A takeaway from Blend Labs' latest earnings is that, although it's growing consumer banking broadly, the mortgage operations are the biggest investment theme in the short term, Keefe, Bruyette & Woods said.
"The company's expansion into consumer banking adds a new growth vector that should be synergistic with Blend's mortgage client roster and positions the company to evolve into an omnichannel cloud banking platform to financial institutions," said Ryan Tomasello in his wrap on Blend's second quarter earnings. "However, Blend's multi-year timeline to profitability, which is highly dependent on mortgage volumes given its usage-based pricing model, is a key risk, particularly considering near-term debt maturities and still-elevated cash burn."
Blend Labs lost $6.6 million during the quarter, one where it executed an agreement to sell the
After the quarter ended, Blend announced
For the same period last year, Blend lost $19.4 million. Taking continuing operations into account, the loss was $13.1 million. This was helped by the GAAP gross margin improving to 76% from 71%.
In the first quarter
Using non-GAAP diluted net income per share attributable to common stockholders, Blend was able to avoid slipping into the red on that basis at 0 cents compared with a non-GAAP diluted net loss of 3 cents for the second quarter of 2024.
This was in line with KBW and consensus estimates, Tomasello said, while non-GAAP operating income of $4.7 million was ahead of the $4.3 million KBW and consensus estimates.
Blend's mortgage revenue decreased 3% year-over-year to $18 due to continued market headwinds.
"Our strong results today are a reflection of the hard work we did in 2023 and the first half of 2024, to get our house in order and refocus on our strength as a platform company with our Simplify Blend strategy," Nima Ghamsari, CEO, said on the earnings call. "We turned the corner around the middle of 2024 and entered 2025 ready to execute."
The company had 23 new or expanded relationships during the quarter, double that of the first quarter; and 18 of those included consumer banking or home equity products. "This growth was driven by a healthy mix of new customer acquisitions and deep product expansions from existing customers, reinforcing Blend's position as a long-term multiproduct platform partner," Ghamsari said.
During the quarter, Blend created a dedicated business unit dedicated to independent mortgage bankers. The company also announced a partnership with Crosscountry Mortgage.
In June, Onity and its PHH subsidiary expanded a relationship with Blend. This builds on an
The new IMB unit, headed by Jason Venhousen, "brings innovation and go-to-market under a single leader, allowing us to focus on this vertical and capture market share ahead of a market rebound," Ghamsari said.
Consumer banking made up 36% of Blend's total revenue, up from 28% one year ago.
Ghamsari also announced Blend is piloting an artificial intelligence tool which spans documents, data and origination guidelines. "The AI tool can identify gaps and potential discrepancies with lightning speed and efficiency," he continued.
Blend is "very early" in its AI journey, Ghamsari added during the question and answer session.
"So I want to couch my answer with that in mind," he said. "But one of the things that makes AI very helpful for us is not only the use cases and outcomes that it can drive for our customers, but it's also making us more efficient as an organization using the AI tools internally."
At the same time it released its earnings, Blend announced Jason Ream is joining the company as of Aug. 8 as head of finance and administration.
Most recently he was senior managing director at Haveli Investments after previously being chief financial officer at two public companies, SailPoint Technologies Holdings and SolarWinds Corporation. He also worked for two private companies, Mitratech Holdings and Relativity ODA.
Ream replaces Amir Jafari, who will stay on for a transition period to ensure continuity, the company said.
"I'd like to say that while I will be moving on from Blend, I'm extremely proud of what we've achieved during my time here," said Jafari, who participated in the earnings call. "Everything we've done, including our Simplify Blend strategy has made Blend stronger."
