An S-4 application of Aurora Acquisition Corp., the SPAC with which digital mortgage lender Better.com planned to merge, gives stark details about the latter company’s financial performance.
The filing – dated April 24, 2022 – reveals that Better.com posted a loss of more than $300 million last year, a sharp turnaround from its profitable 2020. The rapid decline in Better.com’s business, caused by several factors, is remarkable, as the company is not the only group active in consumer mortgages; other companies are taking similar fire.
Aurora’s filing says Better’s financial performance “deteriorated” due to a host of factors, including fluctuating and rising interest rates, the ongoing impact of the reorganization of its sales and operations teams in the third quarter of 2021, continued investments in its business. (including investments to expand its product offering) and the effects of “negative media coverage” resulting from, and layoffs, costs associated with a series of mass layoffs that began on December 1, 2021.
The first round of layoffs — which affected approximately 900 people — and subsequent workforce reductions have led to numerous problems for the company, Aurora notes in the filing. Aurora attributes the slump to widespread employee dissatisfaction, which it said has “adversely impacted” the company’s productivity, financial results and third-party relationships. It also noted that the layoffs and subsequent media coverage resulted in “increased turnover” across the company, including the senior management team.
Marketingwithanoy reported in February that Sarah Pierce, who served as Executive Vice President of Customer Experience, Sales and Operations, and Emanuel Santa-Donato, who served as Senior Vice President of Capital Markets and Growth, were no longer with the digital mortgage company. Pierce had been with Better.com since August 2016, when she started as a “growth partner.” Santa-Donato joined the company in January 2016 as a “capital markets associate.”
Their departure followed that of three other executives who left the company in December in the wake of the layoffs: Patrick Lenihan, the company’s VP of communications; Tanya Gillogley, head of public relations; and Melanie Hahn, head of marketing.
The company’s CTO, Diane Yu, moved from her leadership role to an advisory role in April.
Meanwhile, that same week, Better.com held its second mass layoff, resulting in the loss of more than 3,000 employees. Just a few weeks later, the company carried out a third round of layoffs. The company is believed to have effectively reduced its workforce from around 10,000 in December to less than 5,000 in less than five months.
A change of seasons
It’s not hard to see why Better.com went public, given its 2020 results. The company’s $875.6 million in revenue — nearly 10x more than the year before — led to $172 in net income. .1 million, meaning Better.com was just that – booming during the boom.
Then the year turned and the season turned from summer to winter as the mortgage market deteriorated. Last year, Better.com’s revenue grew to about $1.23 billion, or 41%. That growth rate, while slower, is still more than respectable for a company on its way to IPO.