Figure Technology Solutions, Inc. ($FIGR)

All right. Welcome back, everyone. So next up, we have Macrina Kgil, CFO of Figure Technology Solutions. Figure's the largest nonbank originator of home equity lines in the country. with its origination marketplace, asset transfer technology, all built on the Provino blockchain since going public last fall figure and its 380-plus partners have originated around $10 billion in loans with a marketplace volume up triple digits year-over-year. And I think today, you reported that volumes in the month of May were up 5% month-over-month consumer loan marketplace volumes.

Yes.

If I'm not mistaken. They just delivered their first AAA-rated blockchain native securitization from both S&P and Moody's. Macrina brings real public markets pedigree, having led OneMain's IPO and serving as CFO of blockchain.com. Macrina, thanks for joining us.

Thank you for having me, Patrick, and I had my whole spiel laid out for what figure does and you've already done it.

Well, I think, why don't we start with -- maybe just on the environment then. It's been a busy period. Can you walk us through how figure is performing today, where origination loans are tracking, volumes are tracking, what the funding environment looks like and maybe how the macro setup is kind of shaping demand.

Sure. So as Patrick mentioned earlier, we've been doing tremendously well. Our May volumes came out last night, $1.4 billion month-over-month, it's been 5%. But really, we look at year-over-year because we do have some seasonality as well. it's over 100%. And so we have been hitting 3 months in a row in terms of $1 billion plus funding volume. Business and partners that we have been adding overall from a foundational perspective, we've reached 380 partners that has been performing very well. And if you look at the macro landscape and how that has been impacting or actually less impacting figure is that we have been growing through these volumes across the board through higher rate markets, lower rate markets with the whole geopolitical macro economy being more unstable, we have been continuously in the market with our capital market vehicles since Q1. And Q1 was a tough market for everybody I do want to repeat that we have been very stable of being able to use our capital markets infrastructure that Patrick had mentioned, that is who we are Figure connect as a capital market infrastructure. We have been able to see that whole loan buyers are coming into our marketplace and also that we are continuing to use our securitization vehicle. But before I go deeper into like what we do, and I know you mentioned we are more of a HELOC long bank HELOC originator, I do want to start with how we view figure is that figure is a blockchain-based capital marketplace infrastructure. And what that means is, yes, in the past, we have been originating HELOCs ourselves. Selling them into the marketplace through forward flow agreements that we developed ourselves and also placed the securitization vehicle in place. But since June of 2024 before we went public in September of '25, we built out a marketplace called Figure Connect. And what that essentially does is we are connecting loan holders, loan originators to be able to utilize our marketplace to get capital and return. So in essence, it's really an asset and capital exchange marketplace, and that's what we view as Figure Connect. And where Figure is benefiting from that is we receive a revenue for volume that goes through the marketplace. And we call that more of an ecosystem fee to be able to use our marketplace, which includes a loan origination system for HELOC, and we've been doing this for a very long time. We base all of our assets on blockchain technology, which is amazing because it is very efficient, and blockchain technology provides you with immutable information, where if you change any information, you can see it right away. And then because we've been around since 2018, we do have the whole loan buyers that are very used to understanding bigger standard and homogenous loans coming on to the marketplace. And we have been AAA rated, as you have said, from S&P and Moody's since the summer of last year. Hopefully, I touched on...

No. Yes. So I do want to touch on the blockchain aspect and the lending aspect of the business still. I think sometimes people have a hard time fully comprehending what it is that really differentiates the platform. You mentioned you've been growing loans by over 100% year-over-year. You've been aggressively taking market share in HELOC and you're entering into other products. But what are maybe the one or two things that have allowed you to grow so quickly into this market, whether it's the technology stack, the funding cost advantage, the speed at which you can originate loans because of the blockchain. Just talk a little bit about what those factors are?

