PART I. Financial Information [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited financials detail Blend Labs, Inc.'s financial position and performance, highlighting revenue growth and reduced net loss [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance sheets show total assets of $183.1 million, increased liabilities to $55.4 million, and an improved stockholders' deficit Balance Sheet Summary | Account | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total current assets** | $126,830 | $135,243 | | **Total assets** | $183,072 | $178,085 | | **Total current liabilities** | $52,743 | $39,022 | | **Total liabilities** | $55,396 | $40,403 | | **Total stockholders' equity** | $(22,565) | $(56,356) | - Assets and liabilities related to the Title segment, which is being divested, are classified as held for sale from discontinued operations[34](index=34&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Statements of operations show Q2 2025 revenue increased to $31.5 million, gross profit rose, and operating loss significantly narrowed Statements of Operations Summary | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | **Total revenue** | $31,523 | $28,696 | | **Gross profit** | $23,305 | $20,341 | | **Loss from operations** | $(4,624) | $(13,069) | | **Loss from continuing operations** | $(3,647) | $(19,199) | | **Net loss attributable to Blend Labs, Inc. common stockholders** | $(11,021) | $(23,595) | | **Net loss per share - basic and diluted** | $(0.03) (Continuing Ops) | $(0.09) (Continuing Ops) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow statements show $14.0 million net cash from operations, a significant improvement, with cash used in investing and financing Cash Flow Summary | Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $14,022 | $(10,534) | | **Net cash (used in) provided by investing activities** | $(7,603) | $35,537 | | **Net cash used in financing activities** | $(8,827) | $(10,507) | | **Net (decrease) increase in cash, cash equivalents, and restricted cash** | $(2,408) | $14,491 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, Title segment reclassification, revenue recognition, and the "One Big Beautiful Bill Act" impact - The company's operations are now reported as a single segment after classifying the Title segment as discontinued operations in Q1 2025[34](index=34&type=chunk)[163](index=163&type=chunk) - As of June 30, 2025, the company had **$190.4 million** in remaining performance obligations, with about half expected to be recognized as revenue over the next 12 months[65](index=65&type=chunk) - On June 9, 2025, the company entered into a definitive agreement to sell its title insurance business, which is expected to close later in the fiscal year. An impairment charge of **$2.0 million** was recorded related to the write-off of intangible assets from this business[167](index=167&type=chunk)[169](index=169&type=chunk) - A new law, the "One Big Beautiful Bill Act," was signed on July 4, 2025, which will allow for immediate expensing of domestic R&D expenditures starting in 2025. The company is currently evaluating its impact[174](index=174&type=chunk)[175](index=175&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 performance, highlighting 10% revenue growth, reduced operating expenses, and the Title business divestiture strategy [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Q2 2025 results show 10% total revenue growth to $31.5 million, improved gross margin, and a 16% reduction in operating expenses Revenue by Suite (Three Months Ended June 30) | Revenue Source | 2025 (in thousands) | 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Mortgage Suite | $17,961 | $18,454 | (3%) | | Consumer Banking Suite | $11,430 | $8,021 | 43% | | **Total Revenue** | **$31,523** | **$28,696** | **10%** | Operating Expenses (Three Months Ended June 30) | Expense Category | 2025 (in thousands) | 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Research and development | $7,332 | $12,916 | (43%) | | Sales and marketing | $6,950 | $9,004 | (23%) | | General and administrative | $13,619 | $11,376 | 20% | | **Total operating expenses** | **$27,929** | **$33,410** | **(16%)** | - The decrease in R&D expenses was primarily due to a **$2.3 million** increase in capitalized internal-use software development costs and a **$2.1 million** decrease in personnel-related expenses from restructuring[217](index=217&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity stands at $88.3 million, deemed sufficient for 12 months, with $14.8 million cash generated from operations in H1 2025 - Principal sources of liquidity as of June 30, 2025, were cash, cash equivalents, and marketable securities of **$88.3 million**[238](index=238&type=chunk) - The company repurchased and retired **1,267,662 shares** of Class A common stock for **$4.1 million** during the six months ended June 30, 2025. Approximately **$20.9 million** remains authorized under the share repurchase program[240](index=240&type=chunk) Cash Flow Summary (Six Months Ended June 30) | Cash Flow from Continuing Operations | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Operating Activities | $14,793 | $(6,311) | | Investing Activities | $(7,483) | $35,552 | | Financing Activities | $(8,827) | $(10,507) | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate and inflation risks, with interest rate changes not materially impacting short-term investments - The company's primary market risks are interest rate risk on its investment portfolio and inflation risk on its operating costs[258](index=258&type=chunk)[259](index=259&type=chunk) - Due to the short-term nature of its investments, a hypothetical **100 basis point** change in interest rates would not have a material impact on the company's financial statements[258](index=258&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[261](index=261&type=chunk) - No changes were identified