in wallets. So I think those are big opportunities for us as yield products get built. But also as the -- just capital markets in general become more tokenized and you see BUIDL as an example and what BlackRock is doing. And you see a lot of different parties looking to tokenize the money markets in general. Well, the collateral inside those money markets will also start to tokenize and Figure has 75% market share in real-world asset tokenization. And that market share has been growing, right? We had that market share at the time of IPO, and we're going to continue to do so.

Again, one of the favorite investor topics on Figure is unit economics. I mean -- and that's also evolved. At one end, this was going from the origination to Figure Connect as a platform. And then you're also seeing this simultaneous shift between loans, right, as you're going from HELOCs to first lien and other sort of newer products. How do you see unit? I mean, first, -- what is a sustainable business model in terms of unit economics for Figure? And how do you sort of see that evolving?

Well, Figure has become increasingly capital-light as we've moved to Figure Connect. And essentially, with Figure Connect, we aren't involved in the origination of the loan from a balance sheet perspective. So it's really a technology fee that we earn and like a processing fee, which is sort of also a technology fee. And that has -- as I mentioned, has gone from 0 to 60 in 23 months as we've doubled each year. So it's grown tremendously, and it has a lot of momentum behind it. And when we do that, we see a much a more balance sheet-light P&L, but we also see higher margin, and that's why our margins are approaching 50% right now because we're basically get that marketplace style economic of earning a fee and we have some variable costs, but not much. And as a result, that kind of drops down to the bottom line. Offsetting some of that, of course, is going to be newer products that we're focused on where we haven't reached that level of scale, and we don't necessarily have those margins. So that would be like newer consumer loan marketplace products like our DSCR product where we're not as evolved our residential transition loan, -- and then you get into like yields and Democratized Prime, which are almost 100% incremental margin products because --

It's all fees.

Right. It's all fees with a stablecoin or with a short-term capital marketplace. And so the net of all that, as we've kind of shared in our medium-term guidance is around 60% margins. And I think from a unit economic standpoint, we started with the direct-to-consumer a long time ago, and that would be like the highest revenue, but the lowest margin. And then we moved into like an intermediary business where we leverage the sales and marketing of our partners to have them originate, but then we bought and then sold quickly thereafter, and then we moved to full Figure Connect. And in each of these cases, our actual dollars of revenue has come down, take rate has come down, but margin has come up and capital intensity has gone down.

And how should investors think about credit risk in general, in terms of loan quality, but also from the perspective of liquidity because the big funders here are private credit investors.

Well, the big funders aren't private credit investors, right? Some of the big funders are private credit investors, but many of the big funders are insurance companies. It depends on what your definition of private credit is. But I think Blue Owl, not to throw shade at them, like they're fine, like we -- I don't know anyone there or whatever, I don't mind them. There's actually someone there with my last name. Kurt Tenenbaum he covered us back, at my last company. But anyway, so he's fine. But the point is Blue Owls bought loans from us, I think, once. So they're not like a big part of what we do. And I think we have a very diversified base, and I also talked about this on the earnings call, which is that even in early April, which was like probably the peak of drama related to this topic, we were executing at the best -- the lowest spreads ever. So we're just kind of doing something a little bit different than that world. But that was a bit of a tangent from your question. And the focus for us in terms of like credit risk and liquidity, which was your question. So from a credit risk standpoint, we are the -- at least in the mortgage part of what we do, -- the average FICO score for our borrower is 740. The average income is 180. The average equity in the home after the loan is 30%. So it's a solidly mass affluent customer that's very diversified. We're talking about $100,000 average loan amount. So these are pretty -- these aren't like chunky credits to software companies that are getting disrupted by AI. It's pretty different. And on the liquidity thing, we've obviously invested in the marketplace and also something we haven't talked about today and haven't been talking about as much, but it's really important because we invest in the future is the relationship that we have with Sixth Street, who I guess would be defined as private credit, but for those of you who listen to invest like the best, which I do, they had their founder on relatively recently. It was a pretty interesting podcast, I think very thoughtful platform, not to say other platforms aren't thoughtful. And we've worked with Sixth Street to build out kind of a guarantee or permanent equity vehicle, which we call the guarantor. And that term, the guarantor, the SEC didn't love that during our IPO process, but we kept the term. And the guarantor is a permanent equity that has been established to buy loans in the Figure marketplace. It is -- we are somewhat inspired by Fannie Mae, and it represents a bit of what's going on there, which is to say that Sixth Street likes what we do enough to say we're going to commit permanent equity here. And I will tell you that in early April, in the sales conversations that I'm a part of, something like the guarantor was coming up more than it would normally come up with originators who don't care about this until it's a problem. And so it is a differentiator for us because people see Figure as a capital market that will be there in times that are not as robust. And I don't think I actually specifically said what the guarantor is. It's a permanent equity that's been established to buy Figure loans. And an expectation, it would always be the best buyer of loans. But in a hot market, it will not be a great buyer. And in a bad market, it will be. And sometimes it may be the only buyer, but it will be there.