Yes. I would say it's really a mix of everything that you just mentioned. So we started out the company by being able to build out a technology stack that originates loans in as fast as 5 days or on average, 9 to 10 days. So I think that's something that has not really been around before, traditional mortgage markets. I know many people in this room have experience getting a mortgage, it would take you about 45 days to be able to originate a loan. So the technology stack that we built has been very efficient to be able to replace humans who are part of the origination process with technology. The other part that I would say is because we're using technology, the cost to originate a loan is less than $1,000 which I think is a huge benefit and a huge motivator for many of the loans that we originate using the Figure ecosystem. As an example, so if you are a borrower going to a credit union, and you're looking to borrow $50,000, many of the credit unions may say, no, this really doesn't make sense because it costs around 11,000 to originate the mortgage. In our case, it's $1,000. So we wouldn't be able to -- we wouldn't turn it away or our partners would not turn your way because they're using our ecosystem in the tech stack. They are able to enter into greenfield markets where the borrower now can access funding and they're able to get the mortgage where previously they would have just ignored and moved on. And so bigger works with our partners behind the scenes because of the cost advantage and also the speed in terms of the technical advantage as well. And that's how we are able to bring more customers and borrowers and partners into our ecosystem. Where blockchain technology is really critical and very helpful is that it adds speed and it also cuts down cost in terms of how the transaction moves through the ecosystem. So I'll give an example of when a borrower borrows through a partner. Our partner name is actually reported onto the blockchain technology together with the characteristics of the loan onto the blockchain. So as I mentioned earlier, if you're on the blockchain, the loan is native to the blockchain. It will say it's a $100,000 loan that is borrowed by Macrina, that's me. And they'll have the rate and we'll have the term, all of that information onto the blockchain and you can read it if you are the loan holder and the loan buyer at the end of the day. When the loan moves through our structure and it goes to a third-party buyer, a whole loan buyer on the other side of the securitization vehicle. Usually, there is a lot of third parties that come in and review all of the information that's on the loans. So I'm sure many of you have experienced, it could take weeks at a time. It does cost a lot of money to be able to do that as well. And if you're in the capital markets, often enough, this trade happens multiple times throughout the life of the loan, and it does take a lot of time and cost to be able to do that. Where blockchain technology is so efficient is that you can see the information right away and blockchain whenever there is a change in the information can also have a record of who changed it and what changed. And so there is a lot more trust and there's less review by third-party intermediaries into the blockchain technology. So I just wanted to give you that context of why there's efficiency in terms of speed and cost. And then the other thing, if I'm the one buyer at the end of -- on the other side of the capital market infrastructure what works really well is that if I wanted to see the information on the loans, I can literally pull down the information on a daily basis or live. In a normal loan world for you to be able to see the loan information if it's defaulting, if it's prepaid, what the interest rates are, et cetera, et cetera, you would need to wait 30 to 45 days. And so that immediate impact from a portfolio management perspective of the risk management that they can take. I think it's a huge benefit if you use blockchain technology.

So your core competency up to this point with the underwriting model and the loans that are on your platform is in HELOC, you are launching, what you would call HELOC mortgage adjacent products. Can you talk about what those are and kind of what the pace of growth there could look like in the next couple of quarters?

Sure. So I think everyone is used to what a HELOC is and you kind of think of a HELOC as more of a second junior lien to your main mortgage that you have in your home. What figure has been doing in the past several years is that we've introduced the concept of a mortgage, a home-based product where it could be a first lien because there's $35 trillion of home equity out there. And you can use your home equity to be able to borrow into these types of loans. We've also introduced different types of loans using home as our collateral base. So we have SMB products or business loans that we give to business owners who have equity in their home. So we're taking the home as a collateral, but then we're actually giving you the cash onto the business itself. And so it's a hybrid to what you understand as a mortgage or a HELOC based product, but it is really going out to the business side. We're also thinking through investment property loans, which is called DSR, we're also looking at construction-related loans, which is an RTL loan as well. So I think the opportunity within a HELOC set or a home-based mortgage product is quite huge. And as I mentioned earlier, because of the cost advantage that we have as a company and the tech stack that we offer to all of our partners, we are seeing that there are more borrowers, more volume coming through. And there I say HELOCs are becoming more trendy because there's more originators and banks entering into the overall ecosystem, which I think is very beneficial because people continue to understand what the loan product offers.

So on HELOC specifically, I don't know the exact stat, but I think your market share you have to share this if you don't want to disclose it, but I think it's sub-5% is my guess. So there's a lot of runway there. How do you think about prioritizing like the white space and the growth that you have in front of you in HELOC. And then I'll follow up some questions on some other product categories that you're going into. But in terms of just HELOC, how much runway is there?

I would say I wouldn't really look at the $35 trillion of home equity that's in the overall market out there rather than looking at the HELOC loan category in a narrow way because, as I mentioned earlier, HELOCs were larger loans. It took many days to be able to close on a loan and a lot of money from the borrower and the bank perspective to be able to originate these types of loans. What we are introducing is a whole new greenfield or products where it can be used for home improvement, which is what traditionally HELOCs were used for, but you can also use it for debt consolidation where if you're thinking about asking for a $50,000 loan on a personal loan, it could actually have many times multiples in terms of the rate that you need to pay. If you're using our product, you can think of a 30-year amortizing loan at a high single digits or 7% to 9% rate is how we think about our type of product. And so, we think the market opportunity is very large, not just as part of the smaller HELOC ecosystem is how we really think about it.

