FIGR's Structural Growth Undervalued, Buy Reiterated

Overview

This is a Goldman Sachs earnings review report on Figure Technology Solutions (FIGR) for 2Q26. The core judgment of the report is: market concerns over FIGR's declining take rate (commission fee rate) are misguided; it actually reflects a positive, structural trend of the company's business migrating toward a higher-margin, light-balance-sheet model. Based on this, Goldman Sachs reiterates its Buy rating and raises the target price by 8% to $40.

Core views

FIGR's 2Q26 results overall beat expectations: the company reported EPS of 35 cents, higher than Goldman Sachs' estimate and Visible Alpha consensus estimate of 24 cents; Core Adjusted EPS was 32 cents, compared to Goldman Sachs'/market estimates of 32 cents/28 cents. The beat was primarily driven by revenue being 2% higher and core adjusted expenses being 1% lower (both relative to market consensus). However, despite strong core performance and an upward revision in 3Q26 loan volume guidance, the stock performance was limited on the day of the earnings release due to a lower-than-usual quarterly take rate and management guidance suggesting the take rate might remain near the lower levels seen in 3Q26. The report argues that the market's focus is misplaced. It reiterates the Buy rating based on three reasons: first, the company has achieved consecutive years of loan volume year-over-year growth exceeding 100%, and Goldman Sachs expects recent growth momentum to continue supported by strong 3Q26 guidance, continuous expansion of new TAM (Total Addressable Market), and accelerating growth in originating partners; second, despite investor concerns over declining take rates, FIGR's adjusted EBITDA margin continues to climb; third, the valuation is not expensive—based on Goldman Sachs' forecasts for Q5-Q8, the stock trades at approximately 19.5x adjusted P/E and 8.0x adjusted EBITDA. Regarding the nature of the declining take rate, the report provides key clarifications. Goldman Sachs believes investors' focus on take rate is an oversimplification of FIGR's business model. Specifically, the lower take rate is the result of two structural factors, rather than active price cuts by the company (management explicitly stated there were no full-business-range price cuts): one is that customers send more volume to FIGR and thus receive pricing discounts; the other is product mix migration to new TAMs, where although these new products have lower take rates, they contribute margins comparable to existing businesses. Evidence for this is that despite this mix migration, margins are still rising—adjusted EBITDA margin increased by approximately 510 basis points quarter-over-quarter. Key growth drivers come from the accelerated expansion of the partner network. In 2Q26, 102 new originating partners were added, bringing the total to 489 (+26% QoQ), compared to 80 new partners in 1Q26 (+26% QoQ). Goldman Sachs believes this accelerated partner growth will continue to support the expansion of FIGR's best-in-class platform. On the revenue side, total adjusted net revenue exceeded market consensus by 2% (+31% QoQ), primarily driven by a 66% increase in non-cash gains related to servicing asset creation, while gross revenue from the consumer loan market decreased by 5%—loan volume grew by 2%, but was offset by a net take rate decline of approximately 15 basis points. Management attributed this quarter's strong loan volume growth to three factors: (1) continued strong adoption of Figure Connect, which accounted for 65% of this quarter's loan volume, with the company expecting it to exceed 70% in the medium term; (2) accelerated growth in originating partners, adding 102 new partners to reach a total of 489; (3) continuous traction for new products, with SMB loan volume growing 57% quarter-over-quarter. Management guidance shows a structural tilt toward a light balance-sheet model. 3Q26 consumer loan market loan volume guidance is $4.8 billion to $5.2 billion, with the midpoint 2% higher than Goldman Sachs' estimate and 12% higher than consensus, and year-to-date loan volumes are trending toward the upper end of the guidance range. The company reaffirmed its medium-term take rate guidance of 3.5%-4.0%, but noted that the 3Q26 take rate should remain at the low end of this range. The company also raised its long-term target for Figure Connect's share of loan volume—from 60% previously to 70%—representing a continued migration toward lighter balance sheet businesses. It also reaffirmed its 2026-28 adjusted EBITDA margin target of above 60%, relying on structural migration to lighter balance sheet businesses and fixed cost leverage from platform scaling. Additionally, the Agora integration and Kiavi acquisition are proceeding as planned; Agora is expected to start contributing to Figure Connect loan volume in 2H26, and Kiavi is expected to complete the transaction in 2H26. Credit quality remains healthy amidst rapid growth. Management emphasized that despite rapidly increasing lending volumes, the credit profile of the loan portfolio is improving: average FICO for loans originated year-to-date in 2026 was 751 (vs. 737 in 2020), and combined LTV was 62% (vs. 64.6% in 2020). Based on results and management guidance, Goldman Sachs adjusted its earnings forecasts. On the revenue side, adjusted net income for 2026/27 was downgraded by 1%, because the 3% increase in loan volume was offset by take rate reductions of approximately 8/10 basis points. On the expense side, benefiting from adjusted EBITDA margin beats and reaffirmed margin guidance, adjusted expenses for 2027 were downgraded by 1%, and adjusted EBITDA margins for 2026/27/28 changed by approximately +75/+10/-5 basis points. Ultimately, although adjusted EBITDA for 2026 declined by 1%, due to lower tax rate guidance, adjusted EPS for 2026/27/28 was raised by 10%/5%/6%. On valuation, Goldman Sachs lowered the target P/E multiple from 26x to 25x for Q5-Q8 EPS (to reflect lower market valuation multiples), but due to upward revisions in earnings forecasts, the 12-month target price was still raised by 8% from $37 to $40.

