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, native crypto has moved to what we call real-world assets. I think that's where Figure fits in. Mike, thanks for doing this. Figure's had a bit of a history. You've been around for a while. How has that Figure vision evolved over time? There's been regulatory shift, there's been technological shift. Just take us through that.
Thanks for having me. The vision of Figure has actually been remarkably consistent since the beginning. I think the company has been really purposeful in the way it's built out marketplaces on blockchain rails. That's been consistent through a number of different regulatory environments, a number of different crypto winters and summers, also, a number of different interest rate environments. I think Figure has been a business that's thrived through all of those things. To go back to the vision of the company when it was founded in 2018, Figure came out of SoFi in many ways. SoFi, when I was there, we were doing about $1.5 billion a month of volume. SoFi was not a bank then. Many non-banks, you're always thinking how do you find a solution for all the assets you originate?
Blockchain at the time was one of the summers for blockchain, back in 2015, 2016. It was hot and it was also hot in 2013. It goes through these waves. 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. That vision and that purpose of using especially blockchain technology, but other automation to standardize the capital markets and modernize them, bring them onto blockchain rails, has always been the goal. I think Figure's been unique in that we've been not afraid to build out marketplaces with our own inventory. We started by doing consumer loans ourselves until we turned that over.
Today, 60% of our business and consumer loan marketplace is Figure Connect, meaning Figure is just the rails and doesn't touch the loans, doesn't touch our balance sheet. Democratized 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. Tokenize equity as an example, we started with our own security. 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 raised that money. 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.
When they are built, they're really durable and they're hard to disrupt.
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?
What we're doing is building the future of the capital markets on blockchain rails. 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.
Sort of stepping back, why is it important to tokenize credit?
I think tokenization has been, and Figure's been really fortunate, like tokenization two years ago, for sure, and probably even 18 months ago, was not a term in the lexicon. 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've been laughed out of a board meeting previously if you had brought that up. Now people are asking at the board meeting, "What's our strategy?" Clearly that's changed. Why is it important in credit? Well, credit actually is the biggest beneficiary of at least the three main reasons why we use blockchain. Those reasons are for transactional efficiency, for liquidity efficiency, and then, for what I would broadly call lien perfection. I'll go through all three.
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 would be checked, the attributes of that loan would be checked, and then someone would sit there at the company and dispute any findings that that third-party diligence provider found. That's how loans trade. That's obviously inefficient, what Figure does is we take the attributes of the loan upfront and move them on chain.
They are immutably there, and people don't need to check. I think I want to be clear on this, as Figure has become more ubiquitous and the standard through which many mortgages and now 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 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. People understand what Figure stands for, and they see the attributes they need to see, and there's just a lot more liquidity and standardization in what we do as a result. That's the transactional benefits. I think those are pretty well understood. The next are the liquidity benefits.
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. What we've identified is that things like mortgages and consumer credit have much more in common than they do not in common. 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. 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. Fannie Mae is a more direct comparison.
With Fannie Mae, nobody asks, "Well, which person originated this Fannie Mae loan?" They just say, "Is this loan a Fannie Mae loan?" A lot of people get this wrong, and they assume that that has to do with the government guarantee. It doesn't. Credit risk is not the number one 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%-65%. There's 30%-35% equity in the home in our loans. People are not actually worried about credit risk. They're worried about liquidity and interest rate risk.
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. 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. 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." The reason they track that is because they're worried about liquidity. Another conversation I've been having today on this liquidity point is, 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. That's because what they do, this standardization that they bring, is extremely valuable. It's not just about that government guarantee. 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. Also to other asset classes, auto, small business, all the things we've been talking about. 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? That's number two. That's liquidity. First, transactional. Number two, liquidity.
Number three is lien perfection. This gets to a conversation we had about tokenized equity as well. What's really important when you are a lender, the number one way that people lose money in lending today and in the past year has been fraud. If you look at Tricolor, you look at First Brand, you look at MFS, the places that people have lost hundreds of millions of dollars has been on fraud. In the warehouse lending markets, in the asset-backed markets, people are really concerned with double pledging, and they're concerned with double sales. 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. Sometimes it turns out they did.
You do that on blockchain, you prevent that from happening. You get this lien perfection. It's why we are so focused on care about the provenance of the loan. That lien 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. That's the third way that we use blockchain. All of those things together create an opportunity in consumer credit to do something different, to lower costs, bring liquidity, and ultimately bring the value propositions and the value back to the originators and the investors and sort of reduce the value capture in the middle.
Sort of this gets me to one of your significant businesses, is HELOCs. You have almost a 5% market share of HELOCs. 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 explain the proposition to the two 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.
