Blend revenue grew in 3Q but it took loss on Title365, personnel costs

Blend, a mortgage technology firm expanding into consumer banking automation, saw its top line grow during the third quarter; but it slipped into the red on a net basis due to mounting costs.

The company, which went public in July, recorded a net loss of $76.3 million during the period, down from $5.8 million in earnings during the second quarter, when a tax-asset reversal resulted in a one-time gain. Its revenue totaled nearly $90 million after subtracting a little over $4 million in underwriter commissions related to its acquisition of Title365. That was up significantly from just prior to the acquisition, when Blend’s revenue was slightly over $32 million.

However, Blend also incurred stock-based compensation charges totaling nearly $34 million in the third quarter, and took a loss from operations of more than $70 million, said Marc Greenberg, Blend’s head of finance, during the company’s earnings call.

While these investments generated a net loss, they allowed the company “to innovate at a faster pace than our competitors and faster than in-house IT capabilities at the largest financial services firms,” he said.

An increase in personnel associated with the Title365 acquisition largely drove operational expenditures in the third-quarter, Greenberg said. The transaction more than doubled Blend’s head count, adding 1,220 employees.

The investments Blend is making are paying off, both Greenberg and Nima Ghamsari, co-founder and head of Blend, said during the earnings call. The company has been able to grow market share over the past two years from just 4.5% to nearly 14%, according to Ghamsari.

“The customers signed in the third quarter added capacity for more than 300,000 annual banking transactions, and the total capacity grew 40% year over year. So we're excited about continuing to add to our customer base and lay a foundation for the future in this quarter,” he said.

The company both brought on more housing finance industry clients and cross-sold more technology to the broader consumer-banking market during the quarter, said Ghamsari.

The third quarter marked the first fiscal period in which the majority of business the company brought in came from products outside the mortgage sector.

“So this quarter, it was a little bit of a ‘flip the script’ from what it used to be,” Ghamsari said.