Blend Labs(BLND)2024-03-19 13:00Financial Data and Key Metrics - Total company revenues in Q4 2023 were $36.1 million, in line with guidance [40] - Platform revenue was $25.9 million, also within guidance [40] - Non-GAAP gross profit was $19.9 million, up 33% YoY despite a 16% decline in total revenue [20] - Non-GAAP operating costs for Q4 totaled $33 million, down from $58.1 million in the previous year [21] - Non-GAAP loss from operations was $13.1 million, ahead of guidance [70] - Cash, cash equivalents, and marketable securities stood at $144 million at the end of Q4 [46] Business Line Data and Key Metrics - Consumer Banking suite revenue totaled $6.4 million in Q4, up 15% YoY [67] - Mortgage Suite revenue declined by 3% YoY to $17.2 million, despite a 20%-25% decline in origination volumes [19] - Economic value per funded loan in the Mortgage Suite rose by $10 YoY to $91 [19] - Non-GAAP software gross margins reached 79%, up from 72% YoY [68] - Title revenue was $10.2 million, near the high end of guidance [41] Market Data and Key Metrics - The mortgage industry origination volume in Q4 was estimated at $300 billion to $330 billion, below the MBA's forecast of $380 billion [31] - Q1 2024 mortgage volume is expected to be consistent or slightly below Q4 2023, with approximately 800,000 to 875,000 total originations [47] - The company has a pipeline of 70 opportunities in Consumer Banking alone, just two months into 2024 [9] Company Strategy and Industry Competition - The company is focusing on expanding its Consumer Banking suite, with a $50 million annual revenue run rate expected once fully rolled out [8][25] - The company is investing in digital closings and next-generation refinance flows to prepare for future market recovery [62][87] - The company is managing its business to achieve non-GAAP profitability by the end of 2024, regardless of macroeconomic conditions [38][44] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenging mortgage market, citing strong customer adoption of value-accretive products [5][14] - The company expects Q1 2024 Platform revenue to be between $22 million and $24 million, with total company revenue expected to be between $32.5 million and $35.5 million [73] - Management remains confident in the long-term targets shared at Investor Day, despite lower mortgage volumes [48] Other Important Information - The company prepaid $85 million of its term loan balance in Q4, extending the maturity date to 2027 [45] - The company signed two multiyear eight-figure deals in Q4, expanding relationships with large customers [27] - The company has a remaining performance obligation (RPO) of $94.9 million, up $35 million from Q3 [71] Q&A Session Summary Question: How is Blend positioned relative to its 2026 forecast given the challenging macro environment? - The company remains confident in its 2026 targets, with customers gaining market share and adopting digital closings to improve revenue per funded loan [77][78][79] Question: What are the near-term opportunities to grow revenue per funded loan in the mortgage business? - The company sees near-term upside in digital closings and remote online notarization, with one of its largest customers rolling out e-closings across their entire loan portfolio [80][81] Question: Can you provide more color on the strong growth in remaining performance obligations (RPO)? - The RPO growth reflects new customer signings and renewals, with platform fees and unit economics contributing to the increase [82] Question: How is Blend winning new clients in the competitive consumer banking sector? - The company is winning deals by offering fraud verification, funding options, and cross-selling capabilities that turn deposit relationships into deeper customer relationships [84][85] Question: What is the outlook for the Builder platform and its partner ecosystem? - The Builder platform is being hardened with existing customers, and the company is exploring opportunities to expand its partner ecosystem [88][89] Question: Can the company reach a $50 million annual revenue run rate in Consumer Banking in 2024? - The company expects to reach the $50 million run rate as existing signed customers roll out products, though some rollouts may extend into 2025 [91][92] Question: Are there opportunities to reduce OpEx further and achieve profitability sooner? - The company is focused on operational excellence and process improvements to manage OpEx, with profitability potentially accelerating if the macro environment improves [93][94] Question: What is the current churn rate in the mortgage business, and how is the competitive landscape evolving? - The company has maintained steady market share despite some churn, with win rates remaining stable in the top 50-100 financial institutions [97][98][99] Question: How is the company managing dilution from stock compensation? - The company is focused on managing dilution while incentivizing top talent, with a priority on maintaining low dilution levels [100][101]