Blend Labs reported a $73.5 million loss in the first quarter, but pointed to the performance of its mortgage banking and title sectors as a positive sign for the rest of the year.
The company’s revenue rose to $71.5 million, up 124% year over year, driven by $38.7 million in revenue from Title 365, which Blend acquired in 2021. Mortgage banking revenue dropped 7% year over year to $24.5 million. However, the company contrasted this with the 44% decline in industry origination volume.
“The higher than expected result can be attributed primarily to better than expected Blend platform performance with the mortgage and consumer banking marketplace and lower than expected year on year decline in Title 365 revenue for the period,” Nima Ghamsari, Blend’s co-founder, said in its earnings call.
“We are now anticipating a more pronounced decline of approximately 41% in 2022
mortgage origination volumes against 2021, compared to a 35% decline predicted at the end of March. Balancing these factors, we are maintaining our full year revenue outlook, which reflects our current expectations that Blend Mortgage Banking will continue to grow market share and outperform the decline in industry origination volumes, while Consumer Banking & Marketplace revenue is expected to double year-over-year.”
Amid the challenging origination environment, Blend’s loss from operations rose to $69.7 million in the first quarter, up from $27.2 million a year ago.
Within the Blend platform, consumer banking and marketplace revenue rose 55% to $7.2 million in the first quarter of 2022 driven by increasing adoption of digital closing solution Blend Close and digital income verification tool Blend Income Verification, the firm said. The figure was up from $4.6 million in the same period last year.
Despite the shrinking mortgage market, Ghamsari said “Blend is well positioned to help our customers navigate this reset.” Blend’s strategy is to diversify its revenue base in the downmarket.
The firm says it expanded its total consumer banking transactions by more than 100,000 transactions year over year to about 155,000 in the first three months in 2022. About one third of its total customers are using one or more of the firm’s consumer banking products, Blend added.
In April, Blend laid off 200 positions — 10% of its workforce — primarily within Title 365. A filing with the Securities and Exchange Commission showed the company expected about $35.4 million in annualized savings. “We expect to begin seeing the cost benefits of this action in the second half of the year,” Ghamsari told analysts.
While adjusting cost structures, Ghamsari highlighted the company’s focus is on long-term growth – investing in fully integrated software, delivering consumer banking products, and building a platform that powers the end-to-end value chain and homeownership.
In April, Blend rolled out three closing products that aim to shorten closing cycles and lower error rates. The new solutions include Blend eVault, a repository of electronic promissory notes available through the platform; Blend Signing Room, Blend’s remote online notarization (RON) solution; and Blend RON Eligibility Engine, which provides RON-eligibility information.
The company’s expectation for this year’s revenue remained unchanged from three months ago, ranging between $230 million and $250 million. With a high-single to low-double digit decline in mortgage banking revenue, the Blend platform is forecast to bring in about $150 million, the firm said. The Title 365 is forecast to bring up to $100 million in revenue.
Blend’s shares closed on Thursday at $3.06, up 6.25% from the previous day. The stocks were down to around $3.00 as of 7pm following the earnings report.