Blend Labs(BLND) - 2025 Q1 - Quarterly Report

PART I. Financial Information Item 1. Condensed Consolidated Financial Statements (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][49][152] Notes to Condensed Consolidated Financial Statements 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] - 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][103] - 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][112] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - 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][215] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] - 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] Item 4. Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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][245][246] - 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][250] - 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][251] - 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][412][413] Item 2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 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 The company reports no defaults upon senior securities Item 4. Mine Safety Disclosures This item is not applicable to the company's operations Item 5. Other Information 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][443] - 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] - 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] - Eric Woersching (Director) adopted a Rule 10b5-1 plan on March 4, 2025, for the sale of up to 40,000 shares[446] Item 6. Exhibits 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] - Inline XBRL data files are included as exhibits, which format the financial data in the report for automated extraction and analysis[448]