Beeline Holdings Inc. (BLNE) Q3 2026 Earnings Call Transcript

Operator: Please note this event is being recorded. I would now like to turn the conference over to Tiffany Milton, Chief Accounting Officer. Please go ahead.

Tiffany Milton: Thank you. Good afternoon, everyone, and Thank you for joining us today to discuss Beeline's results for the third quarter of 2026. I'm Tiffany Milton, Beeline's Chief Accounting Officer, and joining us on today's call to discuss these results is Nick Liuzza, our Chief Executive Officer, Jess Kennedy, Chief Operating Officer, and Chris Moe, our Chief Financial Officer. Following our remarks, we will open the call to your questions. Now, before we begin with prepared remarks, we submit for the record the following statement. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, included but not limited to statements regarding Beeline Holdings' expected future growth of its core business, increased revenue, growth of fee-based revenue streams, including BeelineEquity, our plans with regard to using blockchain and digital assets in our mortgage and home equity businesses, our operating priorities and plans, goals and expectations for future operating results, and expenditures for the remainder of 2026 and beyond, plans and expectations for a potential merger with TYTL, and the opportunities and benefits offered by such a transaction. Forward-looking statements are typically identified by words such as believe, expect, anticipate, plan, intend, seek, estimate, will, would, could, may, continue, forecast, target, potential, project, undertake, and similar expressions. These statements are based on management's current assumptions, beliefs, and expectations, and are not guarantees of future performance. Actual results may differ materially from those described in forward-looking statements due to various risks and uncertainties. These include, without limitation, the risk factors we provided in our 2025 Form 10-K and prospectus supplement dated March 10, 2026, as well as in our Form 10-Q filed with the SEC. We caution investors not to place undue reliance on any forward-looking statements made during this call. All forward-looking statements speak only as of the date of this presentation and are based on information available to Beeline as of today. We undertake no obligation to publicly update or revise these statements to reflect events or circumstances occurring after today's date, except as required by law. Now, with that said, I'd like to turn the call over to Nick Liuzza. Nick, please proceed.

Nick Liuzza: Thank you, Tiffany, and good afternoon, everyone. Before discussing the quarter, I want to update you on our proposed merger with TYTL. We expect to sign definitive agreements within days, with the closing subject to shareholder approval and other closing conditions to be discussed in an 8-K. Integration planning is already underway. We will continue growing our core mortgage business, but assuming the transaction closes, Beeline becomes a fundamentally different company. By combining our AI-native mortgage and national title infrastructure with TYTL's proprietary patent-pending blockchain securitization platform, we intend to expand into institutional home equity financing and real-world asset digital securitization. Importantly, TYTL is already placing residential home equity data on-chain and digitally securitizing those assets for sales to investors. Through Regulation D offerings, we intend to expand this platform to institutional investors seeking compelling returns, defined risk profiles, and potentially a faster liquidity path. We also plan to bring legacy mortgage data on-chain, improving transparency, real-time valuations, and asset visibility. Beeline is moving well beyond traditional mortgage lending, positioning itself for where real estate finance is headed. Our combined platform will focus on three revenue streams: origination, title, and digital asset securitization. In 2027, we plan to begin bringing legacy mortgage securities on-chain, laying the foundation for greater transparency, faster settlement, and less reliance on today's labor-intensive settlement and reconciliation processes. Our longer-term vision is to develop a regulated digital marketplace where mortgage-backed securities could eventually trade more efficiently, subject to applicable and regulatory approvals. I also want to emphasize my personal commitment to this transaction. Of my approximately 9 million anticipated merger shares, I intend to cancel approximately 3 million shares, which can be used to support Beeline's future capital raising initiatives, reducing dilution for shareholders. Another 33% will be tied to performance milestones, with 16.5% earned when Beeline achieves a $100 million market cap for five consecutive trading days, and another 16.5% at a $200 million valuation. The remaining 33% will be issued at closing, subject to lockup restrictions. This structure aligns my interests directly with shareholders while providing Beeline approximately 3 million shares to support future capital raises, which reduces shareholder dilution. Now, let's take a look at Q3. The third quarter provided clear evidence that our operating strategy is working. Revenue reached $3 million, up 30% year-over-year and 15% sequentially, our strongest quarter revenue since 2021. Our net loss improved 6% sequentially, and our adjusted EBITDA improved for the third consecutive quarter, including a 33% sequential improvement. This happened despite a challenging interest rate environment. These results were driven not by chasing volume, but by focusing on higher-margin products, improving conversion rates, and increasing revenue per transaction. Our margins have expanded every quarter this year. At the same time, we're implementing an additional $250,000 in monthly operating expense reductions, with more than half already realized, and our U.S. payroll costs have already declined 35% in November. This is an important combination, growing revenues, expanding margins, and reducing our cost structure simultaneously. I'll leave the operating details to Jess because they demonstrate the scalability of our business. Two additional areas deserve attention. First, technology and AI. This was our first full quarter of owning 100% of MagicBlocks, our proprietary AI platform. AI is central to our strategy of growing revenue without proportionately increasing headcount. Jess will discuss its impact on conversion rates and loan product costs. Second, home equity. Home buyers are increasingly reluctant to refinance low-rate first mortgages. Our expanding home equity products allow them to access equity while preserving their existing mortgages. Jess will cover our closed-end mortgage launch and upcoming products. I will return later to discuss how these offerings connect with TYTL and our broader digital securitization strategy. With that, I will turn it over to Jess to walk through our operating results. Jess?