during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[262](index=262&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - As of the report date, the company is not involved in any legal proceedings expected to have a material adverse effect on its business[266](index=266&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) Key risks include dependence on financial services, history of net losses, revenue concentration, intense competition, and concentrated voting power - The business is highly dependent on the financial services industry and is subject to risks from the mortgage market, including the impact of rising interest rates[273](index=273&type=chunk)[275](index=275&type=chunk) - The company has a history of net losses, with an accumulated deficit of **$1,400.9 million** as of June 30, 2025, and may not achieve or maintain profitability[278](index=278&type=chunk) - A large percentage of revenue is concentrated with a small number of key customers, and the loss of any of these could adversely affect the business[279](index=279&type=chunk) - The multi-class stock structure concentrates approximately **34%** of voting power with Co-Founder Nima Ghamsari, significantly limiting other stockholders' influence[443](index=443&type=chunk)[444](index=444&type=chunk) [Item 2. Recent Sales of Unregistered Securities and Use of Proceeds](index=99&type=section&id=Item%202.%20Recent%20Sales%20of%20Unregistered%20Securities) The company repurchased 345,000 Class A common shares for $3.02 per share in Q2 2025, with $20.9 million remaining for repurchases Share Repurchase Activity (Q2 2025) | Period | Total Shares Purchased (in thousands) | Average Price Paid Per Share | Value Remaining Under Program (in millions) | | :--- | :--- | :--- | :--- | | April 2025 | 345 | $3.02 | $20.9 | | May 2025 | — | $— | $20.9 | | June 2025 | — | $— | $20.9 | | **Total** | **345** | **$3.25** | **$20.9** | [Item 5. Other Information](index=99&type=section&id=Item%205.%20Other%20Information) Co-Founder Nima Ghamsari established a Rule 10b5-1 trading plan to sell up to $4 million in Class A Common Stock - On June 13, 2025, Co-Founder Nima Ghamsari established a Rule 10b5-1 trading plan to sell shares of Class A Common Stock, aiming to generate up to approximately **$4 million**. The plan expires on March 31, 2026[472](index=472&type=chunk)

[Executive Summary & Recent Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Recent%20Highlights) Blend achieved its fourth consecutive quarter of revenue growth and non-GAAP operating profit, doubling sales momentum and reaching a record $190.4 million RPO, while strategically selling Title365 - Sales momentum accelerated significantly, with **23 new or expanded deals** in Q2, more than double the number from Q1. This includes three new independent mortgage banks[2](index=2&type=chunk)[6](index=6&type=chunk) - Achieved a record Remaining Performance Obligations (RPO) of **$190.4 million**, bolstered by a $50 million renewal and expansion announced in May[6](index=6&type=chunk) - Announced the sale of Title365 to Covius as part of the 'Simplify Blend' strategy, aiming to shift title services to a higher-margin partnership model[6](index=6&type=chunk) - The company reported its fourth consecutive quarter of both year-over-year revenue growth and non-GAAP operating profit[6](index=6&type=chunk) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Blend's Q2 2025 total revenue grew 10% to $31.5 million, driven by a 43% increase in Consumer Banking Suite revenue, while significantly improving profitability to a $4.7 million non-GAAP operating income and maintaining strong liquidity [Revenue](index=1&type=section&id=Revenue) Q2 2025 total revenue increased 10% to $31.5 million, driven by a 43% surge in Consumer Banking Suite revenue, offsetting a slight Mortgage Suite decline Q2 2025 Revenue Breakdown ($ in millions) | Revenue Category | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$31.5** | **$28.7** | **+10%** | | Software Platform | $29.4 | $26.5 | +11% | | ↳ Consumer Banking Suite | $11.4 | $8.0 | +43% | | ↳ Mortgage Suite | $18.0 | $18.5 | -3% | | Professional Services | $2.1 | $2.2 | -4% | [Gross Margin & Profitability](index=1&type=section&id=Gross%20Margin%20%26%20Profitability) Q2 2025 profitability significantly improved, with GAAP loss from operations narrowing to $4.6 million and non-GAAP income reaching $4.7 million, alongside expanded gross margins Q2 2025 Profitability Metrics ($ in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | GAAP Gross Margin | 74% | 71% | | Non-GAAP Gross Margin | 76% | 71% | | GAAP Loss from Operations | $(4.6)M | $(13.1)M | | Non-GAAP Income (Loss) from Operations | $4.7M | $(5.5)M | | GAAP Diluted Net Loss per Share | $(0.03) | $(0.09) | | Non-GAAP Diluted Net Income (Loss) per Share | $0.00 | $(0.03) | [Liquidity, Cash, & Capital Resources](index=2&type=section&id=Liquidity%2C%20Cash%2C%20%26%20Capital%20Resources) As of June 30, 2025, Blend maintained strong liquidity with $93.3 million in cash and no debt, despite using $5.3 million in operating cash flow Q2 2025 Liquidity and Cash Flow ($ in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Cash, Cash Equivalents, & Marketable Securities | $93.3 | - | | Outstanding Debt | $0 | - | | Cash Used in Operating Activities | $(5.3) | $(3.3) | | Free Cash Flow | $(9.0) | $(5.1) | [Third Quarter 2025 Outlook](index=2&type=section&id=Third%20Quarter%202025%20Outlook) Blend projects Q3 2025 total revenue between $31.5 million and $33.5 million, with non-GAAP net operating income of $3.0 million to $4.5 million, assuming marginally higher mortgage originations Q3 2025 Guidance ($ in millions) | Metric | Guidance Range | | :--- | :--- | | Total Revenue | $31.5 – $33.5 | | Non-GAAP Net Operating Income | $3.0 – $4.5 | - The guidance assumes a marginal increase in U.S. aggregate industry mortgage originations in Q3 2025, with an expected market size between **1,160,000 and 1,260,000 units**[8](index=8&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) This