BLND Blend Labs Inc

Third Quarter Results Meet Revenue and Operating Loss Targets for Third Consecutive Quarter

Blend Labs, Inc. (NYSE:BLND), a leader in cloud banking software, today announced its third quarter 2023 financial results.

“Blend’s third quarter results demonstrate the continued strength of our business model and the promise of our long-term vision. We delivered $40.6 million in total company revenue, well within the range we provided during our September Investor Day, driven in part by double-digit year-over-year growth in our consumer banking business revenue. Our mortgage business once again outperformed the broader origination market as our customers continue to utilize our cost-saving product add-ons. Finally, we achieved another material reduction in our cash burn as we inflect towards our ultimate goal of non-GAAP profitability,” said Nima Ghamsari, Head of Blend.

“Our third quarter results represent execution on both our revenue and operating loss targets for the third consecutive quarter. We are more focused than ever on delivering for our customers in a way that aligns with our long-term vision, and we believe we are in a strong position to continue our pace of innovation with speed, scale, and efficiency.”

Third Quarter 2023 Financial Highlights

Revenue

• Total company revenue was $40.6 million, composed of Platform revenue of $28.6 million and Title revenue of $11.9 million.
• Within the Platform segment, Mortgage Banking Suite revenue decreased by 11% year-over-year, to $20.3 million, amidst a 14% mortgage market volume decline over the same period as reported by the Mortgage Bankers Association.
• Consumer Banking Suite revenue totaled $6.2 million in 3Q23, an increase of 18% as compared to the prior-year period.
• Professional services revenue increased 18% year-over-year to $2.1 million.

Gross Margin & Profitability

• Blend GAAP gross profit margin was approximately 54%, up from 38% in 3Q22. Blend Non-GAAP gross profit margin was approximately 55%, up from 39% in 3Q22.
• GAAP Platform gross profit was $20.0 million in 3Q23, down from $20.1 million in 3Q22. Non-GAAP Platform gross profit was $20.2 million in 3Q23 and 3Q22.
• GAAP and Non-GAAP Software gross margins were 79%, in 3Q23, up compared to 76% on a GAAP and non-GAAP basis in 3Q22.
• GAAP loss from operations was $36.2 million, compared to $129.9 million in 3Q22. Non-GAAP loss from operations was $15.9 million, compared to $37.1 million in 3Q22.
• GAAP net loss per share attributable to common stockholders was $0.18 compared to $0.57 in 3Q22. Non-GAAP consolidated net loss per share was $0.09 compared to $0.19 in 3Q22.

Liquidity & Capital Resources

• As of September 30, 2023, Blend has cash, cash equivalents, and marketable securities, including restricted cash, totaling $252.3 million with total debt outstanding of $225.0 million in the form of the Company’s five-year term loan.
• Blend’s $25.0 million revolving line of credit remains undrawn as of such date.

Recent Business Highlights

• Deepening Mortgage Relationships: Blend’s mortgage suite economic value per funded loan rose to $86 in 3Q23 from $77 in 3Q22, representing continued adoption of its mortgage add-on products.
• Launched Blend IMB Essentials: Blend released a lower-cost edition of its mortgage suite specifically for retail independent mortgage banks that combines all the features most critical for their success in this challenging market at a highly competitive price point.
• Expanded Blend’s Income Product with MyPay: Blend’s recently added capability gives lenders the ability to pull Leave and Earnings Statements for borrowers with military and federal income. By adding the largest U.S. employer's payroll data source to its income waterfall, Blend has meaningfully improved income coverage for its customers.
• Builder Platform Driving Growth in Consumer Banking: As of 3Q23, more than one third of Blend customers are live or in active deployment with a consumer banking product.

Fourth Quarter 2023 Outlook

Blend is providing guidance for the fourth quarter of 2023 as follows:

 

$ in millions

Q4 2023 Guidance

Blend Platform Revenue

$25.0 - 30.0

Title Revenue

$9.5 - 10.5

Blend Labs, Inc. Consolidated Revenue

$34.5 - 40.5

 

 

Non-GAAP Net Operating Loss

$17.0 - 14.0

Blend’s 4Q23 guidance reflects an estimated 5% year-over-year decline in mortgage volumes from 4Q22 to 4Q23 as projected by the Mortgage Bankers Association.

Note that economic conditions, including those affecting the levels of real estate and mortgage activity, as well as the financial condition of some of our financial customers, remain highly uncertain.

We have not provided the forward-looking GAAP equivalent to our non-GAAP Net Operating Loss outlook or a GAAP reconciliation as a result of the uncertainty regarding, and the potential variability of, stock-based compensation, which is affected by our hiring and retention needs and future prices of our stock, and non-recurring, infrequent or unusual items.

