Summary Figure Technology Solutions leverages blockchain to disrupt loan origination, showing rapid growth but now facing sequential stagnation and valuation compression. Figure's ecosystem volumes and revenues surged annually, yet Q4 sequential growth stalled, raising concerns about sustainability and seasonality. Recent insider selling at low prices and a sharp share price pullback highlight mixed investor sentiment and possible near-term headwinds. I maintain a cautious, neutral-to-slightly-upbeat stance, awaiting clarity on Q4 results, 2026 outlook, and contributions from new initiatives like OPEN. When shares of Figure Technology Solutions ( FIGR ) went public in September of last year, I concluded that the company made a strong IPO debut. Its usage of blockchain technology to disrupt loan origination and securitization yielded spectacular growth and delivered handsome profits. While this was much to be applauded, I was reserved amidst limited operating history and potential for disintermediation (or fees being cut) over time. Continued growth in the third quarter was followed by stabilization (on a sequential basis) in the fourth quarter, which, combined with selling shareholders offering shares on the cheap, raises some real questions here. Building The Future Of Capital Markets On Blockchain Figure is built on the aha moment of its founder Mike Cagney back in 2018, recognizing the potential of blockchain to revolutionize financial services. With much of the traditional financial model based on intermediation, it requires trust between multiple parties, even for simple purchases like a financial transaction or a stock purchase. Blockchain has the potential to reduce this to just the buyer and seller, eliminating all the rent-seeking intermediaries in such transactions. These opportunities are not just limited to transactions but also eliminate counterparty and settlement risks, to name a few. Starting out with home equity lines of credit (HELOCs) this was deemed an easy market to start with and capitalize on, with the range of opportunities being far wider. The company went public at $25 per share. Strong demand was seen for the shares, levels at which operating assets were valued around $4.5 billion. This was supported by a 75% increase in so-called ecosystem volumes reported for 2024 to $5.9 billion, much tied to consumer loan marketplace volumes. Revenues from such volumes were reported at $341 million, indicating a steep cut, with positive EBITDA reported at $101 million. The revenue number was a bit ironic in my view, with the revenues of Figure reported at nearly 6% of underlying volumes, a steep cut for a party claiming to disintermediate financial services! Ecosystem volumes rose another 40% in the first half-year of 2025, with revenues up 22% to $190 million as fat fees were coming down a bit. Moreover, adjusted EBITDA of $83 million, works down to margins around 40% on that basis! Besides, second-quarter revenues of $106 million broke above the hundred million mark, indicating a continuation of growth; those revenues were reported up 31% on the year before. Trading in the low thirties on the first day of trading, valuations were demanding around 50 times anticipated earnings, driven by the strong growth. While I was appreciative of the business as well, it was its limited operating history and potential for competition that made me uneasy, in combination with the steep revenue cut. Booming & Coming Down Long traded around the $40 mark during the fall; shares rose to a high near $80 in recent weeks, followed by a massive pullback to $29 per share at this point. Momentum to the upside was driven by a solid third quarter, as reported in November, with ecosystem volumes up 38% to $2.54 billion, with consumer loan marketplace volume up 70%; this was driven by the introduction of Figure Connect Volumes, the third-party origination platform. Reported adjusted revenues rose by 42% to $156 million. More information about the revenue streams is reported, with most of these revenues driven by gain on sale of loans, complemented by origination fees, interest income, servicing fees, and ecosystem and technology fees. Operating profits rose to a solid $52 million. In January, shares benefited from the announcement of Figure of the on-chain public equity network, also known as OPEN, allowing companies to list equity natively on the blockchain. Since that period of time, shares have lost some 60%, or better said collapsed, in the time frame of just over a month. This was driven in part by preliminary fourth-quarter results, which were not well received, with adjusted revenues seen at a midpoint of $158 million in the fourth quarter. This came even as Consumer Loan Marketplace Volumes rose to $2.7 billion, up over 130% on the year before. Adjusted EBITDA is seen between $80 and $83 million, down from an $86 million and change number in the third quarter. This was followed by the news that selling shareholders sold about 4.7 million shares at just $32 per share in the middle of February. With the pro forma diluted share count standing at 212 million shares, this values equity at $6.1 billion at $29 per share. The company operates with over $900 million in net cash holdings as of the third quarter, granting the company a $5.2 billion enterprise valuation. With revenues trending around $600 million and operating profits trending around $200 million, unleveraged after-tax profits could run at around $150 million, assuming statutory taxes, working down to about $0.70 per share. Based on these calculations, the business is valued at around 40 times earnings here, and while year-over-year growth is spectacular, sequential revenue growth and certain profitability metrics show real stagnation between the third and fourth quarters. While seasonality might in part be to blame for that, some momentum appears lost here, after expectations have gotten a bit higher, certainly in January. And Now? At this point, there are quite a few interesting dynamics. For one, there has been strong momentum in the share price at the start of the year, which has reversed. This was driven by the news about somewhat stable sequential performance in the fourth quarter and selling shareholders selling quite a few shares at lower prices. For now, valuations are still demanding, but they have come down, which creates a tough balancing act. The focus will be on the 2026 outlook, learning about the degree of seasonality impacting the fourth quarter results, and contribution from new initiatives like OPEN to distribute the core technology beyond HELOCs and consumer finance options. In between all these, there are quite a few mixed signals, with growth continuing on an annual basis, sequential growth coming down, the underlying technology being very promising and seen expanding to other financial markets. Of course, there still are the elevated earnings multiples based on the current performance. Compared to the time of the IPO, I am appealed by a solid third quarter, and shares on a net basis having come down a bit. The observation of no sequential fourth-quarter growth and selling shareholders on the cheap are worrying signs. Given all this, I am erring on the side of caution, having decided to learn more about the final fourth quarter results and 2026 outlook, before reconsidering this neutral, but slightly upbeat stance.