Jess Kennedy: Thanks, Nick. Q3 was the quarter the operating model came together. Revenue was up, margins were up, and operating expenses were down, all in the same quarter and against a tougher rate backdrop. Regarding originations and funnel efficiencies, we closed 268 loans in the third quarter, up 11% from both a year ago and from Q2 2026. The quarter built as it went, and September was our strongest closing month since March. That growth came on essentially flat dollar volume of roughly $67 million, which tells you the revenue improvement is coming from mix and margin and not from volume. Just as important is how we did it. We deliberately pulled marketing away from lower return segments to focus on non-QM mortgage products, so lead volume was down about 28% from Q2, and closing still rose 11%. Our lead-to-close conversion improved by more than 50% in a single quarter. We closed more loans with a meaningfully smaller funnel, and that is the efficiency we have been driving towards. Turning now to product mix and margin. The mix shift we began in the middle of Q2 is now fully in the numbers. Non-QM products, led by DSCR and bank statement loans, represented nearly nine out of every 10 loans we closed in Q3, up from roughly eight in 10 in Q2. That share rose every month, 83% in July, 89% in August, 93% in September, and that share has held above 90% in October. The margin result followed. Margins expanded for the third consecutive quarter this year. Overall margin was 3.56% in Q3, up from 3.07% in Q2 and 2.78% in Q1, a 16% improvement quarter-over-quarter and roughly 84 basis points higher than a year ago. The strength carried through the quarter. September was our strongest margin month of the year at 3.59%, and October stepped up again to approximately 3.67%. Revenue per loan increased approximately 5% sequentially and approximately 15% year-over-year. A year ago, choosing economics over volume was a strategy we described, and today we can see this decision in the unit economics. Now turning to MagicBlocks and AI. This was our first quarter with MagicBlocks wholly owned and consolidated, and you can see its fingerprints on the results I just described. MagicBlocks is the AI engine leading our customer journey. The conversion improvement I mentioned is the clearest evidence, fewer leads, more closings, less marketing spend per funded loan. Through the remainder of the year and into early 2027, we are extending the focus into back office operations. This application of AI will continue to build scale in the back office and loan fulfillment areas of the business. AI is how we grow revenue and reduce our cost to produce each loan at the same time. I'd also like to highlight new products, closed-end seconds and HELOCs. in the third quarter, we launched closed-end second mortgages, and in the fourth quarter, we launched HELOCs. The logic is simple. At today's rates, most homeowners don't want to touch their first mortgage. Second lien products let them access their home equity while keeping that low first lien rate in place, and many of these transactions can carry our title and settlement services with it. Together with BeelineEquity on the fractional side, this gives Beeline a full spectrum of home equity access, cash-out refi, a second mortgage, a line of credit, or equity access without new debt. The last of your products whose demand holds up or improves when rates stay high. We can now meet a homeowner's equity needs in whatever form fits them, and it's not dependent on rates falling. Now looking ahead, a measured word on the fourth quarter. Q4 brings normal seasonality, and the rate environment remains elevated, so we are planning for a quarter where volume growth is harder to come by. That is exactly why the work I've described matters on both sides of the ledger. On the cost side, the expense reductions we announced in mid-October, on top of the actions taken earlier this year, have meaningfully reduced our U.S. payroll, and we expect additional savings as we streamline our Australian operations. On the revenue side, we carry into Q4 a higher margin mix, a far more efficient funnel, and a set of home equity products, closed-end seconds and HELOCs and equity products, whose economics are not directly tied to interest rates. Our priority in Q4 is protecting margin and efficiency, again, not chasing volume. With that, I'll turn it over to Chris to walk through the financials.