section presents Blend's unaudited condensed consolidated financial statements, including the Balance Sheet, Statement of Operations, and Statement of Cash Flows, detailing financial position and performance [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Blend reported total assets of $183.1 million and total liabilities of $55.4 million, with a notable rise in liabilities driven by deferred revenue Balance Sheet Highlights (In thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $36,499 | $38,011 | | Total current assets | $126,830 | $135,243 | | **Total assets** | **$183,072** | **$178,085** | | Deferred revenue | $32,746 | $19,240 | | Total current liabilities | $52,743 | $39,022 | | **Total liabilities** | **$55,396** | **$40,403** | | Total stockholders' equity | $(22,565) | $(56,356) | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 total revenue reached $31.5 million, with loss from operations significantly reduced to $4.6 million and net loss attributable to common stockholders narrowing to $11.0 million Q2 Statement of Operations Highlights (In thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenue | $31,523 | $28,696 | | Gross profit | $23,305 | $20,341 | | Total operating expenses | $27,929 | $33,410 | | Loss from operations | $(4,624) | $(13,069) | | Net loss | $(6,645) | $(19,421) | | Net loss attributable to common stockholders | $(11,021) | $(23,595) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q2 2025 saw net cash used in operating activities of $6.4 million, investing activities of $10.8 million, and financing activities of $3.7 million, resulting in a $20.9 million net cash decrease Q2 Cash Flow Highlights (In thousands) | Activity | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,368) | $(6,666) | | Net cash used in investing activities | $(10,831) | $(25,084) | | Net cash used in financing activities | $(3,651) | $(7,320) | | **Net decrease in cash** | **$(20,850)** | **$(39,071)** | [Supplementary Financial Information](index=11&type=section&id=Supplementary%20Financial%20Information) This section details revenue disaggregation, highlighting 43% YoY growth in Consumer Banking Suite, and provides comprehensive reconciliations of GAAP to non-GAAP measures, including adjustments for stock-based compensation [Revenue Disaggregation](index=11&type=section&id=Revenue%20Disaggregation) Q2 2025 revenue disaggregation shows the Consumer Banking Suite as the primary growth driver with 43% YoY increase, while the Mortgage Suite experienced a slight decline Q2 Revenue Disaggregation (In thousands) | Revenue Source | Q2 2025 | % of Total | Q2 2024 | % of Total | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Mortgage Suite | $17,961 | 57% | $18,454 | 64% | (3)% | | Consumer Banking Suite | $11,430 | 36% | $8,021 | 28% | 43% | | **Total software platform** | **$29,391** | **93%** | **$26,475** | **92%** | **11%** | | Professional services | $2,132 | 7% | $2,221 | 8% | (4)% | | **Total revenue** | **$31,523** | **100%** | **$28,696** | **100%** | **10%** | [Reconciliation of GAAP to non-GAAP Measures](index=12&type=section&id=Reconciliation%20of%20GAAP%20to%20non-GAAP%20Measures) Blend provides detailed reconciliations from GAAP to non-GAAP measures, with Q2 2025 adjustments including $7.6 million for stock-based compensation to clarify operational performance - To reconcile GAAP loss from operations of **$(4.6)M** to non-GAAP income from operations of **$4.7M** for Q2 2025, the company made several adjustments, the largest being the exclusion of **$7.6M in stock-based compensation**[48](index=48&type=chunk) - Non-GAAP gross profit for Q2 2025 was **$24.0 million (76% margin)**, compared to GAAP gross profit of **$23.3 million (74% margin)**, with adjustments primarily for stock-based compensation and amortization[46](index=46&type=chunk) [About Non-GAAP Financial Measures and Other Performance Metrics](index=3&type=section&id=About%20Non-GAAP%20Financial%20Measures%20and%20Other%20Performance%20Metrics) Blend uses non-GAAP measures to provide insights into operational performance, adjusting for non-core items like stock-based compensation, and defines 'Economic Value per Funded Loan' as a key performance metric - Management uses non-GAAP measures internally to analyze financial results and believes they are useful for investors in evaluating ongoing operational performance and trends[16](index=16&type=chunk) - Key adjustments to derive non-GAAP figures include excluding: - **Stock-based compensation** (a non-cash expense) - **Workforce reduction and restructuring costs** - **Transaction-related costs** - **Amortization of capitalized internal-use software** - **Litigation contingencies**[17](index=17&type=chunk)[18](index=18&type=chunk)[22](index=22&type=chunk) - The company defines 'Economic Value per Funded Loan' as a key metric to measure success in selling additional products through its software platform, breaking it down into core software, add-on products, and partnerships[29](index=29&type=chunk)

Company Overview - Blend Labs (NYSE: BLND) is a fintech software provider that focuses on digitizing various functions for banks, credit unions, and mortgage originators [1]. Industry Insights - The platform developed by Blend Labs aims to streamline the labor-intensive processes often associated with banking and mortgage origination [1]. Investment Philosophy - The company emphasizes a fundamental investment philosophy that prioritizes thorough due diligence, focusing on financial health, competitive positioning, and management quality [1]. Market Opportunities - There is a belief that the Real Estate Investment Trusts (REITs) sector presents abundant opportunities for investors, highlighting the potential for long-term growth [1]. Research Approach - The company engages in meticulous analysis to identify undervalued companies, particularly in the REIT sector, that are poised for substantial appreciation [1].