Yeah, probably. Yeah
There's a reason for that. It's just the truth. There's no document or presentation, and there's lots of documents and presentations at Figure. None of them is like, what's our market share of HELOC today? The reason is.
It's 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. 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.
Yeah.
do not think that that metric is relevant, but I'm fine for you to cite it because I can't control you. To your question of why do originators use us and why do investors use us, the value proposition to the originator is there's some things that are consistent and there's 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. We're a combination of Ellie Mae plus Fannie Mae, and as I mentioned, a little piece of what Tradeweb does. We bring all that in one system, and because they all work together, there's significantly less costs than the alternative.
Those costs aren't going away with AI, right? Reminder, loans once were done with pen and paper. We've added tons of software to the process. Costs have not come down. Just adding token spend also into that mix, digitizing a bad process didn't improve anything, and AI-ing a bad process won't improve anything either. 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's 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 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 was listening intently to that earnings call. What you heard was us talk about Flagstar. 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 number one risk is interest rate risk. We also serve fintechs, and fintechs that use us at home improvement companies, people like Lowe's Home Improvement, a big retailer, pool financing companies, all these people. We're actually competing more with home improvement financing in that business. Again, we're offering a lower cost and a more efficient process.
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. There's some things that are consistent around cost and speed, but then other things that are nuanced by the type of partner. 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. As a result, there's a lot of consistency, and so buyers are looking for a risk-adjusted return. They're looking for a yield, even in a world of kind of some of the disruption we've seen with 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. That's a big trend in the market, not going away as sort of lending has moved off bank balance sheets.
As a result, 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. Is that forever? Is that whatever, right? Point is, 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. 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. 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. 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. 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. Figure, in the past nine months, has done a really nice job of expanding what we do to serve other blockchain ecosystems.
We were built on Provenance, but increasingly, we have expanded what we do to serve the Solana ecosystem and the Ethereum ecosystem, which 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+ partners right now. How significant it is or how involved it is to 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. 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, we talked about Flagstar Bank. If you go to what they're doing, they sell loans to Fannie Mae, they sell loans to a bunch of different people, right? They also are using a bunch of different third-party software. 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. Now by May 2026, so less than two years later, it's over 60% of our volume. 0- 60, like a car, in 23 months. 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. That's hard to do. That's part of building a marketplace. We don't really see, at least today, anyone capitalized or incentivized or with the technology to go and do something like that. Everyone's sort of solving kind of myopically their near-term thing. We don't have any competitors that are doing this exact thing.
If they were to try to do this exact thing, well, they would have to start where we were eight 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. Obviously, this is America, people can do that and compete, but I think it will be hard.
Obviously, we started talking about HELOCs, but there's a lot more coming. There've been new loan categories that Figure's 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?
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. As a result, it's $2 trillion outstanding in a bad year, and we think that over time, all of that's addressable. 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. We're using a short-term financing marketplace to Democratized 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.
When you compare the sort of newer products, small businesses, what's the kind of scale that one could imagine, especially for products beyond mortgage?
Well, mortgage is the largest consumer credit class. At the same time, mortgage is a lower rate, and it's also the longest. When you talk about dollars outstanding or dollars of origination, mortgages tend to be bigger and outstanding for longer. I look at an asset class like small business as a really big opportunity for Figure for a variety of reasons. One, we talked about this in our Q1 call, $60 million of volume in Q1 was done through SMB partners. 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. What that means is we're building out a network of SMB origination partners in addition to mortgage partners.
Those SMB origination partners have other loans that they would like to use other Figure products for, like Democratized Prime, like our securitization product, like DART, our Digital Asset Registry Technology, right? They want those products. They want that standardization. They want that automation. 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 I guess I can't probably say who does it, but it's not Bernstein. It's not SocGen, don't worry. They have a warehouse line, and they're looking to use us instead or as a supplement. 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. They are looking to pair their loans with other SMB loans and build a securitization shelf. Build liquidity, right? The same thing that we did in mortgage, we want to do in SMB. 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. 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.
Just broadening the ecosystem that Figure's building. There's Democratized Prime. There's your Yields stablecoin. Can you just paint the picture for us? How do each of these parts of the ecosystem sort of stack up?
The originator relationships are the hardest thing to get. From the perspective of an originator, most of those people are mortgage, but they're not all, right? Some are small business, as we talked about. One is auto. 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. People are doing that and largely accessing our capital markets and our liquidity, when they do so. We have a bunch of products that offer that. Figure Connect, as we talked about, the origination system, which comes with Figure Connect. 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 often you need financing to aggregate loans.
