Key Takeaways:
– Mortgage tech firm Blend Labs narrowed its financial losses in Q3, driven by growth in its consumer banking business.
– The company reported a non-GAAP net loss of $21.4 million in Q3, compared to $22.7 million in Q2 and $42.8 million year over year.
– Blend’s GAAP net loss in Q3 was $41.8 million.
– The company posted $40.6 million in revenues in Q3, within the range provided during its investor day in September.
– Revenue consisted of platform revenue of $28.6 million and title revenue of $11.9 million.
– Blend’s mortgage banking suite revenue declined by 11% year over year, but the company launched Blend IMB Essentials to offer competitive pricing.
– The company continued to invest in add-on products for lenders in Q3, including an AI-powered chat tool.
– Consumer banking suite revenue rose by 18% over a year ago, becoming a significant revenue opportunity for the company.
– Blend’s non-GAAP operating costs in Q3 totaled $38.2 million, a decrease from the same period the year prior.
– The company’s cash burn in Q3 was $25.9 million, about half of the cash burn in Q3 2022.
– Blend aims to achieve positive cash flow by 2026.
– As of Sept. 30, Blend has cash, cash equivalents, and marketable securities totaling $252.3 million.
– The company estimates a decreased non-GAAP net operating loss of between $17 million and $14 million in Q4.
– Blend is confident that its strategy is well suited for the current market conditions and will position it for when the industry conditions normalize.
HousingWire:
Mortgage tech firm Blend Labs continued to narrow its financial losses in the third quarter, driven by strong growth in its consumer banking business.
Its mortgage business outperformed the broader origination market and the company reduced cash burn, putting the firm on track to its goal of reaching non-GAAP profitability by next year.
The San Francisco-based company reported a non-GAAP net loss of $21.4 million in the third quarter, compared to a non-GAAP net loss of $22.7 million in Q2 and a non-GAAP net loss of $42.8 million year over year.
The company’s GAAP net loss in Q3 was $41.8 million, slightly up from a GAAP net loss of $41.5 million in the previous quarter, according to its 8-K filing with the Securities and Exchange Commission (SEC).
“Our third quarter results represent execution on both our revenue and operating loss targets for the third consecutive quarter. We are more focused than ever on delivering for our customers in a way that aligns with our long-term vision, and we believe we are in a strong position to continue our pace of innovation with speed, scale, and efficiency,” said Nima Ghamsari, head of Blend.
The company posted $40.6 million in revenues in Q3, within the range of $40 million to $42 million provided during its investor day in September.
Revenue consisted of platform revenue of $28.6 million and title revenue of $11.9 million.
Blend’s platform segment includes the mortgage suite, consumer banking suite and professional services.
The mortgage banking suite revenue declined by 11% year over year to $20.3 million despite a 14% mortgage volume drop over the same period as reported by the Mortgage Bankers Association (MBA).
To offer competitive price points for cost-conscious independent mortgage banks, Blend launched Blend IMB Essentials, a lower-cost edition of its mortgage suite that combines all the critical benefits of Blend, Ghamsari noted.
The mortgage tech firm continued to invest in add-on products for lenders in the third quarter, a strategy to “ensure success of existing customers because those customers end up becoming the reference for other banks and lenders to sign up with Blend,” Ghamsari told analysts.
Blend’s new product and services included an AI-powered chat tool ‘Copilot’ aimed at executing precise tasks and deconstructing nuanced questions borrowers have.
As a result, growing usage of add-on products drove Blend’s mortgage suite economic value per funded loan to $86 in the third quarter, up from $77 in Q3 2022.
Consumer banking suite revenue rose in Q3 by 18% over a year ago to $6.2 million. Professional services revenue increased by 18% to $2.1 million during the same period.
“This is quickly becoming the biggest revenue opportunity for us next year,” Ghamsari emphasized.
“As we convert more and more of our customers to Blend Builder, they’re well positioned with our technology to grow their business and their deposit bases, increasing revenue and profitability as a result, which is so important to us to be able to support that kind of success,” he added.
