Blend Labs (NYSE:BLND) FY Conference November 19, 2025 03:45 PM ET Company ParticipantsNima Ghamsari - CEOConference Call ParticipantsMichael Turrin - AnalystMichael TurrinGreat. Thanks. Good afternoon. Appreciate everyone joining. This is Michael Turrin with the Wells Fargo software team. Please step Nima Ghamsari, founder, CEO, Blend Labs. Appreciate you making time.Nima GhamsariThanks for having me.Michael TurrinYes. In sunny Southern California. Before I go into more detailed questions, I think it's use ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $32.9 million, down 1% year over year, but ahead of the midpoint of guidance [20] - Non-GAAP operating income was $4.6 million, representing a non-GAAP operating margin of 14%, exceeding the high end of guidance [22] - Non-GAAP gross margin improved to 78%, up from 76% in the previous quarter [22] - Free cash flow for the quarter was negative $5 million, with a year-to-date total of positive $1.5 million [22] Business Line Data and Key Metrics Changes - Mortgage Suite revenue decreased by 18% year over year, attributed to strategic transitions and churn [20] - Consumer Banking Suite revenue increased by 11% quarter over quarter, driven by go-live deployments and increased usage [21] - Economic value per funded loan (EVPFL) for Q3 was $86, with expectations for Q4 to be approximately $83-$84 [23] Market Data and Key Metrics Changes - Blend's HMDA market share decreased to 18.6% in 2024 from 21.7% in 2023, primarily due to churn notices [24] - Anticipated market share headwinds in 2026 of approximately 100 basis points, mainly due to lower volume from Mr. Cooper [25] Company Strategy and Development Direction - The company is focusing on three key areas for 2026: increasing take rate in the Mortgage Suite, expanding the Consumer Banking Suite, and building new growth horizons through AI and Rapid products [13][16] - The Consumer Banking Suite now represents 39% of total revenue, up from 29% a year ago, indicating a strategic shift towards higher-margin products [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business's resilience and the potential for growth as the macro environment shows signs of improvement [17] - The company is positioned to benefit from a recovery in the mortgage market, with a disciplined cost structure providing operating leverage [17] Other Important Information - The company signed 14 new deals and expansions in Q3, maintaining the quality of customer relationships [7] - The company repurchased 1.6 million shares worth over $5 million in Q3, with a total of $9.2 million year-to-date [23] Q&A Session Summary Question: Impact of Rocket Cooper deal on conversations with financial institutions - Management noted that the acquisition has prompted mortgage servicers to rethink their strategies, with increased interest in upgrading technology [32] Question: Revenue impact from Mr. Cooper in 2026 - Management indicated that while there will be a revenue headwind, a significant portion of revenue is protected under contract until mid-2028 [39] Question: Market share growth expectations - Management confirmed a strong mortgage pipeline and emphasized the potential for growth in both mortgage and consumer banking segments [41] Question: Renewal risk and pricing discussions - Management clarified that the renewal discussions were initiated long ago and do not foresee renewal risks in the current pipeline [46] Question: Economic value per funded loan long-term outlook - Management expressed optimism about long-term growth in EVPFL, particularly with the introduction of new products [62]

Financial Performance - Total revenue and non-GAAP operating income for Q3 2025 exceeded guidance[6] - Consumer Banking Suite revenue increased by 34% year-over-year[7] - Non-GAAP operating expenses reflect cost discipline[17] - Q4 2025 total revenue is expected to be between $31 million and $32.5 million, representing a year-over-year increase of 5% at the midpoint[26] - Non-GAAP net income from continuing operations was $5560 thousand for Q3 2025, compared to a loss of $631 thousand in GAAP[35] Revenue Breakdown - Consumer Banking Suite revenue was $12724 thousand in Q3 2025, a 34% increase year-over-year[29] - Mortgage Suite revenue was $17735 thousand in Q3 2025, an 18% decrease year-over-year[29] - Total Software Platform revenue was $30459 thousand in Q3 2025, a 2% decrease year-over-year[29] Market Position - Blend's funded loans as a percentage of HMDA mortgage originations is estimated to be 16-18% in 2025[23] - The company's market share has decreased since 2023 due to churn notices received primarily in 2023 and 2024[24] - Added or expanded 14 customer relationships this quarter, with pipeline up approximately 60% year-over-year[6]

