After reading the earnings transcript and going over the numbers, I am conflicted.
The Numbers
They were good. Revenue was up 146% YoY. EBIDTA margins were 50%. They are GAAP profitable. They guided to $4 billion in originations for Q2, which I calculate as translating to $220 million in revenue, analysts have them at $205 million. That would be a revenue growth rate between 127% and 144% depending on which number you use. So this looks great to me, but now to the things that give me pause.
Issues?
- They are giving me Upstart vibes in two ways
- Upstart made all their money originating and packaging consumer loans, but they told the story that their superior borrower scoring method would make them the next FICO. But they never were anything but a consumer lender. Similarly FIGR makes all their money with HELOC loans, but they tell the story that they will be the on-chain DeFi marketplace of all kinds.
- When Upstart started holding loans on their balance sheet it ended up being a red flag even though they had good story about it. Similarly, FIGR is now holding $350 million on their balance sheet. They say this is to seed Democratized Prime, but it looks like they are propping up YLDS to me.
- It seems Democratized Prime does not have enough borrowers, so they are using the $350 million on their balance sheet as collateral to borrow on DP and support the lenders they have their. This cost them $2 million in the quarter and reduced margins by 1.4%. Could be a major red flag if it continues.
- They seem to be introducing too many product too fast. It seems they just started Democratized Prime and Open. Now they introduced Forge. Maybe I am being harsh here, but if they are still needing to prop up DP with their own balance sheet then why are they introducing new market places?
- This last one could be a misinterpretation because I read the transcript and have not listened to the call. The CEO seemed very defensive on a couple of questions. The questions were about HELOC market share where the CEO actually said “We’ve said this before, which is that we don’t actually consider the HELOC market to be relevant to what we do.” HELOC is almost all their revenue. The other questions were about how they did $1.3B origination in April and guided to $4B for the quarter so that implies no growth in May and June. The other question was about how the Macro environment (interest rates) might affect take rate or origination volume.
I have a 5% position in FIGR and I am a bit stumped here. The numbers look great. I think the call was not great. There are possibly some red flags. Anyone else have thoughts?
The Sea
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At first I was bullish on Democratized Prime, but from this quarter it turns out that I was misunderstood. I thought there is a demand for this products, but now it looks more like it is not a product-market-fit yet. They need to put $350 mil to create a (fake) demand to create liquidity. Let’s keep an eye on their balance sheet for the coming quarters.
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I probably do not have a good understanding of how this business works. Assessing financial institutions make my head hurt. I am more comfortable in high tech. But I do want a segment of my portfolio in fintech for diversification. Let me get ahead of my skis and correct me where I am confused. I do own a position in FIGR.
The analogy with UPST got me thinking, but I think it is different in some ways. All the FIGR loans are asset backed. The UPST loans started as just personal loans (no collateral) but eventually added autos and homes. UPST originated all the loans I believe (correct me if I am wrong). They got caught with their pants down when the market interest rate changed faster than their origination rate and they could not collateralize and sell them fast enough. Thus, debt got stuck on the books. FIGR is just providing an auction like market that matches borrower requests with lenders. Using the blockchain technology they securely cut out the banks which fix their rates and take a big cut. The YLDS pools (backed by their corporate equity) simply provides ‘short term’ liquidity. So it seems to me to be much safer than UPST. I am assuming the time the leverage is against the FIGR’s equity is measured in hours or a day rather than weeks for UPST. FIGR HELOCS turn over in 7-10 days vs standard HELOCS in 30-45 days.
So FIGR does not originate loans but it does collateralize the auction demands and them sells them to institutional buyers. To me the risk right now is the overall HELOC lending market. I did see the CEOs comment on not watching the HELOC market. My interpretation is that he does not care about their old HELOC process. But he sure better watch the HELOC market demand. When loan buyer appetite cools, that fee stream compresses quickly. So the macro risk is very real.
-zane
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I read the earnings. I still need to listen to the call. I liked the numbers. I think that at this point I view $FIGR as a “story stock” as we have traditionally written about elsewhere on this board. The story is of a very large TAM and endless possibilities with blockchain technology and real world application for Figure Markets, Democratized Prime, Forge, etc.
That said, I love the fact that they are growing revenue as fast as they are and in a profitable way with the first use case being loans (mostly HELOCS).
In a way, I would take the first application as the template for future applications of the technology. If it’s working with loans, it could work with all the rest and this is what e will need to keep eyes on. To me, it just helps that there are numbers and not “just a story”. I see the HELOC revenue as a way to justify staying in because they have revenue and profit.