On track to profitability in 2024
On the expenses side, non-GAAP operating costs in Q3 totaled $38.2 million compared to $58.7 million in the same period the year prior.
“The improvement in our non-GAAP operating loss met our expectations benefiting from resilient revenue in our mortgage business, sustained higher margins and the adoption of greater financial leverage through continued improvement and our operating efficiency,” Amir Jafari, Blend’s head of finance and administration, told analysts.
The third quarter marked another period of improvement in the firm’s cash burn of $25.9 million, which was about half of the $50.9 million cash burn the same quarter in 2022.
“Our actions to operate with efficiency in combination with our resilient top line and improved margins are having a real impact as we inflect towards positive cash generation,” Jafarni said.
Executives had set a goal of achieving positive cash flow by 2026 in its investor day in September.
As of Sept. 30, Blend has cash, cash equivalents and marketable securities, including restricted cash, totaling $252.3 million. The company has a total debt outstanding of $225 million in the form of the company’s five-year term loan.
Looking ahead, the mortgage tech firm estimates decreased non-GAAP net operating loss between $17 million and $14 million in Q4.
“While the market conditions are sending signs the industry volumes may remain lower in the short term, we are confident our strategy is well suited for the current environment, and will make us well positioned for when the industry conditions ultimately normalize,” Ghamsari said.
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Property Chomp’s Take:
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In recent news, mortgage tech firm Blend Labs has been making waves in the industry. In the third quarter, Blend Labs managed to narrow its financial losses thanks to impressive growth in its consumer banking business. This is a significant achievement, as the company aims to reach non-GAAP profitability by next year.
During the third quarter, Blend Labs reported a non-GAAP net loss of $21.4 million, showing a positive trend compared to previous quarters. Its GAAP net loss for the same period was $41.8 million. Despite the losses, Blend Labs remains optimistic about its long-term vision and ability to innovate with speed, scale, and efficiency.
In terms of revenue, Blend Labs posted $40.6 million in Q3, falling within the range it had projected during its investor day in September. The revenue was derived from platform revenue of $28.6 million and title revenue of $11.9 million. The company’s mortgage business revenue experienced a decline of 11% compared to the previous year, but it still outperformed the overall origination market.
To cater to cost-conscious independent mortgage banks, Blend Labs launched Blend IMB Essentials, a lower-cost edition of its mortgage suite. This move aims to offer competitive price points while providing all the critical benefits of Blend. Additionally, Blend Labs continued to invest in add-on products for lenders to ensure the success of its existing customers and attract new ones.
One of the notable add-on products introduced by Blend Labs is an AI-powered chat tool called ‘Copilot.’ This tool helps execute precise tasks and assists borrowers in answering nuanced questions. The company’s focus on add-on products led to an increase in usage and drove the mortgage suite’s economic value per funded loan from $77 in Q3 2022 to $86 in the third quarter.
Blend Labs also experienced growth in its consumer banking suite and professional services revenue, both increasing by 18% compared to the previous year. The company sees consumer banking as a significant revenue opportunity for the upcoming year, as it enables customers to grow their business and deposit bases, leading to increased revenue and profitability.
On the financial side, Blend Labs managed to reduce its non-GAAP operating costs in Q3 and improve its cash burn rate. The company’s actions to operate efficiently, combined with resilient revenue and improved margins, are showing positive results. In fact, Blend Labs aims to achieve positive cash flow by 2026, and the third quarter demonstrated progress towards that goal.
Looking ahead, Blend Labs anticipates a decreased non-GAAP net operating loss in Q4, estimating it to be between $17 million and $14 million. While the industry may experience lower volumes in the short term, Blend Labs remains confident in its strategy and believes it is well-suited for the current environment.
In conclusion, Blend Labs’ performance in the third quarter showcases its commitment to innovation and growth. With its focus on consumer banking, investment in add-on products, and efforts to reduce losses and improve cash flow, the company appears to be on track to achieving its goal of non-GAAP profitability by next year. As the industry evolves, Blend Labs aims to remain a leader in mortgage technology, providing value to its customers and driving success in the market.