Financial Performance - Total revenue for Q3 2025 was $32.86 million, a slight decrease from $33.10 million in Q3 2024, while total revenue for the nine months ended September 30, 2025, increased to $91.15 million from $85.64 million in the same period of 2024[220]. - Gross profit for Q3 2025 was $24.46 million, compared to $24.50 million in Q3 2024, with a gross profit margin of approximately 74.4%[220]. - The company reported a net income of $12.53 million in Q3 2025, a significant improvement compared to a net loss of $2.63 million in Q3 2024[220]. - Total revenue for the three months ended September 30, 2025, decreased by $0.2 million, or 1%, compared to the same period in 2024, totaling $32.86 million[225]. - Mortgage Suite revenue decreased by $3.8 million, or 18%, primarily due to a decrease in homeowner's insurance revenue and customer churn[230]. - Consumer Banking Suite revenue increased by $3.2 million, or 34%, driven by deployments of several large customers[230]. - Gross margin for the nine months ended September 30, 2025, improved to 73% from 71% in the same period in 2024, with gross profit increasing by $5.8 million, or 10%[239]. - Total revenue for the nine months ended September 30, 2025, increased by $5.5 million, or 6%, totaling $91.15 million compared to $85.64 million in 2024[237]. Operating Expenses - Operating expenses for Q3 2025 totaled $29.37 million, down from $35.78 million in Q3 2024, reflecting a strategic focus on cost management[220]. - Total operating expenses for the three months ended September 30, 2025, decreased by $6.4 million, or 18%, compared to the same period in 2024, totaling $29.37 million[228]. - Research and development expenses decreased to $8.52 million in Q3 2025 from $10.13 million in Q3 2024, indicating a shift in investment strategy[220]. - Research and development expenses decreased by $1.6 million, or 16%, for the three months ended September 30, 2025, primarily due to a decrease in personnel-related expenses[229]. - General and administrative expenses increased by $2.5 million, or 7%, for the nine months ended September 30, 2025, primarily due to an increase in stock-based compensation[244]. - The company anticipates a slight decrease in operating expenses for 2025 compared to 2024, reflecting ongoing cost efficiency measures[210]. Cash Flow and Financial Position - As of September 30, 2025, the company had cash, cash equivalents, and marketable securities totaling $77.3 million[250]. - The accumulated deficit was $1,388.3 million as of September 30, 2025, indicating significant losses from operations[251]. - Net cash provided by operating activities for the nine months ended September 30, 2025, was $12.1 million, compared to a net cash used of $5.0 million in the same period of 2024[259]. - Net cash used in investing activities during the nine months ended September 30, 2025, was $20.0 million, primarily due to the purchase of marketable securities[260]. - Net cash used in financing activities for the nine months ended September 30, 2025, was $15.0 million, mainly for tax payments related to equity awards and share repurchases[262]. - The company believes current cash and marketable securities will be sufficient to fund operations for at least the next 12 months[255]. Strategic Initiatives - The company plans to exit its title operations, with a definitive agreement to sell the title insurance business expected to close later in the fiscal year[200]. - A strategic shift towards a platform-first model is underway, aiming to enhance the partner ecosystem and drive revenue growth[201]. - The shift from subscription arrangements to prepaid multi-year usage-based arrangements is noted, indicating a change in customer contract preferences[205]. Other Financial Metrics - Other income (expense), net increased by $6.7 million, or 63%, for the three months ended September 30, 2025, totaling $17.35 million[234]. - Restructuring expenses decreased by $4.6 million, or 98%, for the three months ended September 30, 2025, reflecting a smaller workforce reduction plan compared to 2024[233]. - Restructuring expenses decreased by $4.9 million, or 85%, for the nine months ended September 30, 2025, compared to the same period in 2024[245]. - Interest expense decreased by $6.7 million, or 100%, for the nine months ended September 30, 2025, primarily due to the repayment of $146.1 million under the Credit Agreement[246]. - Other income (expense), net increased by $7.6 million, or 64%, for the nine months ended September 30, 2025, primarily due to a $16.6 million gain on investment in non-marketable equity securities[247]. Share Repurchase Program - The share repurchase program authorized up to $25 million, with $15.8 million remaining available for future repurchases as of September 30, 2025[252].

Blend Announces Third Quarter 2025 Financial Results November 6, 2025 SAN FRANCISCO -- Blend Labs, Inc. (NYSE: BLND), a leading origination platform for digital banking solutions, today announced its third quarter 2025 financial results. Highlights Third quarter revenue was $32.9 million, a decrease of 1% compared to the third quarter of 2024. Software platform revenue was $30.5 million, down 2% year-over-year and Professional services revenue was $2.4 million, up 18% year- over-year. Total GAAP gross profi ...

