Blend Labs, Inc. Q3 FY2024 earnings call

• This quarter marks the first positive non-GAAP operating income quarter as a public company. • Consumer Banking revenue grew 54% year over year, surpassing the 35% CAGR target shared at Investor Day. • Signed significant deals, including with a top 10 bank by assets for consumer banking and a leading mortgage servicer. • Entered a strategic partnership in Homeowners Insurance Origination, transitioning Blend Insurance Services to a partner model to simplify operations and enhance profitability. • The mortgage pipeline is robust with various institutions preparing for future growth, and the consumer banking segment refreshed its deposit and member onboarding solution, driving a strong pipeline and customer value. • Achieved non-GAAP operating profitability a full quarter ahead of target, with focus on sustainable profitable growth.

In the third quarter, total company revenues amounted to $45.2 million. Platform revenue was $33.1 million, representing a 16% year-over-year growth, which is 73.7% of the total revenue. Mortgage suite revenue was $21.5 million, showing a 6% year-over-year growth and 17% sequential growth, accounting for 47.6% of total revenue. Consumer Banking revenue surged 54% year over year to $9.5 million, making up 21% of total revenue. Professional services revenue was $2 million, slightly down from the prior-year period. Title revenue was $12.1 million. Non-GAAP gross profit was $26.3 million. The non-GAAP Blend Platform segment gross margins were 75%, software gross margins were 80%, and title margins were 12%.

• Q4 platform revenue is expected to be between $29 million and $31 million, with the midpoint representing a 16% year-over-year growth. • Title business revenue is projected to be between $10.5 million and $11.5 million, with the midpoint showing an 8% year-over-year growth. • Total company revenue for Q4 is expected to be between $39.5 million and $42.5 million, with the midpoint indicating a 14% year-over-year growth. • Non-GAAP net operating income for Q4 is anticipated to be between zero and $3 million, maintaining the third quarter's non-GAAP operating profit into the seasonally low fourth quarter.

• Forward-looking statements involve substantial risks and uncertainties, as factors beyond the company's control could materially affect actual results. • Industry consolidation, regulatory changes, and macroeconomic fluctuations such as mortgage rate variations may impact business performance.

Q: Could you provide more details on the top 10 bank by asset consumer banking deal and the split of consumer banking products by revenue or growth rate?

A: The top 10 bank by asset already uses Blend for mortgage and is expanding into consumer banking. In consumer banking, the largest and fastest-growing product is home equity lending, followed by the deposit account opening new membership product.

Q: How might potential consolidation in the end market affect the go-to-market strategy?

A: Consolidation could be favorable for Blend as it tends to operate in the higher end of the market, and consolidated entities may increase adoption of Blend's solutions.

Q: Provide an update on the refi product adoption?

A: The refi product is in pilot with mortgage servicers. We are focusing on gathering real ROI data from these pilots before rolling it out broadly to the market.

Q: What is the impact of the insurance business sale on the guidance?

A: The sale of the Homeowner insurance business led to a revenue decline, which was factored into the guidance. However, profit per unit transaction is expected to increase to offset this revenue decline.