Okay. So moving on to other product categories, as you think about the longer-term product road map, which other lending verticals do you think are the most natural fit for figures technology and unread capabilities?

Sure. So how we think about our capital market infrastructure that I mentioned earlier, Figure Connect, and we also have a short-term marketplace infrastructure as well called democratize Prime. What would be a great fit is you're thinking about giving an asset or a collateral into an asset in exchange for liquidity. And so if you have a loan category that has a collateral -- tangible collateral behind the scenes, that can be validated and placed onto the blockchain technology platform that we offer, we think that is a really great asset class to continue on to our ecosystem. And so Auto loan is a great example. We announced a partnership with a company called Agora data in February of this year. That meets a lot of the characteristics of what I just explained being able to place the loan on blockchain technology, having a car behind the scene so that you can sell it. And then there is already a very active market of liquidity buyers, loan buyers on the other side, securitization market is well built out whole loan buyers actually understand the long characteristics. And so we do think both types of loans, auto, SMB, small medium business loans, receivables and many other different types of asset categories along that line will be extremely beneficial for the borrower, the originator who is providing these loans and also for the loan buyers on the other side.

So taking all these different pieces together, the originations that you do, the third parties like Agora, secondary market liquidity that's being generated from these loans. What do you view as the next phase of the figure story. Like where do we go from here? What are you most excited about?

Great. Well, we have a lot of things to be excited about. But we've been talking about the Figure Connect journey where it took us about 8 years to build out the marketplace from a lender and a borrower side of the house. I would say the next phase of where we think we're going to be really great at is democratize prime. And what that infrastructure does is it's really a short-term warehouse facility. So if you are a loan originator as a company and you want to be able to have a forward flow agreement to sell your loans or be able to place your loans into a securitization vehicle, many of these companies spend a lot of time, legal fees, hire people to be able to go out and get a warehouse facility. And I'm sure many of you have had that experience where if you are working with the bank to get a warehouse facility in place, even a renewal takes several months and the underwriting is a lot of work. What Figure is offering is a decentralized blockchain-based finance network. called Democratize Prime, and you can plug and play and bring your loans like Agora data did into the ecosystem and be able to get a short-term warehouse facility through third parties that are coming into the marketplace. So as an example, the lender supply is really coming from blockchain real-world asset technologies, like Solana. They have their own curators and a group of companies that come together to be able to lend to certain types of yielding assets. Where Figure is really unique as in the past, if you're lending on a blockchain DFI ecosystem, you're lending to Bitcoin or you're lending to Ethereum, and the assets are not really self yielding. In figure's case, we are providing a platform where auto loan lenders or HELOC loan lenders or any types of yielding asset could come into democratize prime takes a few weeks for them to be able to get through our validation tool and be able to be recorded onto the blockchain technology with the asset information and they can start using democratized prime. And so if you're an originator coming into figure, you have the option to an originate loans, be able to get the warehouse facility in place without too much effort. These are all homogenous and standardized. And then over time, once there is a securitization market that's built for your asset class, auto being a great example of it's already there. And there's loan buyers on the other side, you can also tap into a longer-term facility, which is where you're selling your loans to third parties. So we're very excited about long story short, bringing on Democratize Prime to be more of a big marketplace infrastructure that continues on from what we have on Figure Connect. And so you have the whole set of suites of possible financing that could come. The other thing that we're really excited about is our stable coin security, which is wild DS because we're on blockchain technology to be dependent on more of the banking system where it takes about 2 to 3 days to settle your funds we actually want to make sure that there is a stable coin on the other side that can atomically settle all of these transactions that are taking place. And so we're really excited to see that democratize prime and while DS are pairing up together to be able to work on our ecosystem quite well. And then lastly, I'm going to touch on briefly is we also have started tokenizing equity on the blockchain natively. Starting with figures on equity on the blockchain. So we call that system open. That was launched in February. And so we think we have the capability as a holistic marketplace where equity can be native to the blockchain, trade at 24/7. If you want to be able to lend out your equity to other people, you can lend your equity and be able to get all of the benefits of interest income that come through. And then lastly, because it's the blockchain, every single owner or whoever is owning the equity is also very transparent. So from an issuer perspective, so figure if I wanted to know if Patrick is holding on to the equity or myself, we can actually see that information. I think that's highly beneficial. It's the same thing as you have to wait for a service to report 45 days to see your loan performance. You don't have to wait for a 13F to come out 45 days later to know who is holding on to your equity.