Core Insights - Blend Labs, Inc. has introduced Intelligent Origination, an AI-powered system designed to transform the lending process by embedding intelligence directly into the core of lending operations [2][3][6] - The new model aims to reduce the high costs associated with traditional lending, which average over $11,000 per mortgage and $2,000 per home equity loan, while also addressing lengthy cycle times of 20 to 30 days [4][10] Intelligent Origination Overview - Intelligent Origination represents a shift from traditional AI tools to a system that executes decisions autonomously, enhancing speed, accuracy, and oversight in lending [3][6][8] - The system integrates data, documents, and product rules, allowing for contextual awareness and the ability to handle complex decisions in real time [7][10] Implementation and Impact - The initial focus of Intelligent Origination is on back-office use cases that are labor-intensive, such as data validation and pre-funding quality control, which can significantly reduce processing times and costs [10][11] - Early pilot partners have reported substantial improvements, with tasks that previously took analysts 20 minutes now completed in seconds, leading to potential cost savings and enhanced quality control [11] Future Developments - Starting in 2026, Blend plans to expand Intelligent Origination to include additional use cases such as fraud detection and borrower communication across various lending products [10]

Core Insights - The article emphasizes the author's extensive experience in financial markets, particularly in hedge funds, and highlights a focus on technology sectors, especially SaaS and cloud businesses, which are seen as having significant growth potential [1]. Group 1: Analyst Background - The analyst has over a decade of experience in financial markets, primarily in a hedge fund in Rotterdam [1]. - The analyst has a rigorous approach to investment, maintaining high standards for personal investments [1]. Group 2: Sector Focus - The preferred sectors for analysis are technology, specifically Software as a Service (SaaS) and cloud businesses, which are noted for their incredible growth opportunities [1]. - The technology sector is characterized as active, with a substantial amount of news emerging weekly, making it an engaging area for research [1].

Blend Labs (BLND) FY Conference Summary Company Overview - **Company**: Blend Labs - **Industry**: FinTech, specifically focused on mortgage and consumer banking technology - **Founded**: Approximately 13 years ago - **Current Position**: Serves six or seven of the top 10 banks and credit unions in the U.S. and many large independent mortgage banks and servicers [6][7] Key Points and Arguments Market Dynamics - **Mortgage Market Trends**: - From 2010 to 2021, the mortgage industry saw increasing volumes, with low interest rates peaking in 2020 and 2021. - In 2022, mortgage volumes dropped significantly due to rising interest rates, with a decrease from approximately 14 million units in 2021 to about 6 million in 2022, and further down to around 4 million in 2023 and 2024, representing a 70% decline in a short period [12][13][14]. - **Current Market Share**: Blend has increased its market share to nearly 20% despite low mortgage volumes, with revenue per funded loan rising to about $90 [14][15]. Financial Performance - **Consumer Banking Growth**: - Consumer banking now accounts for approximately 36% of Blend's revenues, growing over 40% year-over-year from single-digit percentages in 2019 and 2020 [15][43]. - **Profitability**: Blend achieved profitability starting mid-2023, even amidst depressed mortgage volumes [20][24]. Product Development - **New Product Lines**: Blend is developing new offerings such as Rapid Refi and Rapid Home Equity, which are expected to enhance revenue per funded loan by 50-70% compared to existing products [28][34]. - **Transaction Volume Potential**: The scale of transactions in consumer banking is significantly larger than in the mortgage sector, indicating a larger total addressable market (TAM) for consumer banking products [50]. Competitive Landscape - **Industry Consolidation**: The acquisition of Mr. Cooper by Rocket has prompted banks to reassess their competitive strategies, leading to increased interest in Blend's offerings [55][56]. - **Sales Cycle Dynamics**: Blend's sales cycles are long, but competitive moves in the market can catalyze interest and accelerate pipeline growth [58][59]. Leadership Changes - **CFO Transition**: Amir Jafari, the outgoing CFO, played a crucial role in stabilizing the company during a challenging period. Jason Ream is set to take over, with expectations for continued growth and simplification of operations [60][61]. Additional Important Insights - **Operational Discipline**: Blend has focused on operational efficiency and customer base expansion during the downturn, positioning itself for future growth as mortgage rates potentially decline [16][22]. - **Market Readiness**: The company views itself as a "coiled spring," ready to capitalize on any uptick in mortgage activity as market conditions improve [16][20]. - **Regulatory Environment**: The consumer banking sector is highly regulated, which presents both challenges and opportunities for technology providers like Blend [40][41]. This summary encapsulates the critical insights from the Blend Labs conference, highlighting the company's strategic positioning, market dynamics, and future growth potential.

