Blend Labs(BLND) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved its first positive non-GAAP operating income quarter as a public company, marking a significant milestone in profitability [7] - Total company revenues for Q3 were $45.2 million, representing an 11% year-over-year growth, exceeding guidance [26] - Platform revenue reached$ 33.1 million, growing 16% year-over-year, while mortgage suite revenue was $21.5 million, reflecting a 6% year-over-year growth [26][28] - Consumer Banking revenue grew 54% year-over-year to$ 9.5 million, significantly surpassing the previously shared growth target of 35% [26][28] - Non-GAAP gross profit was $26.3 million, with gross margins for the Blend Platform segment at 75% [27] Business Line Data and Key Metrics Changes - The Consumer Banking business outperformed expectations, achieving over 50% growth compared to the same quarter last year [9] - Mortgage suite revenue showed a 17% sequential growth, aligning with expectations of higher industry originations [26] - Professional services revenue slightly decreased to$ 2 million from $2.1 million year-over-year [26] Market Data and Key Metrics Changes - The mortgage industry is experiencing a positive sentiment shift despite high mortgage rates, with increased willingness to invest in businesses [8] - Blend achieved a 21.7% share of HMDA originations in 2023, a 120 basis point increase from 2022, although a slight decline is expected in 2024 due to industry churn [31][32] Company Strategy and Development Direction - The company is transitioning to a simpler software-focused model, emphasizing operational leverage and partnerships to enhance customer value [11][12] - A strategic partnership with Covered Insurance Solutions aims to enhance the insurance marketplace while reducing operational costs [33][34] - The company plans to continue expanding its platform and partnerships to drive growth and profitability [37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the mortgage industry's recovery and the potential for increased adoption of technology solutions among customers [17][18] - The outlook for Q4 2024 includes expected platform revenue between$ 29 million and $31 million, reflecting cautious optimism amid high mortgage rates [39] - Non-GAAP net operating income is projected to be between zero and$ 3 million for Q4, maintaining profitability from Q3 [40] Other Important Information - The company ended the quarter with approximately $124 million in cash, cash equivalents, and marketable securities, providing a strong balance sheet for strategic initiatives [29] - Remaining performance obligations (RPO) reached a record$ 107.4 million, marking an 82% year-over-year growth [38] Q&A Session Summary Question: Can you provide more details about the deal with a top 10 bank in consumer banking? - The bank is expanding its relationship with Blend, having previously used Blend for mortgage services and is now adopting consumer banking solutions [43] Question: How is the sentiment shift among customers impacting adoption of new offerings? - The shift is driven by customers finally achieving profitability, allowing them to invest in new solutions like Blend Close [48] Question: What is the current strategy for the title business? - The title business remains critical, with ongoing innovations to enhance the mortgage process [66] Question: How will the sale of the insurance business impact revenue and guidance? - The sale will lead to a decline in revenue but is expected to increase profit per transaction, aligning with the company's strategy for higher operating leverage [75]