So maybe just a quick follow-up there. Do you have any comments on the regulatory environment, specifically this innovation exemption that is being talked about. Do you have any concerns? Do you think that could be a tailwind? Any thoughts at all?

So Figure has really thrived and grown in any regulatory environment or any administration, to be frank. And so we received a lot of the licenses, and we see the blessing from the SEC on many of the products that we have throughout the last 3 or 4 years. So it's not really a recent event. However, we welcome the tailwind. I really enjoy the fact that tokenization is more of an everyday work that people think about and talk about and there's more understanding on the benefits of tokenization of assets that are used on a day-to-day basis. So I really think that the regulatory headwind -- tailwind in helping us get through the understanding from institutions and more interest from the institutions, I think, is very, very helpful. I think the other part I would also add is that there is more awareness around stable coin. And because we do have our own stable coin called Wild DS, that was registered with the SEC. It is a face amount certificate, more like a debt security and earning yield. We think that's going to be a huge tailwind for us because the current Clarity Act that's going through the government right now, it talks about stable coins not being able to earn yields if you're a passive holder. Whereas our token yield token is more of a security. So we are able to provide yield. Right now, it's so far minus 35 basis points. And it is freely transferable peer to peer, which I think is a huge benefit for the holder. And I think as I was doing my research around what are treasurers of companies really interested in they want to be able to hold stable coin, but they think about, is this something that is actually yielding and I don't want to be able -- I don't want to lock up my cash on something that's not yielding. And I think why DSR, that security is really an attractive alternative in that case as well.

So let's shift gears. On competition, you're competing with not only traditional originators, but also there's a growing set of cryptonative players who are trying to tokenize real-world assets. We have many of them at this conference, but you've probably been outgrowing a lot of them, most of them. What do you view as figures most durable moat in the tokenized world?

I would take us back to us being a capital market infrastructure. We essentially have created an alternative view of the credit capital market. So the one that you will be most familiar with is with the GSEs, Fannie and Freddie. So they have created a standard homogenous process for mortgages to go through the ecosystem there. and there is a buyer on the other side. And so you definitely know when the mortgage is originated there is going to be a takeout at the end of the day, and there is liquidity that's readily available. And that's essentially what Figure is doing in terms of the capital markets infrastructure. I would say the other advantage and the huge moat that we have is we've been securitizing figure loans that are native to the blockchain for a very long time since 2021. And we are one of the very few companies are actually the only company that has AAA from S&P and Moody's for our securitization vehicle. So a huge moat in terms of any competitor coming in, sure, if you're looking at your fintech companies out there, it takes time, and it takes experience and it also takes the performance of the loans to be able to get these types of ratings. So I think that's another huge moat that we have. And then the other one I would add is we're licensed in all of the states in the U.S. for originations and servicing. We also have different types of registered broker-dealer. We have a transfer agent for our equity. So being able to, one, get these licenses, and then two, maintain them over time without major issues is also a huge effort for the company itself. And you can see -- you can only see all of this through history. And you have to have the experience in several years of what we have been doing as a company to be able to build out the capital infrastructure and bring in the different types of buyers and lenders into the ecosystem.

All right. Well, on a big patent question. If we fast forward 3 to 5 years, what does figures revenue mix look like? Are you still primarily a HELOC business? Or is the tokenization democratize prime open platform become the dominant story.

So we have been growing really fast. So being able to predict 5 years down the line is going to be difficult to be honored. However, I really do think that we're going to be primarily on a market infrastructure. So connect and democratize Prime will be a huge part of what we do. We want to be able to make sure that our partners are using both of the marketplace infrastructures, which makes a lot of sense for them. And ultimately, we want to be able to address many of the different asset classes, not just HELOC coming into our ecosystem. Auto, as I mentioned before, some type of loans that are based on asset classes. And ultimately, today, we're about ecosystem fees, if you look at our revenue and ecosystem fees is what we generate from our marketplace. We want to be -- we want to make sure that, that is the vast majority of what we do and democratize Prime Figure Connect that will all come through our ecosystem. The other part I would mention is we are currently 50% adjusted EBITDA margin. We would want that to continue to grow A lot of the volume that goes through our ecosystem is really -- contribution margin is quite high. So ultimately, if you look at who we are 5 years down the line, I'm sure we'll continue to be profitable. Our margins are going to be high, and we have lots of different types of assets on our market infrastructure.

All right. Well, it's been a fun story to watch so far, and we look forward to watching the play out over the next year Macrina, thanks for joining us.

Thank you for having me.