For me, the key questions going forward are:
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How much they can meaningfully grow the first-lien mortgage volume (Y/Y looked great, but not Q1 2026 over Q4 2025)?
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Does Forge and Democratized Prime have a meaningful growth story? For what it’s worth Democratized Prime looks like a great alternative cash storage vessel for a lot of people if it “works” (I haven’t tried it).
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What is the path to growth and widespread adoption for figure markets?
I am staying in for now.
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I guess I think of a story stock as story-only, but I agree with you:
My style is to ignore a lot of the details and focus on what matters, but it’s been a little hard to pull out what matters here. I thought YLDS explosion was going to be a big part of the story, but it has stopped exploding at least for now, and I don’t think it generates much revenue yet anyway.
The actual key seems to be (rather simply) the loan marketplace and specifically Connect. Connect is capital-light (they say) and high margin, and also high-volume. Think large customers. Even thought they usually have year-end seasonality, this year saw steady increases in Loan Marketplace:
Sep Q: $2.5b
Dec Q: $2.7b
Mar Q: $2.9b
…steady, but kinda not explosive. However for Q2 they guided to $4.1b at the top end and the CFO said “We could be a little bit on the conservative side.” In Q1 Connect was 56% of total Marketplace volume. My guess is in Q2 it will be like 70%+.
So it seems Connect is what matters here. If only it were that simple. Maybe it is, but when I see things like $350m of loans on their balance sheet, I feel like I’m in over my head. This is not a “simple” company. (Should we focus on 1st lien? Dem. prime? ???)
My position was never that big, and I’ve taken a fair amount of profits, but I should probably stop trimming. Even though the price is not “cheap” (PS ~18 and fwd PE ~45), this seems like at least a hold.
Bear
more here: https://www.reddit.com/r/GrowthStockInvesting/comments/1td20d2/figr_q1_2026/
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Thanks for the thoughts. Love your perspective. I do think that they are in a prove it stage. I just like that they actually have revenue and it is wonderful that they monthly release those loan marketplace volume numbers as well as YLDS.
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Here is my initial take on the Figure Technology FIGR Q1 earnings. I liked this report a lot overall and have begun building back a more significant position slightly over 5% now. There were three items I would point out which seem promising for the business,
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They started giving guidance which I like as it may mean they are getting visibility and understanding of customer ramps. The Consumer Loan Marketplace is guided for Q2 with a range of 3.8 - 4.1B. However, it is going vs a comp of 1.84B which would be +123% yoy
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The number of partners is expanding greatly with a record 80 partners added to bring the total to 387. I was actually expecting these types of numbers to slow down for partner additions because I thought they may have gotten the low hanging fruit customers first. They mention adding the 6th largest mortgage lender in the quarter. I also saw a mention that it takes 3-6 months for these new partners to ramp on the platform. This lines up well with potentially posting strong results in the later half of the year.
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Adj EBITDA was 83M +192% yoy, and it sounds like this is a business which does not require a lot of OpEx or CapEx to scale up. I think the reason the team is downplaying HELOC loans on the call is because they see the much broader opportunity to keep tokenizing real world assets
Another point that is top of mind is that this company is the sole survivor of so many different platforms that wanted to tokenize real world assets. I noticed a couple times when they were asked about competition they basically had to inform the analyst that this is really the only viable solution currently. Figure still has a big lead over any other blockchain solutions in the space for tokenizing real world assets. Since they have got buy-in from these older financial institutions in the mortgage space, it is giving the company a lot of credibility overall to onboard other institutions.
On the current quarter’s numbers the revenue was slightly lower than I expected, but the consumer loans grew the predicted +113% yoy, which could be calculated from their monthly reports. Encouragingly the ecosystem volume grew faster at +136% yoy.
I was hoping the tokenized stock market aspect of their business would be ramping a bit more by now. A few months ago it sounded like regulatory approval for the tokenized stock market was right around the corner. I’m basically okay with this stock market taking longer than expected. In the meantime, they launched “Figure Forge” which allows for fractionalization of loans into single dollar units on different blockchains. Again this is where I see Figure pushing the pace of innovation. There are multiple product or partnership announcements each quarter that could have significant financial impacts to the business.
My understanding of Figure’s stable coin YLDS has evolved a bit. It seems like there is a natural ebb and flow to the YLDS in circulation balance. This is because the token is used to fund the loans but once the loans are financed, most institutions are cashing out their balance. From what I gathered, the large spike in YLDS a few months ago most likely comes from a financial company that made an investment in YLDS. The token is a security which is paying a yield and this may be a secondary function of the YLDS token to offer a place to store money.
Overall I see Figure developing nicely and I would expect them to be able to beat the top end of the guidance range they gave.
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