I wanted to touch upon tokenized equities as well. I know there's open very different -- very early stage of the business versus the credit business.

Sure.

Just like what's the idea behind it?

Right now, it seems at least to me that there's sort of a jump ball in equity, right? Everybody is trying to plant their ground in tokenized equity, and we also are trying to do that because clearly, tokenized equity is a big trend and things are changing. And what Figure is focused on is that lean perfection that we spoke about, right? Because if we're going to -- where does Figure have the right to win? We have the right to win in the prime brokerage business and the securities lending business. And prime brokerage today, a lot of the money is made when stocks are lent and borrowed against for short sale. And right now, that economics is not earned by the owner of the stock or the borrower, right? It's generally earned by the prime broker. And a big part of what we did in credit is disrupt the middlemen and sort of turn over the economics to the originator or turn over the economics to the investor. And in the mortgage space, prior to Figure being there, there'd be all kinds of people that buy from small guys and then sell the big guys and like -- and we kind of cut that all out, right? And we're trying to do the same in equity. And in order for us to do that super well, the equity needs to be blockchain native because you need to know that that's what you're lending against and going back to a different thing I talked about earlier this afternoon, in order to like borrow against equity and be sure that you're borrowing against that equity and not have like an archego-style blow up, right, you kind of -- that's where blockchain can come in. It can prevent fraud, which again tends to be where people lose a lot of money. And so we believe in a future of lean perfection and tokenized equity that is native to chain. We put out kind of our vision for that future by doing our own equity on chain. We initiated -- excuse me, we issued an all blockchain share class, FGRS, and we did a secondary transaction in February to show the market that, that could be done. Now we're signing up other issuers to do the same. But ultimately, what we -- our vision is not that different than the vision that Bullish and Equiniti promoted 3 weeks ago when they did that deal. And I believe very strongly that, if that becomes the place that equities trade, the prime brokerage business will be bigger because the vision that they have is aligned to the vision that we do, and we are best positioned to win. So I think equity is not an asset class that we want to ignore because tokenization is coming there. Figure is about the future of capital markets on blockchain. And so we want to have our -- we've put out our stake. And I think we have historically been the infrastructure layer, and that is my best guess as to where we will thrive in equity as well. But I think in today's world where so much is still up for grabs, it's very important that Figure flags what we're about and how we see the future and continue to build out that marketplace, even if that marketplace evolves to be kind of behind other people's distribution, which is what most of our marketplaces are.

I'm going to just ask one last question and then turn it over if the audience has any questions. As you said, right, the Figure volume is growing 130% year-on-year. Top line has been very strong. EBITDA is expanding as you get operating leverage from the tokenization platform. It seems like pretty straightforward to me. What do you think is sort of investors misunderstand about Figure?

Number one thing is that they narrowly focus just on home equity as like a trade, and they miss the fact that we've really created liquidity in a space in which there haven't been. And so they're always trying to like talk about the origination technology. And what people don't sort of miss in that context is like there's lots of software out there, right? People aren't needing a new software provider. Nobody -- when I'm having a conversation with an originator, I'm talking 0% of the time about software. And I'm talking 100% of the time about capital markets, liquidity and how we can offer a solution that scales with their business and sort of changes the game. So that's the #1 thing. And I think in general, we do have a more complicated story because we're blockchain and we're fast growing and we're fintech and there's a lot and there's regulatory interest rate, there's a lot going on. But I think at the highest level, and one of the reasons why we focus so much on that combination of growth and EBITDA is because like we don't look like other people. So don't bucket us with whatever you are. We think about us as something that is unique and singular and special, and we'll continue to execute into the really large market opportunity that we have.