Chris Moe: Thanks, Jess. I'll walk through our third quarter financial performance with a focus on the sequential trend we've built over the course of the year, and then cover our balance sheet, liquidity, and financial priorities. Third quarter total net revenue was $3 million compared with $2.3 million in the prior year quarter, an increase of 30%. Sequentially, revenue increased 15% from $2.6 million in Q1. The revenue mix was as follows. Gain on sale of loans net was $2.1 million, up 23% from $1.7 million last year. Loan origination fees were $492,000, up 63% from $302,000 last year. Title fees were $380,000, essentially flat from last year. Fractional equity revenue was $20,000, and other revenue was $71,000. We originated 268 loans in the quarter, compared with 242 in the third quarter of 2025, an increase of 11%. Non-QM loans remain our focus, representing 86% of our loans by origination volume and nearly 90% by units. We delivered that growth into a tougher rate environment, with the average 30-year fixed rate at 7.03% in late September, compared with 6.3% a year earlier. For the first nine months of 2026, total net revenue was $8.3 million, up 59% from $5.3 million in the prior year period. Total operating expenses were $6.8 million, compared with $5.2 million in the third quarter of 2025. The current quarter total included $1.1 million of stock-based compensation and $845,000 of depreciation and amortization. The year-over-year increase is driven largely by stock-based compensation under our 2025 Equity Incentive Plan. Excluding stock-based compensation, operating expenses increased 10% year-over-year against revenue growth of 30%. Sequentially, operating expenses decreased by $327,000, or 5% from Q2, and by $1.1 million, or 14% from Q1. With stock-based compensation broadly flat, that reduction came from cash expenses. Key expense categories included compensation, commissions, and benefits of $2.9 million, down $157,000 sequentially, general and administrative expense of $1.3 million, the one category that increased sequentially, reflecting increased costs for legal and special committee compensation, marketing and advertising of $993,000, down $135,000 sequentially, depreciation and amortization of $845,000, and other operating expense of $799,000, down $159,000 sequentially. As Jess noted, Q3 was the first quarter this year in which revenue increased while operating expenses declined. Loss from operations was $3.8 million, compared with $2.9 million a year ago. On a sequential basis, operating loss improved by $716,000, or 16% from Q2, and by $1.4 million, or 27% from Q1. On October 20, we announced an additional cost reduction plan targeting approximately $250,000 of monthly savings, or about $3 million annualized, on top of the reductions made earlier this year. We expect approximately $300,000 of one-time transition costs through December 1st, after which we expect to realize the full monthly savings. These are management estimates. Net loss was $3.8 million, compared with $4 million in the prior year quarter. On a continuing operations basis, the prior year net loss was $3.6 million. Sequentially, net loss improved by $224,000, or 6% from Q2. Recall that Q2 included a $480,000 non-cash gain from remeasuring our previously held interest in MagicBlocks. Excluding that