Core Viewpoint - Covius Services, LLC has signed a definitive agreement to acquire Title365 Holding Co., enhancing its title insurance and settlement services capabilities and technology platform integrations [1][2]. Group 1: Acquisition Details - The acquisition is subject to third-party consents and regulatory approvals, with an expected closing in the coming months [2]. - Title365 is licensed in 43 states and serves top-10 lenders, capital market participants, and home equity originators, offering a full range of mortgage origination services [3]. Group 2: Strategic Implications - The acquisition will expand Covius' presence in the origination title space and complement its strengths in loss mitigation and default title services [5]. - Covius aims to deliver a comprehensive range of tech-enabled products and services across origination, servicing, and capital market sectors [5]. - Title365 will continue to partner with Blend to provide integrated title and closing services for Blend customers, ensuring seamless service delivery [4]. Group 3: Company Background - Covius is recognized for its technology-enabled solutions that enhance operational efficiencies and mitigate risks in the financial services industry [6]. - Blend Labs Inc. is a leading digital origination platform that powered $1.2 trillion in loan applications in 2024, focusing on streamlining workflows for financial institutions [7].

Summary of Blend Labs Conference Call Company Overview - **Company**: Blend Labs - **Industry**: Mortgage and Consumer Banking Technology Key Points and Arguments Company Background and Ideology - Blend Labs was founded in 2012 to address inefficiencies in the mortgage industry, which was historically underserved by technology [5][4] - The company aims to provide a digital, data-driven origination experience for consumers, moving away from legacy systems [5][4] Customer Base and Market Penetration - Blend has successfully penetrated large financial institutions, which is challenging due to regulatory requirements [6][7] - The company has expanded its customer base and product lines over time, moving beyond mortgages to include all consumer banking products [5][7] Current Market Conditions - The mortgage industry faced significant challenges in 2023, with volumes down 70% and margins down 60% due to rising interest rates [10][11] - Financial institutions were primarily focused on stabilizing their operations during this period, leading to reduced technology investments [11][12] Future Outlook and Recovery - Blend's customer base is now profitable, allowing for renewed investments in technology as the market begins to recover [12][13] - Historical averages suggest a potential rebound in mortgage volumes, which could significantly benefit Blend's business model [12][60] Product Innovations - Blend has introduced new products like Rapid Home Equity and Rapid Refi, which enhance customer experience and increase conversion rates [19][24] - The Rapid Home Equity product has shown a conversion rate increase from 30% to 45% in pilot tests [22] Financial Profile and Revenue Model - Blend's revenue model is primarily usage-based, with contracts including a usage component [29][30] - The company has achieved positive free cash flow and non-GAAP operating profitability for three consecutive quarters [59][60] Competitive Landscape - Blend differentiates itself by offering a comprehensive platform that integrates mortgage, consumer banking, and small business solutions [56] - The competitive landscape varies by segment, with larger banks often opting for custom-built solutions while smaller institutions may use point solutions [54][55] Strategic Focus on AI and Automation - Blend is leveraging AI to improve operational efficiency and reduce costs associated with manual processes in the mortgage industry [34][36] - The company aims to provide a win-win scenario for clients by reducing their operational costs while increasing software spend [35][36] Transition to a Pure SaaS Model - Blend is simplifying its operations by divesting from non-core businesses like title insurance and home insurance, focusing on its software capabilities [61][63] - The transition allows Blend to concentrate on software development and leverage partnerships for ancillary services [63][65] Additional Important Insights - Blend Builder is a new platform that enables rapid product development and integration, allowing for faster and cheaper launches of new offerings [41][42] - The company is positioned to capitalize on the growing demand for digital solutions in the financial services sector, especially as interest rates stabilize [12][60] This summary encapsulates the key insights from the Blend Labs conference call, highlighting the company's strategic direction, market challenges, and innovative solutions within the mortgage and consumer banking technology landscape.

