Blend posts another big loss, promotes market share gains

Blend Labs is seeing some green shoots despite posting another eight-figure loss in the first quarter and projecting that profits are still more than a year away. 

The San Francisco-based fintech recorded a $66.1 million net loss to begin the year, an improvement from the prior quarter's $81.4 million loss, it reported Tuesday. Executives in a conference call said they expect losses to shrink in each subsequent quarter, but don't project a profit until the fourth quarter of 2024. 

The firm saw some of its smaller mortgage customers go out of business and others move to lower-cost or free technology solutions, said Nima Ghamsari, co-founder and head of Blend. Its mortgage revenue also fell 33% year-over-year to $17.8 million in the quarter, alongside a 58% market decline in volume.

However, lenders in the second half of last year used the company's software in 23.2% of all originations, up from 14.5% in the second half of 2021. Some companies told Ghamsari they were profitable in the first quarter despite headwinds, which he said he believes is the result of some of the firm's mortgage technology.

"We saw some customers on the mortgage side who did come back to us after going to lower-cost products," Ghamsari said. "And so I think those are really good indicators for us, but we know we have a lot more work to do."

Blend also recorded $98 in mortgage suite revenue per transaction, a significant leap from the $85 per transaction to close last year. That figure benefited from some "accounting treatment of multi-year contracts" and should fall to the mid-to-high $80s through the rest of the year, said Amir Jafari, the company's head of finance and administration. 

Blend's title revenue fell slightly from $13.2 million in the fourth quarter last year to $12.6 million in the first quarter. Minor dips in other segments brought total revenue to $37.3 million to begin the year, from $42.7 million in the prior period. 

Expenses meanwhile fell 13% quarterly to $77.2 million at the end of March, following the layoff of 340 employees in January. Blend retained $307 million of cash and cash equivalents in the first quarter, and hasn't drawn from its $25 million revolving line of credit. A $225 million five-year term loan is due in July 2026.

The firm received a notice from the New York Stock Exchange last week that it wasn't in compliance with a listing standard, as its stock traded below $1 per share over a 30-day trading period. Blend has a six-month period to meet the standard, and Ghamsari told National Mortgage News Wednesday he wasn't worried about the notice. 

Blend's stock at the end of trading Wednesday sat at $0.99 per share after opening at $0.84. It opened at $20.90 a share in July 2021 when the business went public at the height of the refinance boom.

Navy Federal Credit Union in March adopted Blend's deposit software, a major move the firm said will reflect in second quarter earnings. Company executives are counting on the new Blend Builder customizable platform to drive huge revenues, which one day could reach $1 billion, 

Ghamsari in a call with National Mortgage News described Blend Builder's potential boost for lenders, suggesting it wasn't a debate of digital versus loan officer-driven work but rather eliminating laborious tasks. The software allows firms to drag-and-drop processes such as soft credit pulls into a customizable workflow.

"There's so many things that people do manually today that cost them money that nobody wants to deal with and don't add value to the consumer that we have now made drag-and-drop," he said. "And so I think the possibilities, it's sort of unknown. There's so many opportunities that come from that."