gain, the sequential improvement was $704,000. Adjusted EBITDA was a loss of $1.8 million, compared with a loss of $2.7 million in the prior year quarter. That is an improvement of $943,000, or 35%. Compared with Q2, adjusted EBITDA improved by $848,000, or 33%. That is the third consecutive quarter of improvement this year, from a loss of $3 million in Q1, to $2.6 million in Q2, to $1.8 million in Q3. Adjusted EBITDA excludes stock-based compensation, depreciation and amortization, non-warehouse interest expense, and certain non-recurring items, which in this quarter were $63,000 of legal defense costs. A reconciliation to net loss is included in our Form 10-Q. At September 30th, 2026, we had cash and cash equivalents of $2.1 million, +$0.3 million of restricted cash, mortgage loans held for sale of $11.2 million, warehouse lines of credit and accrued interest of $8.9 million, and total shareholders' equity of $49.8 million. All three of our warehouse facilities were in compliance with their covenants at September 30, with $16 million of availability. In October, one facility renewed for a further annual term, and a $5 million line that we were utilizing only minimally reached the end of its term and was not renewed. Our total warehouse capacity is now $20 million. For the first nine months of 2026, net cash used in operating activities of continuing operations was $1.6 million, compared with $12.1 million in the prior year period. That figure benefited from working capital timing, including $1.8 million of loans that had closed but were not yet funded on our warehouse lines at September 30, and should not be interpreted as a normalized cash burn rate. During the first nine months, we raised $5.4 million of net proceeds under our equity line and at-the-market program, largely offset by $5.6 million of net warehouse repayments. In August, Nick, as our CEO and principal shareholder, invested $500,000 through a convertible note, which converted into common stock on August 19th at $1.50 per share. on October 30, he exercised 400,000 warrants for proceeds of $264,000. The $350,000 promissory note we issued after the second quarter was repaid in full on October 1. We are actively managing liquidity while continuing to improve the operating profile of the business. Looking ahead, our financial priorities are: continue growing revenue with a focus on higher margin non-QM products, recognizing normal fourth quarter seasonality, execute the October cost reduction plan and realize the full run rate savings from December, use MagicBlocks, which we consolidated from July 1, to improve automation and operating leverage, reduce cash use while securing the capital needed to fund our plan, and lastly, close the all-stock combination with TYTL Corp. We are not providing formal financial guidance today. Our focus is on executing against these priorities and reporting measurable progress as it is achieved. To summarize, third quarter revenue increased 30% year-over-year and 15% sequentially. Operating expenses declined for a third consecutive quarter. Operating loss improved 16% from Q2, and adjusted EBITDA improved 33% sequentially and 35% year-over-year. We still have work to do, but in Q3, revenue growth and cost reduction moved in the right direction at the same time. With that, I'll turn it back to Nick.