Excellent. Just going to see if the audience wants to ask any questions. Okay. I'm going to ask a question. Sure. CLARITY Act. How does Clarity Act impact Figure? I mean, most -- I think a lot of investors think that this should accelerate tokenization. But just like what's the impact of CLARITY on Figure?

High level, Figure has been successful in a number of regulatory environments, right? Our stable coin was approved under Biden, and we are a company that's thrived prior to kind of the risk -- the blockchain forward administration, although we welcome that administration, right? It's obviously been helpful for business. But I think it is important to remember things change. And Figure has been a company that has not needed any one sort of legislative body or approach to make our business work. And we think about the world as back -- like just zooming out blockchain sort of a subset of fintech. Fintech, you need regulatory, you need technology and you need capital markets to succeed in fintech typically. And so we care about all 3 of those. CLARITY, in particular, it will help on our Democratized Prime platform clarify the role of DeFi. So I think that will give institutional investors more certainty when they're signing up to lend in something like that. I think there's a world where our stablecoin yields YLDS is uniquely positioned as something that both can offer yield because it's not a GENIUS Act stablecoins.

Security.

It's a security, but may potentially not require a transfer agent to move. And if that happens, yield would be just a better USDC, right, because it would be a yielding USDC. So that would be very disruptive. I mean that's -- I'm not counting on making the year with that, but that would be definitely nice. And just in general, I think CLARITY, as you said, it's kind of solidifying the future of tokenization, which is a big trend for Figure. But if CLARITY passes, it's not like that's not going to be a poll vault for Figure's business. And if it doesn't pass, it's not going to be a brick wall.

How does AI sort of accelerate the Figure business model? And how are you sort of adapting to the sort of agentic finance?

Yes. AI is among the biggest challenges, I think, for people running companies today because it's just the pace of innovation and the pressure that is put on companies to evolve and adopt is high. And I think we are meeting that moment very much. I think we're doing it across not only our product, but also how we run the business. So in terms of our product, we're very well positioned in that we represent -- I like to say that, AI is the brain, but blockchain is the nervous system. And kind of going back to what I mentioned before, just because you add AI to an origination process does not mean you will lower its cost or speed it up. And you cannot -- digitizing a bad process left us with a $12,000 cost to originate. And so for us, it's very important that the inputs are verified on chain because otherwise, you just get AI slot, right, which was the word of the year in 2025. And at the same time, as we look to bring new asset classes on to what we do, we're using AI to adapt those asset classes to the same schemas that we've done for mortgage and translate them, and that's been very helpful. So AI is providing a lot of operating leverage there, which that would have been like a whole thing prior to AI for sure. Then you get to how do we use AI ourselves, like not in our product, but as our company -- and one of the reasons why our direct -- I don't talk about this too much, but this is a close group of friends. And we don't emphasize our direct-to-consumer business very much because it kind of competes with our partners. And -- but I think one of the reasons why I have wanted to keep it is because it is actually our way of making sure that we are always at the forefront of using AI in marketing. And we have continued -- even though every marginal -- originatating partner that comes on our platform is competing with ourselves, right? We are giving away our advantage to our partners. We're still growing that also 100% year-over-year. And that's because we are the most effective user of AI of the partners. Because we are a company that really focuses on that. And I just don't think -- you never know where the world will go, and that's not something I'm prepared to give up in case we need to go back -- who knows what AI can do. And if it can do so much that we need to -- that we're really the only ones who Figure out how to do it well. I'm trusting -- I'm betting on ourselves, right, on that one. And then lastly, how do we use it in terms of operating leverage and costs. That's where we do more third-party stuff. So chat is something that we've leveraged heavily, voice AI for service. We also -- I think I said this on the most recent call, just in terms of coding, I think 30% of our coding is done is AI code. So we're leaning in, but we already are a lean business at 50% margin. So at the margin, I'm focused on AI and the product, not an AI taking out cost because we don't have a cost problem.

Sure.

We're only 600 people-ish so.

All right. That's it. Thanks, Mike, and thanks for doing this.

Thank you.