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Cloud banking software provider Blend Labs Inc. managed to grow both its mortgage and consumer banking businesses during the second quarter, trimming its net loss by 53 percent from a year ago to $19.4 million.
While not a dramatic improvement from the company’s $20.7 million Q1 net loss, Blend now has a longer runway to become profitable, having secured a $150 million cash injection in April from Austin, Texas-based private equity firm Haveli Investments. Blend used the money to pay off the debt it took on to get into the title insurance business by acquiring Title365 in 2021.
Blend’s second quarter results exceeded analysts’ earnings and revenue expectations, and shares in Blend gained 23 percent Friday to close at $3.30. Shares in Blend, which in the last year have changed hands for as little as $1.03 and as much as $4.14, hit an all-time low of 53 cents on May 5, 2023.
“The second quarter marked another strong quarter for Blend, as we signed several important deals with new customers across mortgage and consumer banking,” Blend CEO Nima Ghamsari said in a statement. “Despite continued pressures on the mortgage industry, we’re excited about the new investments we made in the Blend Platform and the success we achieved in expanding our relationships with key customers through their increased adoption of our add-on products.”
At $40.5 million, Q2 revenue was down 5 percent from a year ago but up 16 percent from $34.9 million in Q1. Blend said it expects Q3 revenue of $39.5 million to $43.5 million.
Ghamsari said that guidance doesn’t take into consideration the fact that mortgage rates have fallen dramatically and could continue to do so.
“Mortgage rates hit their lowest level since April 2023 earlier this week, and we’re already starting to see this show up in our business through application activity levels,” Ghamsari said on a call with investment analysts. “While I’d say it’s too early for us to tell how this is going to convert into fundings or revenue … it’s an encouraging signal as we look into the second half of the year.”
Growth in consumer banking and mortgage suites
Source: Blend investor presentation.
During the second quarter, Blend maintained the steady growth in revenue it’s realized from consumer banking, which was up 37 percent from a year ago to $8 million. At the same time, it was able to reverse the decline in revenue in its main line of business — providing services to mortgage lenders.
After helping lenders handle 1.8 million mortgage transactions in 2021, Blend saw mortgage transaction volume plummet by 32 percent in 2022, to 1.23 million, and by another 35 percent in 2023, to 805,000.
Blend’s mortgage suite generated $18.5 million in Q2 revenue, up 22 from Q1 but down 17 percent from a year ago. Blend’s title segment generated another $11.8 million in Q2 revenue.
Blend attributed the quarterly growth in mortgage revenue to the addition of “several new mortgage customers,” including Horizon Bank, and to existing customers signing up to use a broader set of services.
More revenue from each mortgage handled
Blend offers a suite of products that lenders can pick and choose from to support the loan origination process, including data collection, verification checks, product selection, pricing, pre-approvals, disclosures delivery and signing closing documents.
As its mortgage clients take advantage of more of these add-on products, the “economic value” of each mortgage loan that Blend helps process has grown by more than 40 percent in the last 2 1/2 years — from $69 at the beginning of 2022, to $97 in Q2 2024.
“Customers are recognizing the benefit of applying our technology throughout the home buying process, and we’re delivering more value as adoption and utilization of our attached products continue to rise,” Ghamsari said, noting that Blend’s remote online notarization solution is “a particular area of strength that I’m excited about.”
“Customers are already completing hundreds of these high-value closings each month,” Ghamsari said. “This may not seem like a lot, given the scale of our business and the scale of the mortgage industry. But we’re just getting started, and we expect these volumes to ramp up as the solution gets rolled to more elbow-eligible loans and more customers.”
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