Nick Liuzza: Thank you, Chris. Let me close with where Beeline stands. This year, we've fundamentally improved the operating model with higher margins, a more efficient cost structure, and technology doing more of the work every quarter. You heard the specifics from Jess and Chris. We have expanded from a mortgage lender into a home equity platform, and with the TYTL definitive agreements expected to be signed within days, we are advancing the infrastructure that we believe can connect these products to institutional capital over time. I back that conviction personally through the investments I made earlier this year and the 3 million shares I'm contributing to the company's treasury. We are committed to building long-term shareholder value through disciplined execution. Thank you to our employees, our shareholders, our lending partners, our customers for their continued support.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Scott Felsenthal, retail investor. Please go ahead.

Scott Felsenthal: Hey, Nick. Good progress on the quarter. Just have a couple questions for you. The balance sheet, the $2 million cash on the balance sheet, how do you think about that in terms of your cash runway? What can you share with us about how you are thinking about that?

Nick Liuzza: Hey, Scott. Good to hear you, man. I am going to let Chris answer that question.

Chris Moe: Hey, Scott. It is Chris. We are taking decisive steps to strengthen our financial position and manage our cash requirements. Our $3 million, as earlier mentioned, of annualized cost reduction initiative is underway, representing approximately $250,000 in targeted monthly savings. We expect these actions to meaningfully improve operating efficiency and reduce our cost structure. In addition, we are carefully evaluating opportunities to strengthen our balance sheet and maintain appropriate financial flexibility as we execute against our strategic initiatives. Our priorities are clear: preserve liquidity, protect margins, improve operating performance, and position Beeline for sustainable long-term growth while remaining mindful of shareholder dilution.

Scott Felsenthal: Thanks. One more, if I can ask about, not sure how much you can say or not say about TYTL, Nick Liuzza, but when you think about the combined companies post-closing and what that valuation could look like from a, obviously with TYTL, you are bringing in a platform that is more fintech, if you will, than what you have historically been. When you think about valuation of the combined companies, how would you kind of describe what you are thinking?

Nick Liuzza: Yeah. Look, it is a good question. Certainly something we think about a lot as we move forward with TYTL. Look, I mean, our objective is to create a company that is more technology-enabled, a financial services platform, rather than a traditional mortgage originator. Those valuations are certainly much higher than a legacy mortgage company to date. When we look at this and we sort of evaluate what is out there, we look at title companies, we look at mortgage companies, we look at financial technology platforms and fintech companies, and try to figure out where we think we are going to fit. What we are doing is different. There is nothing, I do not think, out there like we are getting ready to do once we close this. Bringing a digital mortgage lender, leveraging AI with legacy mortgage data, if you will, and combining with what TYTL brings to the table on the blockchain side, and what the vision is long term, I think it is pretty exciting, and it is something that, again, that is not out there. It is hard to think about what the valuation will be. I think it will take time for the street to understand what we are doing. I think it is going to be very exciting. We start generating our numbers on the home equity side, with those margins being much higher and those products not being tied to interest rates. When you really peel the onion, there is a company out there that I am certainly not going to compare us to, because we are not comparable to them, but they are doing some things that I think are interesting, and that company is a company called Securitize. The symbol is SECZ. When you think about TYTL’s platform and where they are headed with tokenizing mortgage-backed securities, and you look at what Securitize is doing on the tokenization side, the combination of what Beeline brings to the table and what TYTL has already built puts the two companies in a really strong position to build a platform to trade mortgage-backed securities. That is something I think is really exciting. That, again, not a direct comp, but I would call it more of a service that will be offered through Beeline that looks a little bit like Securitize. I think it is going to be interesting. I think it is going to come down really at the end of the day to how we perform and how our revenue grows, and I think we are going to be in a really good spot with two equity products that are not tied to interest rates and offering institutional investors really compelling liquidity options if and when they invest in those products. On the cash side too, I just want to mention, obviously we are mindful of that. I have always supported the company, and I will continue to support the company as we move forward. Once we merge these companies, we have got a lot of options on a going-forward basis. Me surrendering 3 million shares when we do a capital raise reduces that dilution, and in a perfect world, once we are combined, we are looking at a stronger market cap, stronger liquidity options, and certainly potentially 3 million shares thrown into the pot is a good outcome. I will leave it at that, and thanks for the questions.

Scott Felsenthal: Thanks, guys.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Nick Liuzza for any closing remarks.

Nick Liuzza: Yeah. Listen, I think we covered a lot here today. I think really the message is that we are improving. We are in a very tough environment. Look at the other mortgage comps out there, and you will see that it is not a pretty industry to be in right now, but I am really proud of where we are and what we have done. We have achieved really good results in our Q3. We are hyper-focused on our cash burn, managing that cash burn, and ensuring that we can increase our runway by reducing expense, increasing margin, and driving our top line. All things we have already done and will continue to do as we move forward. I want to thank everyone for joining. I want to thank the shareholders for all their support. I want them to know that we are a dedicated, talented team, and we are focused on the future. Thank you very much.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.