In the first quarter of the year, California mortgage technology firm Blend Labs shrunk its financial losses amid efforts to cut costs, improve the mortgage business and grow the Blend Builder platform.
Blend reported a non-GAAP net loss of $35.6 million in the first quarter, compared to $49.2 million in the prior quarter and $45 million in the same period last year. The company’s GAAP net loss in Q1 was $66.2 million, down from $81.4 million the previous quarter, according to documents filed with the Securities and Exchange Commission (SEC) on Tuesday.
Nima Ghamsari, head of Blend, said the first-quarter earnings “came in ahead of our expectations,” with progress in the company’s three strategic priorities.
“Our lower cost structure is driving improvements in operating performance. Our focus on driving success for our mortgage customers in a very tough margin environment is resulting in market share gains and industry outperformance. And finally, we are making early strides in proving our Blend Builder platform, highlighted by one of the largest new customer wins in Blend’s history with Navy Federal [Credit Union],” Ghamsari said in a statement.
Blend’s white-label technology powers mortgage applications on the websites of major lenders such as Wells Fargo and U.S. Bank. Its software processed 23.2% of the mortgage market volume in the second half of 2022, compared to 14.5% in the same period of 2021, per the Mortgage Bankers Association (MBA) estimates.
The company notched $37.3 million in revenues in the first quarter, above the guidance provided by executives between $33 million and $35 million. Blend’s platform segment came in at $24.7 million in revenues and the Title365 segment revenue posted $12.6 million.
Amid a shrinking mortgage market, the mortgage banking suite revenue declined by 33% year over year to $17.8 million in Q1. Meanwhile, the consumer banking suite revenue reached $5.2 million in the first quarter, up 34% year over year. Professional services revenue was at $1.7 million in Q1, down 12% year over year.
On the expenses side, Ghamsari told analysts that Blend “came in well ahead of our expectations on operating expenses with a sequential improvement of $11 million and down $21 million from the same period last year.”
Non-GAAP operating costs for the first quarter totaled $47.1 million compared with $68.9 million in the previous year.
Despite the net loss, the firm has ample liquidity.
As of March 31, Blend had cash, cash equivalents, and marketable securities totaling $306.9 million, with total debt outstanding of $225 million in the form of Blend’s five-year term loan. Blend’s $25 million revolving line of credit remains undrawn.
Blend expects its second-quarter revenue to be between $39.5 million and $41 million — and platform revenue will post between $27 million and $28 million. Its title business revenue is expected to post between $12.5 million and $13 million. The guidance reflects an estimated 37% decline in volumes from Q2 2022 to Q2 2023, as projected by MBA.
Ghamsari told analysts he expects the company’s net loss “will continue to decline each quarter from here forward.”
The company estimates a non-GAAP net operating loss between $26.5 million and $25 million in the second quarter, compared to $30.7 million in the first quarter.
