Blend Labs(US:BLND)2022-11-09 16:00Financial Performance - For the three months ended September 30, 2022, Blend Labs, Inc. experienced a 3.0% decrease in total banking transactions and a 35.7% decrease in mortgage transactions compared to the same period in 2021[233]. - The Mortgage Bankers Association (MBA) reported a 63% decrease in overall industry origination volumes during the same period, impacting Blend's revenue significantly[233]. - Total revenue decreased by $34.2 million, or 38%, for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to a $35.2 million, or 65%, decrease in Title365 revenue[286]. - Blend Platform revenue increased by $1.0 million, or 3%, with Mortgage Banking revenue decreasing by $7.4 million, or 27%, and Consumer Banking and Marketplace revenue increasing by $8.7 million, or 132%[286]. - The net loss for the three months ended September 30, 2022, was $132.7 million, compared to a net loss of $76.3 million in the same period of 2021, indicating a significant increase in losses[280]. - Total revenue for the nine months ended September 30, 2022, increased by $38.9 million, or 25%, driven by a $35.4 million, or 65%, increase in Title365 revenue[297]. Cost Management and Workforce Reduction - The company implemented workforce reduction plans, eliminating approximately 200 positions in April 2022, resulting in an annualized compensation expense reduction of approximately $35.4 million[236]. - A second workforce reduction plan in August 2022 eliminated approximately 140 positions, with expected annualized compensation savings of about $27.3 million[237]. - A third workforce reduction plan in November 2022 is expected to eliminate 100 positions, with anticipated annualized savings of approximately $7.1 million[238]. - The restructuring charges for the nine months ended September 30, 2022, amounted to $12.3 million, resulting from the elimination of approximately 340 positions[273]. Impairment Charges - Blend recorded impairment charges of $240.1 million and $151.7 million for goodwill and customer relationship intangible assets, respectively, for the three months ended June 30, 2022[242]. - The company recorded impairment charges of $287.2 million for goodwill and $162.5 million for customer relationship intangible assets for the nine months ended September 30, 2022, due to declines in market conditions[272]. - Impairment of intangible assets and goodwill increased by $57.9 million for the three months ended September 30, 2022, due to impairment charges in the Title365 reporting unit[294]. - Impairment of intangible assets and goodwill rose by $449.7 million for the nine months ended September 30, 2022, due to impairment charges related to Title365[307]. Revenue and Expense Trends - Title365 segment revenue for the three months ended September 30, 2022, was $55.4 million, a decrease from $89.6 million in the same period of 2021, reflecting a decline of approximately 38%[280]. - The cost of revenue for Title365 was $34.2 million for the three months ended September 30, 2022, compared to $49.2 million in the prior year, resulting in a gross profit of $21.1 million, down from $40.3 million[280]. - Total operating expenses for the three months ended September 30, 2022, were $151.0 million, up from $110.9 million in the same period of 2021, marking an increase of approximately 36%[280]. - Operating expenses increased by $40.1 million, or 36%, for the three months ended September 30, 2022, with significant increases in research and development expenses by $8.7 million, or 34%[288]. - Research and development expenses increased to $34.2 million for the three months ended September 30, 2022, from $25.5 million in the same period of 2021, representing a growth of approximately 34%[280]. - General and administrative expenses decreased by $26.9 million, or 46%, primarily due to a decrease in stock-based compensation[291]. - General and administrative expenses increased by $11.2 million, or 12%, for the nine months ended September 30, 2022, compared to the same period in 2021[304]. Future Outlook - The company anticipates further declines in mortgage origination activity due to rising interest rates and economic conditions, which may adversely affect future revenue[232]. - The company expects revenue from Title365 to face significant headwinds due to projected declines in mortgage industry origination volume driven by rising interest rates[260]. - The company expects to continue incurring operating losses and may require additional capital resources to support growth[311]. Cash Flow and Financial Position - As of September 30, 2022, cash, cash equivalents, and marketable securities totaled $400.8 million, with an additional $25.0 million available under a revolving credit facility[310]. - The accumulated deficit was $1,082.4 million as of September 30, 2022, indicating significant losses from operations[311]. - Net cash used in operating activities was $143.1 million for the nine months ended September 30, 2022, compared to $84.4 million in the same period of 2021[323]. - Net cash provided by investing activities was $42.0 million for the nine months ended September 30, 2022, primarily from sales and maturities of marketable securities[324]. - Net cash provided by financing activities was $2.2 million for the nine months ended September 30, 2022, mainly from stock option exercises[326]. - As of September 30, 2022, the company had $225.0 million of principal outstanding under its Term Loan, with an interest rate of 10.03%[339]. Inflation Impact - Inflationary factors such as increases in overhead costs may adversely affect the company's operating results[342]. - The company does not believe that inflation has had a material impact on its financial condition or results of operations to date[342]. - A high rate of inflation in the future may adversely affect the company's ability to maintain current levels of operating expenses as a percentage of revenue[342]. - The company may need to increase selling prices of its products to offset increased costs due to inflation[342].