Financial Data and Key Metrics Changes - Platform revenue for Q1 2025 was $26.8 million, representing a 12% year-over-year growth and marking the third consecutive quarter of year-over-year growth [35][36] - Non-GAAP operating income for Q1 2025 was $1 million, with a non-GAAP operating margin of 4%, coming in at the high end of guidance [37][38] - Free cash flow for Q1 2025 reached a record $15.5 million, representing a free cash flow margin of 58% [39] - RPO for Q1 2025 set a record at $158.1 million, exceeding the target of $150 million for 2025 [40] Business Line Data and Key Metrics Changes - Mortgage suite revenue was $14.6 million, while consumer banking suite revenue grew 45% year-over-year to $9.6 million [36][37] - Professional services revenue for Q1 2025 was $2.5 million [37] Market Data and Key Metrics Changes - The average homeowner currently has approximately $315,000 in equity, indicating a significant opportunity for lenders in the home equity market [20] - The home equity market has reportedly grown double digits year-over-year based on customer data [20] Company Strategy and Development Direction - The company is transitioning to a software-first model, focusing on strategic partnerships rather than building non-core services [6][9] - The potential sale of the title insurance business is seen as a final step in simplifying operations and enhancing focus on software solutions [6][7] - The company aims to leverage partnerships to provide seamless workflows and deep integrations, capturing value without direct operational ownership [9][10] Management's Comments on Operating Environment and Future Outlook - Management noted that Q1 2025 was volatile but recognized that such volatility typically leads to spikes in originations [30][31] - The acquisition of Mr. Cooper by Rocket is viewed as a potential catalyst for the industry, validating the company's vision for a unified digital mortgage experience [11][14] - The company expects to see continued momentum in Q2 2025, with a growing pipeline nearly double that of the previous year [25][27] Other Important Information - The company repurchased approximately 923,000 shares of Class A common stock for a total of $3.1 million during Q1 2025 [39] - The company plans to invest in AI and enhance its go-to-market strategies to capitalize on growth opportunities [70][75] Q&A Session Summary Question: How are you thinking about the dual benefit of higher ARPU products? - Management emphasized that the product is designed to be the easiest way to refinance, tailored to specific situations, which drives higher conversion rates for customers [47][48] Question: What does simplification mean for the financial profile of Blend? - Management stated that simplification is aimed at accelerating growth while maintaining profitability, allowing for higher margins and faster growth [51][53] Question: Can you discuss the $50 million expansion and its timeline? - Management noted that the relationship has evolved over years, with the customer now using multiple products, and typically about half of RPO is collected within the next twelve months [57][60] Question: How does business deposit account opening compare to retail? - Management explained that while the experience is similar, business accounts require different checks and support for various account types, making it a more complex process [63][64] Question: How will you reinvest for growth moving forward? - Management indicated that they have earned the right to invest in growth again, focusing on products like Rapid Refi and AI to enhance customer efficiency [67][68] Question: What about capital deployment philosophy post-title sale? - Management confirmed that they will continue to reinvest with a focus on efficiency and ROI, particularly in AI and go-to-market strategies [79][81]

Financial Data and Key Metrics Changes - Platform revenue for Q1 2025 was $26.8 million, above the midpoint of guidance, representing a 12% year-over-year growth and marking the third consecutive quarter of year-over-year growth [32][33] - Non-GAAP operating income for Q1 2025 was $1 million, with a non-GAAP operating margin of 4%, coming in at the high end of guidance [35][36] - Free cash flow reached a record $15.5 million, representing a free cash flow margin of 58% [37][38] Business Line Data and Key Metrics Changes - Mortgage suite revenue was $14.6 million, while consumer banking suite revenue grew 45% year-over-year to $9.6 million [33] - Professional services revenue for Q1 2025 was $2.5 million [34] - Economic value per funded loan for Q1 2025 was $93, slightly below guidance, with expectations for Q2 to be $88 [38][40] Market Data and Key Metrics Changes - The average homeowner has approximately $315,000 in equity, indicating a significant opportunity for lenders in the home equity market, which has grown double digits year-over-year [19] - The company anticipates HAMDA originations to range from $1.15 to $1.25 million for Q2 2025 [41] Company Strategy and Development Direction - The company is transitioning to a software-first model, focusing on strategic partnerships rather than building non-core services [6][7] - The potential sale of the title insurance business is seen as a final step in simplifying operations and enhancing focus on software solutions [7][31] - The acquisition of Mr. Cooper by Rocket is viewed as a catalyst for the industry, validating the company's vision for a unified digital mortgage experience [10][24] Management's Comments on Operating Environment and Future Outlook - Management noted that Q1 was volatile but recognized that such volatility typically leads to spikes in originations [28][29] - The company is optimistic about the potential