An S-4 filing from Aurora Acquisition Corp., the SPAC that digital mortgage provider Better.com intended to merge with, provides stark details about the latter company’s financial performance.
The filing — dated April 24, 2022 — reveals that Better.com swung to a loss of more than $300 million last year, a sharp turnaround from its profitable 2020. The rapid-fire decline in Better.com’s business, brought on by several factors, is notable, as the company is hardly the only concern working in the consumer mortgage space; other companies are taking similar fire.
Aurora’s filing says that Better’s financial performance “deteriorated” as a result of numerous factors, including fluctuating and increasing interest rates, the continued 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 offerings) and the effects of “negative media coverage” following, and severance costs associated with, a series of mass layoffs that began on December 1, 2021.
The first round of layoffs — which affected about 900 people — as well as subsequent workforce reductions, have led to a host of issues for the company, Aurora notes in the filing. Aurora attributes the malaise to widespread employee dissatisfaction, which it says has “detrimentally affected” the company’s productivity, financial results and third-party relationships. It also noted that the layoffs and subsequent media attention resulted in “increased attrition” throughout the company, including on its senior leadership team.
TechCrunch in February reported that Sarah Pierce, who served as executive vice president of customer experience, sales and operations, and Emanuel Santa-Donato, who was 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 associate.” Santa-Donato joined the company in January 2016 as a “capital markets associate.”
Their departures followed those 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, in April transitioned from her leadership role to an advisory position.
Meanwhile, that same week, Better.com conducted its second mass layoff, which resulted in more than 3,000 workers losing their jobs. Then just a couple of weeks later, the company conducted a third round of layoffs. The company is believed to have effectively reduced its headcount from about 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 pursued going public, looking at its 2020 results. The company’s $875.6 million in revenue — up nearly 10x on the year prior — led to net income of $172.1 million, meaning that Better.com during the boom times was just that — booming.
Then the year changed and the season turned from summer to winter as the market for mortgages worsened. Last year Better.com’s revenue grew to some $1.23 billion, or 41%. That pace of growth, while slower, is still more than respectable for a company on its way to going public.