• Total Revenue: $45.2 million, 11% year-over-year growth.
• Platform Revenue: $33.1 million, 16% year-over-year growth.
• Mortgage Suite Revenue: $21.5 million, 6% year-over-year growth.
• Consumer Banking Revenue: $9.5 million, 54% year-over-year growth.
• Professional Services Revenue: $2 million, slight decrease from $2.1 million last year.
• Non-GAAP Gross Profit: $26.3 million.
• Non-GAAP Software Gross Margins: 80%.
• Non-GAAP Title Margins: 12%.
• Non-GAAP Operating Costs: $26.3 million, down from $38.2 million last year.
• Non-GAAP Operating Profitability: Achieved one quarter ahead of target.
• Free Cash Flow: Negative $1.4 million, improved from negative $25.9 million last year.
• Cash and Equivalents: Approximately $124 million.
• Remaining Performance Obligations (RPO): $107.4 million, 82% year-over-year growth.
• Q4 Revenue Guidance: $39.5 million to $42.5 million, midpoint representing 14% year-over-year growth.
• Q4 Non-GAAP Net Operating Income Guidance: Between $0 and $3 million.

• Warning! GuruFocus has detected 6 Warning Signs with BLND.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Blend Labs Inc (NYSE:BLND) achieved its first positive non-GAAP operating income quarter as a public company, marking a significant milestone in profitability.
• The consumer banking business experienced substantial growth, surpassing a 50% increase compared to the previous year, exceeding the initial target of 35%.
• The company closed two significant deals, including one with a top 10 bank by assets, indicating strong momentum and expansion in their customer base.
• Blend Labs Inc (NYSE:BLND) reported a record remaining performance obligation (RPO) of $107.4 million, marking the sixth consecutive quarter of year-over-year growth.
• The company successfully transitioned its home insurance agency operations to a strategic partnership, enhancing profitability by reducing operational costs and increasing contribution profit.

Negative Points

• Despite achieving profitability, Blend Labs Inc (NYSE:BLND) faces substantial risks and uncertainties due to macroeconomic conditions, such as high mortgage rates.
• The title business reported a decline in non-GAAP gross margins, indicating room for improvement and potential challenges in this segment.
• The economic value per funded loan is expected to decline slightly in Q4 due to changes in the insurance business contribution.
• The company is cautious about origination activity in the fourth quarter, reflecting uncertainty in the mortgage market despite recent positive trends.
• The sale of the home insurance business to Covered Insurance Solutions is expected to have a short-term negative impact on revenue, although it is offset by increased profitability.

Q & A Highlights

Q: Can you provide more details about the recent deal with a top 10 bank in consumer banking? Are they starting with one product or multiple products? Also, can you comment on the top three products by revenue or growth rates in consumer banking? A: The bank already uses us for mortgage services and is now extending into consumer banking. They initially signed with us for mortgage services three to four years ago. The largest and fastest-growing product line is home equity lending, followed by our deposit account opening and new membership product. We're seeing continued growth in these areas. - Nima Ghamsari, Chairman of the Board, Co-Founder, Head of Blend

Q: How is the sentiment shift in the mortgage industry affecting your business, and how do you see this impacting growth? A: The sentiment shift is due to our customers becoming profitable, allowing them to invest in future solutions like Blend Close, which improves operating efficiency. The growth in our per funded loan value is driven by customers adopting new functionalities rather than price increases. - Nima Ghamsari, Chairman of the Board, Co-Founder, Head of Blend

Q: Can you elaborate on the potential for more partnerships similar to the homeowners insurance product? A: We aim to enhance both our mortgage and consumer banking suites by integrating various partners for services like fraud detection, insurance, and payment processing. This strategy allows us to offer more value to our customers and consumers, creating a win-win situation. - Nima Ghamsari, Chairman of the Board, Co-Founder, Head of Blend

Q: How does potential consolidation in the mortgage industry affect your go-to-market strategy? A: Consolidation could be favorable for Blend as we tend to serve larger entities. If smaller entities are consolidated into larger ones that use Blend, it benefits us. We haven't seen any negative impact on investment decisions from our customers due to consolidation. - Nima Ghamsari, Chairman of the Board, Co-Founder, Head of Blend

Q: How does the sale of the homeowners insurance business to Covered Insurance Solutions impact your revenue and guidance? A: The sale will result in a decline in revenue, which is factored into our guidance and economic value per funded loan. However, the transaction will lead to an increase in profit per unit transaction, aligning with our strategy of simplifying operations and enhancing profitability. - Amir Jafari, Head of Finance and Administration

For the complete transcript of the earnings call, please refer to the full earnings call transcript.