Blend Labs executives say they are being conservative in managing the company after recording a massive financial loss in the second quarter of 2022.
The California-based mortgage tech company plans to reduce costs, including cutting 25% of its workforce, and will focus on products with a higher return on investment amid an extreme market downturn.
“We’re operating the company prudently as if the mortgage industry origination volumes will remain at or near historic low levels through 2025,” Nima Ghamsari, Blend’s co-founder, said in an earnings call on Monday.
Blend Labs reported a $478.4 million loss in the second quarter, following a $73.5 million loss in the first quarter. The result reflects a $392 million impairment of intangible assets and goodwill related to an update in the fair value of Title365, a company acquired in 2021.
“This business was purchased during a much more robust economic and mortgage refinance environment. In light of the current market challenges, we perform an assessment of goodwill and intangible assets within the Title365 reporting unit and recognize an impairment charge,” Ghamsari said. “Title365 has strategic value to Blend and remains a leader in its business.”
Blend revenue declined to $65.5 million from April to June, from $71.5 million in the previous quarter. But it was up 105% year over year, mainly driven by Title365 revenues.
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Title365 brought in $31.9 million in revenue in the second quarter, down from $38.7 million in the previous quarter, reflecting declines in refis, partially offset by home equity and default products.
Regarding each business line, Blend Platform came in with $33.6 million in revenue, up 5% year over year. Mortgage banking revenues, however, declined 6% to $23.9 million. Meanwhile, consumer banking was up 53% to $8.5 million. Professional Services revenue was relatively flat at $1.2 million.
Due to the challenging environment for mortgage businesses, Blend eliminated over 400 job positions across two layoff rounds, cutting around 200 employees in April and 220 in August, representing 25% of its workforce.
With the layoffs, the executives expect to save $60 million annually, with the full impact in 2023, they said in the call.
The company is also reviewing its cost structure related to contracts with vendors, intending to save $6 million quarterly, and planning further efficiency gains through offshoring – Blend has operations in India.
On the revenue side, the company is prioritizing product lines that will deliver a return on investment in a relatively short time horizon. It’s also raising prices per transaction as it continues to add value to the platform.
“Blend plans to reduce its non-GAAP net operating loss by 50% from current levels by the end of 2023,” Ghamsari said.
The company expects the full year of 2022 to bring in $230 million to $250 million in revenues. The forecast includes U.S. mortgage market origination volumes declining around 41% from the $4 trillion level in 2021, according to the Mortgage Bankers Associations (MBA).
Blend’s stock closed at $2.76 on Monday, down 0.28% compared to the previous closing. Aftermarket, it was up 14%, following the second-quarter earnings report.