Analysis framework

The main thread of the report's analysis is to identify and correct the market's 'misplaced focus'. Goldman Sachs did not simply worry about the declining take rate; instead, it first broke down the causes of the decline: was it active price cutting or passive mix migration? By distinguishing between these two, Goldman Sachs concluded that the decline in take rate is a structural result of FIGR's migration to a light-balance-sheet, high-margin business model, and its profitability was not impaired. In terms of argumentation, the report used multiple cross-validations: first, using margin data to test the 'harmfulness' of the declining take rate—if the decline was truly competitive price cutting, margins should have been under pressure, but the adjusted EBITDA margin actually increased by approximately 510 basis points quarter-over-quarter, which became key evidence refuting market concerns; second, using partner growth and loan volume growth rates to prove that platform expansion momentum had not diminished; third, using credit indicators to confirm that rapid growth was not achieved at the expense of relaxing credit standards. Finally, the report translated this structural judgment into earnings forecast and valuation adjustments, forming a complete 'evidence-judgment-forecast-valuation' deduction chain.

Methodology notes

• Company Fundamentals and Financial FrameworkEarnings Quality Analysis

  Use changes in margins to test the nature of declining take rates: distinguish between price-cut-type rate declines and structure-migration-type rate declines

  Goldman Sachs did not view the take rate indicator in isolation, but cross-validated it with margin indicators—if the rate decline was a real price cut, margins should have declined synchronously; but FIGR's margins instead rose, indicating that the rate decline was a structural mix migration rather than competitive price cutting. This reflects the thinking in 'Earnings Quality Analysis' that 'looking at changes requires looking at the causes of changes'.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Decompose revenue changes into 'volume' (loan volume) and 'price' (take rate) factors for separate analysis

  The report decomposed the revenue beat into volume and price: loan volume grew by 2%, but net take rate declined by approximately 15 basis points. By decomposing volume and price, the report could separately assess growth momentum (volume, strong) and rate trends (price, structurally downward but harmless), thereby reaching more refined conclusions rather than broadly stating whether revenue was good or bad.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Fixed cost leverage effect brought about by expanding platform scale

  The report mentioned that FIGR relies on 'fixed cost leverage from platform scaling' to support its medium-term adjusted EBITDA margin target of above 60%. This reflects a common business logic: when platform-based businesses expand in scale, revenue grows faster than fixed expenses, and margins naturally improve—this is the embodiment of operating leverage.

• Valuation methodsPE/PEG valuation

  Using forward P/E and adjusted EV/EBITDA to assess FIGR's valuation level

  Goldman Sachs used FIGR's adjusted P/E (approx. 19.5x) and adjusted EBITDA (approx. 8.0x) for Q5-Q8 to argue that FIGR's valuation is 'not expensive', reflecting the idea of relative valuation methods—looking at valuation multiples together with earnings growth rates to judge whether current pricing is reasonable.