for growth driven by banking deregulation and M&A trends in the industry [25][31] - The strong sales momentum and record free cash flow are seen as indicators of the company's strategic direction and potential for accelerated growth [25][36] Other Important Information - The company ended Q1 2025 with approximately $110 million in cash, cash equivalents, and marketable securities [36] - The company repurchased approximately 923,000 shares of Class A common stock for a total of $3.1 million [37] Q&A Session Summary Question: How are you thinking about the dual benefit of higher ARPU products with rapid refi and home loan? - The product is designed to be frictionless and tailored to specific situations, driving higher conversion rates for customers [44][45][46] Question: What does simplification mean for the evolution of Blend's financial profile? - Simplification is aimed at accelerating growth while maintaining profitability, allowing for higher margins and faster growth [48][49] Question: Can you discuss the $50 million expansion and its timeline for realization? - The relationship has evolved over years, starting with mortgage and expanding to multiple products, with about half of RPO typically collected in the next twelve months [54][55][57] Question: How does business deposit account opening compare to retail deposit account opening? - The experience is similar but requires different checks and supports multiple account types, aimed at providing a frictionless experience for small business owners [59][60] Question: How is the company thinking about reinvesting for growth? - The company plans to invest in growth areas like rapid refi and AI, focusing on delivering the best products before expanding further [63][64][70] Question: What is the company's capital deployment philosophy post-title sale? - The company will continue to reinvest efficiently, focusing on AI and go-to-market strategies to enhance customer engagement and product offerings [76][78]

Financial Performance - Blend Labs achieved $1 million in non-GAAP net operating income, marking the third consecutive quarter of profitability[6] - Revenue reached $26.8 million, exceeding the midpoint of guidance[6] - The company delivered $15.5 million of free cash flow, resulting in a 58% free cash flow margin[6] Revenue Breakdown - Consumer Banking Suite revenue increased to $9.6 million in Q1 2025[9] - Mortgage Suite revenue decreased to $14.6 million in Q1 2025[10] - Total Software Platform revenue increased by 12% year-over-year, reaching $24.26 million in Q1 2025[34] Efficiency and Cost Management - Non-GAAP operating expenses significantly reduced year over year, with FY 2025E projected between $85 million and $90 million[22, 25] - General & Administrative expenses decreased to $6.7 million in Q1 2025[23] - Research & Development expenses decreased to $5.6 million in Q1 2025[23] Mortgage Suite Economics - Mortgage Suite economic value per funded loan increased to $93 in Q1 2025[13] - Near-term economic value per funded loan is expected to generate contribution margin of 90%+[17]

PART I. Financial Information [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, show a year-over-year revenue increase to **$26.8 million** and a reduced net loss of **$9.4 million**, reflecting the classification of the Title segment as discontinued operations and the impact of a new Series A preferred stock issuance Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$188,266** | **$178,085** | | Cash and cash equivalents | $56,244 | $38,011 | | Marketable securities | $48,574 | $56,233 | | Assets held for sale from discontinued operations | $14,357 | $15,675 | | **Total Liabilities** | **$59,287** | **$40,403** | | Deferred revenue | $33,266 | $19,240 | | Liabilities held for sale from discontinued operations | $7,696 | $6,210 | | **Series A redeemable convertible preferred stock** | **$145,865** | **$141,663** | | **Total stockholders' equity** | **($16,886)** | **($56,356)** | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Total Revenue** | **$26,770** | **$23,840** | | Gross Profit | $18,958 | $16,042 | | Loss from operations | ($7,693) | ($21,221) | | Loss from continuing operations | ($6,609) | ($20,709) | | Net loss from discontinued operations | ($2,803) | $46 | | **Net Loss** | **($9,412)** | **($20,663)** | | Net loss per share (basic and diluted) | ($0.05) | ($0.09) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $20,390 | ($3,868) | | Net cash provided by investing activities | $3,228 | $60,621 | | Net cash used in financing activities | ($5,176) | ($3,187) | | **Net increase in cash, cash equivalents, and restricted cash** | **$18,442** | **$53,562** | - In the first quarter of 2025, the company classified its Title segment as **discontinued operations** and its assets and liabilities as held for sale, a **strategic shift** to transform into a **platform-first company**[33](index=33&type=chunk)[49](index=49&type=chunk)[152](index=152&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, financial instruments, and equity structure, highlighting the decision to exit the Title business, the issuance of **$150 million** in Series A Preferred Stock, and a **$25 million** share repurchase program - The company initiated a process to exit the title business in Q1 2025, classifying the **Title segment as discontinued operations**, as part of a strategic shift to become a **platform-first company**[156](index=156&type=chunk) - On April 29, 2024, the company issued 150,000 shares of Series A Preferred Stock to Haveli for **$150.0 million**, with net proceeds of **$139.9 million** used to repay outstanding debt, and the stock is classified as **mezzanine equity**[101](index=101&type=chunk)[103](index=103&type=chunk) - In