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $31.5 million, a 10% year-over-year increase, marking the fourth consecutive quarter of growth [23][24] - Non-GAAP gross profit was $24 million, with a non-GAAP gross margin of 76%, up from 71% in 2024 [26] - Non-GAAP operating income was $4.7 million, representing a non-GAAP operating margin of 15% [27] - Free cash flow for the quarter was negative $9 million, compared to negative $5.1 million in the same quarter last year [27] - Remaining performance obligations (RPO) reached a record $190 million, up from $158 million in 2024 [30] Business Line Data and Key Metrics Changes - Consumer banking revenue increased by 43% year-over-year to $11.4 million, now representing 36% of total revenue, up from 28% a year ago [18][24] - Mortgage suite revenue decreased by 3% year-over-year to $18 million, primarily due to lower economic value per funded loan (eVPFL) [24] - eVPFL for 2025 was $88, down from $97 a year ago, attributed to the shift to a partnership model [24][29] Market Data and Key Metrics Changes - The estimated market volumes for 2025 are projected to be between 4.24 million and 4.64 million, representing year-over-year growth of 5% to 15% [31] - The second quarter market volume estimate was between 1.15 million and 1.25 million units, with expectations for slight downticks in Q3 and Q4 [32] Company Strategy and Development Direction - The company is focused on expanding market share through new customer acquisitions and deepening relationships with existing customers [6][12] - The strategic shift to a simplified platform model aims to enhance operational efficiency and capitalize on market recovery [22] - The introduction of products like Rapid Refi and Blend Close is expected to drive future revenue growth and improve customer engagement [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current market challenges and capitalize on future opportunities [19] - The company has stabilized its customer base, reporting zero churn notices in 2025, which positions it well for future growth [10][41] - Management anticipates that the upcoming AI tools will enhance operational efficiency and customer service, further driving growth [20][72] Other Important Information - The company repurchased approximately 1.3 million shares worth over $4 million, with $20.9 million remaining under the repurchase authorization [27] - A definitive agreement to sell Title 365 to Covius was announced, aligning with the company's software-first model [22] Q&A Session Summary Question: Factors contributing to potential volume unlock - Management noted that small rate movements significantly impact customer volume, and the home equity business is helping to insulate against rate fluctuations [36][39] Question: Implementation and ramp of large customer - The ramp for large customers will come from mortgage solutions and the adoption of new products like Blend Close and Rapid Refi [43][46] Question: Mix of new logos versus expansions - Management indicated that many new logos are competitive takeaways, and the company is seeing a good pipeline of new customers [49][50] Question: Rule of 40 guidance - Management is monitoring the macro environment and will provide updates in future calls regarding the Rule of 40 [58] Question: Investment needed for AI initiatives - The company is early in its AI journey, focusing on internal efficiency and customer outcomes, with no specific investment number provided [70][72]

Financial Performance - Blend Labs achieved its fourth consecutive quarter of non-GAAP operating profitability, with a 15% non-GAAP operating margin[6] - Revenue reached $31523000, surpassing the midpoint of guidance and increasing by 10% year-over-year[6, 26] - Record remaining performance obligations of $190 million, driven by a $50 million renewal and expansion[6] Revenue Breakdown - Mortgage Suite revenue was $17961000, representing 57% of total revenue[26] - Consumer Banking Suite revenue totaled $11430000, accounting for 36% of total revenue[26] - Total Software Platform revenue reached $29391000, which is 93% of the total revenue, an 11% increase year-over-year[26] Profitability and Efficiency - Non-GAAP gross margin for the total Blend was 76%[15] - Software Platform non-GAAP gross margin was 79%[15] - Mortgage Suite economic value per funded loan increased to $96 in Q2 2025[12] Expense Management - Significantly reduced non-GAAP operating expenses year-over-year[17] - Non-GAAP Research & Development expenses decreased to $5893000 in Q2 2025[18, 33] - Non-GAAP Sales & Marketing expenses decreased to $6168000 in Q2 2025[18, 33] - Non-GAAP General & Administrative expenses decreased to $7251000 in Q2 2025[18, 33] Guidance - The company projects Q3 2025 total revenue to be between $31500000 and $33500000[22] - The company projects Q3 2025 Non-GAAP Net Operating Income to be between $3000000 and $4500000[23]