Even the biggest firm, even the biggest fintech, anybody, even banks don't want to necessarily hold these loans on their balance sheet for long periods of time. Everybody needs financing. That's why there's trillions of dollars in the money markets and commercial paper markets, right? We're disrupting that prime brokerage, all those types of things. Point is that the short-term aggregation phase is supported by Democratized Prime. $YLDS, our stablecoin, is kind of the oil of the capital markets, and the loans are settled in that. They're serviced by that.
One of the reasons why $YLDS grew a lot week-over-week, for those of you who are tracking it, which may be no one, but the $YLDS 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, their resting bid is in $YLDS. Rather than having dead cash, we offer people the ability to buy stablecoin and bid on lending to our assets. They hang out in $YLDS while they wait, which is better than hanging out in cash that doesn't earn anything. $YLDS is sort of better money, is how we talk about it. People are increasingly in our marketplace being paid in $YLDS. I just say $YLDS just grows as a result of our overall marketplace.
It's a relatively small contributor to the P&L.
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 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 $YLDS stablecoin. What would take you from where you are today to a 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. I don't think that in any way diminishes what Figure does.
Sure.
Also remember, loans are, especially mortgage loans, are outstanding for 30 years. It's really about when I do want to make a trade, which may be in bulk, is that liquidity there?
Some of the investors hold these tokens so they could like, "Oh, I want liquidity. I'm going to come to Democratized Prime.
Right. The fact that there's liquidity matters a lot. 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. Nor did you imply that.
Sure.
I just want to clarify that. However, I think one of the most interesting things about blockchain is this concept of cross-collateralization that you get with lien perfection. This gets to our ambitions in the prime brokerage 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, from a prime broker, if you're a hedge fund and you want to margin a stock, you maybe can use that margin to buy the same stock or maybe another stock. Maybe. Right? 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.
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. 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. 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.
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.
On the other side, obviously, you can create yield products, right? As you're integrating with the digital wallets, how is 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, the exchanges of the world and the wallets of the world. Without naming specific names, your Bullish's, eToro's, Coinbase, whoever, Kraken, right? Their customers are all looking for a yield. How are those customers going to get yield? Figure Assets is a natural place, right? That actually doesn't include just the Western-oriented ones. That would include the Korean and Hong Kong exchanges as well, and wallets. I think those are big opportunities for us as yield products get built. Also as the just capital markets in general become more tokenized, and you see BUIDL as an example and what BlackRock's 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. That market share's been growing, right? We had that market share at the time of IPO, and we continue to do so.
One of the favorite investor topics on Figure is unit economics. That's also evolved. At one end, this was going from the origination to Figure Connect as a platform, 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 First, what is a sustainable business model in terms of unit economics for Figure, how do you sort of see that evolving?
Figure has become increasingly capital light as we've moved to Figure Connect. Essentially with Figure Connect, we aren't involved in the origination of the loan from a balance sheet perspective. It's really a technology fee that we earn and a processing fee, which is sort of also a technology fee. That, as I mentioned, has gone from 0- 60 in 23 months, as we've doubled each year. It's grown tremendously, and it has a lot of momentum behind it. When we do that, we see 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 basically get that marketplace-style economic of earning a fee and we have some variable costs, but not much. 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. That would be newer consumer loan marketplace products like our DSCR product, where we're not as evolved, our residential transition loan. You get into $YLDS 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. The net of all that, as we've kind of shared in our medium-term guidance, is around 60% margins. I think from a unit economic standpoint, we started with the direct to consumer a long time ago. That would be the highest revenue, but the lowest margin. We moved into an intermediary business where we leveraged 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. 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.
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?
Yes.
Are private credit investors, but many of the big funders are insurance companies, or it depends on what your definition of private credit is.
Sure.
I think Blue Owl, not to throw shade at them, they're fine. I don't know anyone there, whatever. I don't mind them. There's actually someone there with my last name Kurt Tenenbaum, I remember he covered us back at , my last company. He's fine. The point is, Blue Owl's bought loans from us, I think once. They're not a big part of what we do, and I think we have a very diversified base. I also talked about this on the earnings call, which is that even in early April, which was probably the peak of drama related to this topic, we were executing at the lowest spreads ever. We're just kind of doing something a little bit different than that world.
That was a bit of a tangent from your question and the focus for us in terms of credit risk and liquidity, which was your question. From a credit risk standpoint, 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%. It's a solidly mass affluent customer that's very diversified. We're talking about $100,000 average loan amount. These aren't chunky credits to software companies that are getting disrupted by AI. It's pretty different.