August 2024, the board authorized a share repurchase program of up to **$25.0 million**, and during Q1 2025, the company repurchased **922,996 shares** for **$3.1 million**, leaving **$21.9 million** available[111](index=111&type=chunk)[112](index=112&type=chunk) - As of March 31, 2025, the company had **$158.1 million** in remaining performance obligations (RPO), with approximately half expected to be recognized as revenue over the next 12 months[62](index=62&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's Q1 2025 performance, noting a **12% revenue increase** to **$26.8 million**, a **28% reduction in operating expenses**, and a narrowed loss from operations, supported by a strategic exit from the Title business and **$104.8 million** in liquidity Revenue and Gross Profit Comparison (in thousands) | Metric | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$26,770** | **$23,840** | **$2,930** | **12%** | | Mortgage Suite | $14,638 | $15,078 | ($440) | (3%) | | Consumer Banking Suite | $9,622 | $6,658 | $2,964 | 45% | | Professional Services | $2,510 | $2,104 | $406 | 19% | | **Gross Profit** | **$18,958** | **$16,042** | **$2,916** | **18%** | | **Gross Margin** | **71%** | **67%** | - | - | Operating Expenses Comparison (in thousands) | Expense Category | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $7,520 | $14,183 | ($6,663) | (47%) | | Sales and marketing | $7,188 | $9,755 | ($2,567) | (26%) | | General and administrative | $11,224 | $12,353 | ($1,129) | (9%) | | **Total operating expenses** | **$26,651** | **$37,263** | **($10,612)** | **(28%)** | - The company made a **strategic decision** in Q1 2025 to exit its title operations to simplify the business and transform into a platform-first company, with the Title segment results now presented as **discontinued operations**[173](index=173&type=chunk) - As of March 31, 2025, principal sources of liquidity, including cash, cash equivalents, and marketable securities, totaled **$104.8 million**, which management believes is sufficient to fund operations for at least the next 12 months[210](index=210&type=chunk)[215](index=215&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk on its **$104.8 million** cash and marketable securities portfolio, though the impact is not material due to short-term investments, and inflation risk could increase operating costs if not offset by price adjustments - The company holds **$56.2 million** in cash and cash equivalents and **$48.6 million** in marketable securities, which are subject to **interest rate risk**, but due to their short-term nature, the company does **not anticipate material risk** from interest rate changes[230](index=230&type=chunk) - **Inflationary factors**, such as increased overhead costs, could **adversely affect operating results** if the company cannot increase the selling prices of its products to match rising costs[231](index=231&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2025, with **no material changes** to internal control over financial reporting during the quarter, acknowledging inherent system limitations - Management, including the principal executive officer and principal financial officer, concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2025[233](index=233&type=chunk) - **No changes** in internal control over financial reporting were identified during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[234](index=234&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any litigation expected to have a **material adverse effect** on its business, though future legal proceedings in the normal course of business are possible - The company is **not presently party to any litigation** that it believes would likely have a **material adverse effect** on its business, financial condition, results of operations, or cash flows[238](index=238&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including dependency on the financial services and mortgage industries, a history of **net losses**, customer concentration, cybersecurity threats, regulatory complexities, and concentrated voting power due to its multi-class stock structure - The business is substantially **dependent on the financial services industry** and is subject to **risks impacting the mortgage market**, such as interest rate fluctuations and economic downturns[242](index=242&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - The company has a **history of net losses** (**$1.39 billion accumulated deficit** as of March 31, 2025) and may not achieve or maintain profitability in the future[242](index=242&type=chunk)[250](index=250&type=chunk) - A large percentage of **revenue is concentrated** with a small number of key customers; in 2024, the **top five Blend Platform customers accounted for 33.0% of segment revenue**[242](index=242&type=chunk)[251](index=251&type=chunk) - The **multi-class stock structure concentrates voting power** with Co-Founder Nima Ghamsari, who held approximately **35% of the total voting power** as of March 31, 2025, severely limiting other stockholders' influence[243](index=243&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk) [Item 2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=90&type=section&id=Item%202.%20Recent%20Sales%20of%20Unregistered%20Securities) The company repurchased **922,996 shares** for **$3.1 million** in March 2025 under a **$25.0 million** program, with **$21.9 million** remaining available for future repurchases as of March 31, 2025 Share Repurchase Activity - Q1 2025 | Period | Total Shares Purchased (thousands) | Average Price Paid Per Share | Approximate Dollar Value Remaining (millions) | | :--- | :--- | :--- | :--- | | January 2025 | — | — | $25.0 | | February 2025 | — | — | $25.0 | | March 2025 | 923 | $3.33 | $21.9 | | **Total** | **923** | **-** | **$21.9** | [Item 3. Defaults Upon Senior Securities](index=90&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities [Item 4. Mine Safety Disclosures](index=90&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations [Item 5. Other Information](index=90&type=section&id=Item%205.