• Financial Industry Specific Terminology

  Using lending credit indicators (average FICO score, combined LTV) to measure loan portfolio quality

  The report used two indicators, average FICO score at origination and Loan-to-Value ratio (LTV), to track credit quality. Higher FICO scores indicate better borrower credit, and lower LTV indicates higher collateral adequacy. Goldman Sachs used this to argue that FIGR did not sacrifice credit quality for scale amidst rapid growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Figure Technology Solutions Inc. (FIGR.US)

  Directly covered target of the research report, Buy reiterated; core beneficiary logic is structural migration to a light-balance-sheet platform model, bringing margin improvement and high-speed loan volume growth

  Strengths

  Loan volume growing at three-digit rates consecutively; accelerated expansion of partner network (adding 102 new partners to reach 489); continuously rising adjusted EBITDA margin; increasing proportion of high-margin Figure Connect business; improving credit quality; valuation remains attractive despite high growth

  Weaknesses

  Continuing decline in take rate; investor focus on take rate may continue to suppress stock sentiment; reliance on HELOC products

  Comparison

  The report did not expand on horizontal comparison data with other companies in the same group

  Risks

  High reliance on HELOC products; product concentration risk; interest rate declines may lead to decreased HELOC demand; economic deterioration may bring credit and financing risks; weakening demand from private credit buyers

Key data

• 2Q26 EPS (Reported)35 centsHigher than Goldman Sachs' estimate and Visible Alpha consensus estimate of 24 cents
• 2Q26 Core Adjusted EPS32 centsCompared to Goldman Sachs' estimate of 32 cents and market estimate of 28 cents
• Loan Volume YoY Growth>100%Achieved three-digit year-over-year growth consecutively
• New Originating Partners Added in 2Q26102Total reached 489, +26% QoQ (1Q26 saw 80 new partners)
• Adjusted EBITDA Margin54.6%Approximately 340 basis points higher than market expectation, expanding approx. 510 basis points QoQ
• 3Q26 Loan Volume Guidance$4.8B-$5.2BMidpoint is 2% higher than Goldman Sachs' estimate and 12% higher than consensus
• Figure Connect Share of Loan Volume65% this quarter, target >70%Medium-term target raised from 60% to 70%
• SMB Loan Volume QoQ Growth+57%Rapid growth of new products
• Change in Adjusted EPS 2026-28+10%/+5%/+6%Raised driven by lower tax rate guidance
• 12-Month Target Price$40Raised by 8% from $37; target P/E multiple lowered from 26x to 25x
• Valuation LevelApprox. 19.5x P/E / 8.0x Adj. EBITDABased on Goldman Sachs forecasts for Q5-Q8
• Average FICO for Loans Originated YTD 2026751Improved credit quality compared to 737 in 2020
• Portfolio LTV62%Compared to 64.6% in 2020

Impact & implications

The report believes that market concerns over FIGR's declining take rate are a form of 'misleading focus', causing investors to overlook the company's true structural changes—namely, FIGR is accelerating its transformation from a model dependent on its own balance sheet to a lighter asset, higher margin, platform-centric model centered on Figure Connect. Specific manifestations of this transformation include the increase in Figure Connect's share of loan volume from 60% to above 70%, continuous exploration of new product TAM, and accelerated expansion of the partner network. For earnings, this transformation-driven decline in take rate does not impair profitability; instead, it supports the continuous improvement of EBITDA margins through higher contribution margins and operating leverage. Goldman Sachs raised its adjusted EPS forecasts for 2026-28, and with the combination of 'earnings upgrade + slight decrease in valuation multiple', arrived at an 8% target price increase. This means that, in the report's view, FIGR's current valuation does not fully reflect its earnings growth and structural growth potential—the approx. 19.5x forward P/E remains attractive relative to three-digit loan volume growth.

Risks

• Over-reliance on HELOC products, leading to product concentration risk
• Interest rate declines may lead to decreased HELOC demand
• Economic deterioration may bring credit and financing risks
• Demand from private credit buyers may weaken, affecting loan sales channels

What to watch

• Whether 3Q26 take rate will remain at the low end of the 3.5%-4.0% range as guided
• Whether Figure Connect's share of loan volume can reach above 70% in the medium term as guided
• The actual contribution of Agora integration to Figure Connect loan volume in 2H26
• Whether the Kiavi acquisition can be completed as planned in 2H26
• Whether the expansion speed of the partner network can continue
• Whether adjusted EBITDA margin can continue to advance toward the medium-term target of above 60%