On the liquidity thing, we've obviously invested in a marketplace and also something we haven't talked about today and haven't been talking about as much, but is 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. 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 a very thoughtful platform, not to say other platforms aren't thoughtful. We've worked with Sixth Street to build out kind of a guarantee or permanent equity vehicle, which we call the guarantor. That term, the guarantor, the SEC didn't love that during our IPO process, but we kept the term.
The guarantor is a permanent equity that has been established to buy loans in the Figure marketplace. 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. 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. 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. 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.
In 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. Sometimes it may be the only buyer, but it will be there.
I want to touch upon tokenized equities as well. I know there's open, very early stage of the business versus the credit business.
Sure.
Just 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's trying to plant their ground in tokenized equity, we also are trying to do that because clearly tokenized equity is a big trend and things are changing. What Figure is focused on is that lien perfection that we spoke about, right? Because where does Figure have the right to win? We have the right to win in the prime brokerage business and the securities lending business. Prime brokerage today, a lot of the money is made when stocks are lent and borrowed against for short sale. 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.
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. In the mortgage space, prior to Figure being there'd be all kinds of people that buy from small guys and then sell to big guys and do that, and we kind of cut that all out, right? We're trying to do the same in equity. 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. Going back to a different thing I talked about earlier this afternoon, in order to borrow against equity and be sure that you're borrowing against that equity and not have an Archegos-style blow up, right, that's where blockchain can come in.
It can prevent fraud, which again, tends to be where people lose a lot of money. We believe in a future of lien 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 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. Ultimately, our vision is not that different than the vision that Bullish and Equiniti promoted three weeks ago when they did that deal. I believe very strongly that if that becomes the place that equities trade, the prime brokerage business will be Figure.
The vision that they have is aligned to the vision that we do, and we are best positioned to win. 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've put out our stake. 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. 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, then turn it over if the audience has any questions. As you said, right, the Figure volume's growing 130% year-on-year. Top line has been very strong. EBITDA is expanding as you get operating leverage from the tokenization platform. Seems pretty straightforward to me. What do you think investors misunderstand about Figure?
Number one thing is that they narrowly focus just on home equity as a trade, they miss the fact that we've really created liquidity in a space in which there haven't been. They're always trying to talk about the origination technology. What people don't sort of miss in that context is there's lots of software out there, right? People aren't needing a new software provider. When I'm having a conversation with an originator, I'm talking 0% of the time about software. 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. That's the number one thing.
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. 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 we don't look like other people, so don't bucket us with whatever you are. 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 think a lot of investors think that this should accelerate tokenization. Just what's the impact of Clarity on Figure?
High-level Figure has been successful in a number of regulatory environments, right? Our stablecoin was approved under Biden, and we are a company that's thrived prior to the blockchain-forward administration, although we welcome that administration, right? It's obviously been helpful for business. 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. We think about the world as just zooming out, blockchain is sort of a subset of fintech. Fintech, you need regulatory, you need technology, and you need capital markets to succeed in fintech, typically. We care about all three of those. Clarity in particular, it will help on our Democratized Prime platform clarify the role of DeFi.
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 YLDS is uniquely positioned as something that both can offer yield because it's not a GENIUS Act stablecoin.
Security.
it's a security, but may potentially not require a transfer agent to move. If that happens, $YLDS would be just a better USDC, right? Because it would be a yielding USDC. That would be very disruptive. I'm not counting on making the year with that, but that would be definitely nice. 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. If Clarity passes, that's not going to be a pole vault for Figure's business. If it doesn't pass, it's not going to be a brick wall.
How does AI sort of accelerate the Figure business model? How are you sort of adapting to the agentic finance?
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. 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. 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. 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. Digitizing a bad process left us with a $12,000 cost to originate.
For us, it's very important that the inputs are verified on-chain because otherwise you just get AI slop, right, which was the word of the year in 2025. At the same time, as we look to bring new asset classes onto 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. AI providing a lot of operating leverage there, which that would've been like a whole thing prior to AI for sure. You get to how do we use AI ourselves, not in our product, but as our company. One of the reasons why I don't talk about this too much, but this is a close group of friends.
We don't emphasize our direct-to-consumer business very much because it kind of competes with our partners. 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. We have continued, even though every marginal originating 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. That's because we are the most effective user of AI of the partners, because we are a company that really focuses on that. 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're really the only ones who figure out how to do it well. I'm betting on ourselves, right, on that one. Lastly, how do we use it in terms of operating leverage and costs? That's where we do more third-party stuff. 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 AI code. We're leaning in, but we already are a lean business at 50% margin. At the margin, I'm focused on AI and the product, not on AI taking out cost because we don't have a cost problem.
Sure. Excellent.
We're only 600 people-ish.
All right. That's it. Thanks, Mike, and thanks for doing this.
Thank you.