%20Other%20Information) Several company officers and a director adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025, including plans for **168,929**, **167,000**, **500,000**, and **40,000 shares** by specific individuals - Oxana Tkach (Head of Accounting and FP&A) terminated a Rule 10b5-1 plan on Jan 25, 2025, and adopted a new one on March 12, 2025, for the potential sale of up to **168,929 shares**[442](index=442&type=chunk)[443](index=443&type=chunk) - Winnie Ling (Head of Legal and People) adopted a Rule 10b5-1 plan on March 14, 2025, for the sale of up to **167,000 shares**[444](index=444&type=chunk) - Brian Kneafsey (Head of Revenue) adopted a Rule 10b5-1 plan on March 14, 2025, for the sale of up to **500,000 shares**[445](index=445&type=chunk) - Eric Woersching (Director) adopted a Rule 10b5-1 plan on March 4, 2025, for the sale of up to **40,000 shares**[446](index=446&type=chunk) [Item 6. Exhibits](index=91&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including **certifications from principal officers** and **Inline XBRL documents** for data tagging - The report includes **certifications** from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[448](index=448&type=chunk) - **Inline XBRL data files** are included as exhibits, which format the financial data in the report for automated extraction and analysis[448](index=448&type=chunk)

Financial Performance - Blend's platform revenue for Q1 2025 was $26.8 million, an increase of $2.9 million or 12% year-over-year[4] - Total revenue for the three months ended March 31, 2025, was $26.77 million, representing a 12% increase from $23.84 million in the same period of 2024[49] - Gross profit for the same period was $18,958,000, up from $16,042,000, indicating a growth of 11.9%[38] - Gross profit for the software platform was $18.40 million with a gross margin of 76% for Q1 2025, compared to $16.56 million and 76% gross margin in Q1 2024[45] - GAAP gross profit margin improved to 71% in Q1 2025, up from 67% in Q1 2024[9] - Non-GAAP net income from continuing operations for Q1 2025 was $2.04 million, a significant improvement from a loss of $15.22 million in Q1 2024[49] - The company reported a GAAP net loss from continuing operations of $6.61 million for Q1 2025, down from a loss of $20.71 million in Q1 2024[49] - Non-GAAP diluted net loss per share attributable to common stockholders for continuing operations was $(0.04), an improvement from $(0.08) in the previous year[38] - Loss from operations improved to $(7,693,000) compared to $(21,221,000) in the prior year, reflecting a 63.7% reduction in losses[38] - Loss from continuing operations decreased to $6,609 thousand from $20,709 thousand year-over-year[40] Cash Flow and Liquidity - Cash provided by operating activities was $20.1 million in Q1 2025, compared to cash used of $3.0 million in Q1 2024, marking a significant improvement[9] - Free cash flow reached $15.5 million in Q1 2025, compared to a negative $5.0 million in Q1 2024, indicating the first positive free cash flow in the company's history[9] - The company achieved a free cash flow margin of 58% in Q1 2025, a significant increase from a negative 21% in Q1 2024[49] - Cash and cash equivalents increased to $56,244,000 as of March 31, 2025, compared to $38,011,000 at the end of 2024, a growth of 48%[36] - Total cash, cash equivalents, and restricted cash at the end of the period was $61,267 thousand, down from $82,602 thousand a year earlier[40] - The company reported a net cash provided by investing activities of $3,228 thousand, a decrease from $60,621 thousand in the previous year[40] - The company reported a net increase in cash, cash equivalents, and restricted cash of $18,442 thousand, compared to an increase of $53,562 thousand in the prior year[40] Operational Efficiency - Total operating expenses decreased to $26,651,000 from $37,263,000, a reduction of 28.6% year-over-year[38] - GAAP operating expenses decreased to $26.65 million in Q1 2025 from $37.26 million in Q1 2024, reflecting cost efficiency measures[47] - Stock-based compensation for the period was $6,048 thousand, down from $8,045 thousand in the prior year[40] - Stock-based compensation expenses decreased to $6.05 million in Q1 2025 from $8.05 million in Q1 2024, reflecting a reduction in equity-based awards[51] Future Outlook - The company expects Q2 2025 platform revenue to be between $30.5 million and $32.5 million, reflecting anticipated growth in U.S. mortgage originations[7] - For the full year 2025, Blend projects non-GAAP operating expenses to be between $85.0 million and $90.0 million[8] Market Position - The company closed nearly three times as many deals in Q1 2025 compared to the same period last year, including a significant partnership with a top 25 credit union[5] - Record first quarter signings resulted in total remaining performance obligations of $158.1 million, representing a 70% increase year-over-year[4] - The company serves 10 of the top 20 mortgage servicers in the U.S., highlighting its growing market presence[5] - Economic Value per Funded Loan is used to measure success in broadening client relationships and selling additional products through the software platform[24] Debt Management - The company repaid all outstanding debt in April 2024, eliminating any debt service obligations[30]