Webcast Information

On Tuesday, November 7, 2023 at 4:30 pm ET, Blend will host a live discussion of its third quarter 2023 financial results. A link to the live discussion will be made available on the Company's investor relations website at https://investor.blend.com. A replay will also be made available following the discussion at the same website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may relate to, but are not limited to, quotations of management; the “Fourth Quarter 2023 Outlook” section above; Blend’s expectations regarding its financial condition and operating performance, including growth opportunities and plans for future operations and competitive positions; Blend’s products and technologies; Blend’s customers and customer relationships, including the businesses of such customers and their position in the market; Blend’s cost reduction efforts and ability to achieve profitability in the future; projections for in mortgage loan origination volumes, including projections provided by third parties; other macroeconomic and industry conditions; and Blend’s expectations for changes in revenue, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “would,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other comparable terminology that concern Blend’s expectations, strategy, plans or intentions. You should not put undue reliance on any forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which such performance or results will be achieved, if at all.

Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith beliefs and assumptions as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks and uncertainties include the risks that: changes in economic conditions, such as mortgage interest rates, credit availability, real estate prices, inflation or consumer confidence, adversely affect our industry, markets and business, we fail to retain our existing customers or to acquire new customers in a cost-effective manner; our customers fail to maintain their utilization of our products and services; our relationships with any of our key customers were to be terminated or the level of business with them significantly reduced over time; we are unable to compete in highly competitive markets; we are unable to manage our growth; we are unable to make accurate predictions about our future performance due to our limited operating history in an evolving industry and evolving markets; we are unable to successfully integrate or realize the benefits of our acquisition of Title365; our restructuring actions do not result in the desired outcomes or adversely affect our business, or impairment charges on certain assets have an adverse effect on our financial condition and results of operations. Further information on these risks and other factors that could affect our financial results are set forth in our filings with the Securities and Exchange Commission, including in our Annual Report on Form 10-K for the year ended December 31, 2022, our subsequent Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 that will be filed following this press release. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. These factors could cause actual results, performance, or achievement to differ materially and adversely from those anticipated or implied in the forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release. Except as required by law, Blend does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

About Non-GAAP Financial Measures and Other Key Metrics

In addition to financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain, and the conference call will contain, non-GAAP financial measures, including non-GAAP gross profit and non-GAAP gross profit margin, non-GAAP software gross margin, non-GAAP Platform gross profit, non-GAAP operating expenses, non-GAAP loss from operations, non-GAAP net operating loss, and non-GAAP consolidated net loss per share. Our management uses these non-GAAP financial measures internally in analyzing our financial results and believes they are useful to investors, as a supplement to the corresponding GAAP financial measures, in evaluating our ongoing operational performance and trends, in allowing for greater transparency with respect to measures used by our management in their financial and operational decision making, and in comparing our results of operations with other companies in the same industry, many of which present similar non-GAAP financial measures to help investors understand the operational performance of their businesses.

We adjust the following items from our non-GAAP financial measures as detailed in the reconciliations below:

Stock-based compensation and amortization of warrant. We exclude stock-based compensation and amortization of warrant, which are non-cash expenses, from our non-GAAP financial measures because we believe that excluding these items provides meaningful supplemental information regarding operational performance. In particular, companies calculate stock-based compensation expense using a variety of valuation methodologies and subjective assumptions, and expense related to stock-based awards can vary significantly based on the timing, size and nature of awards granted.

Compensation realignment costs. We exclude the compensation realignment costs incurred in connection with the change in our compensation strategy from our non-GAAP financial measures. These costs relate to amortization of one-time two-installment cash bonus payment made to certain employees in lieu of previously committed equity-based awards, driven by an organizational initiative to standardize our equity compensation program. We believe that excluding these charges for purposes of calculating the non-GAAP financial measures provides more meaningful period to period comparisons.

Amortization of acquired intangible assets. We exclude amortization of acquired intangible assets, which is a non-cash expense, from our non-GAAP financial measures. We exclude these amortization expenses because we do not believe these expenses have a direct correlation to the operation of our business.

Impairment of intangible assets and goodwill. We exclude impairment of intangible assets and goodwill, which are non-cash charges, from our non-GAAP financial measures. These charges are unusual in nature and we do not believe these charges have a direct correlation to the operation of our business.

Restructuring costs. We exclude restructuring costs as these costs primarily include employee severance, executive transition costs and other costs directly associated with resource realignments incurred in connection with changing strategies or business conditions. These costs can vary significantly in amount and frequency based on the nature of the actions as well as the changing needs of our business and we believe that excluding them provides easier comparability of pre- and post-restructuring operating results.

Litigation contingencies. We exclude costs related to litigation contingencies, which represent reserves for legal settlements. These costs are non-recurring in nature and we do not believe they have a direct correlation to the operation of our business.

Foreign currency gains and losses. We exclude unrealized gains and losses resulting from remeasurement of assets and liabilities from foreign currency into the functional currency as we do not believe these gains and losses to be indicative of our business performance and excluding these gains and losses provides information consistent with how we evaluate our operating results.

Transaction-related costs. We exclude costs related to mergers and acquisitions from our non-GAAP financial measures as we do not consider these costs to be related to organic continuing operations of the acquired business or relevant to assessing the long-term performance of the acquired assets. These adjustments allow for more accurate comparisons of the financial results to historical operations and forward looking guidance. These costs include financial advisory, legal, accounting and other transactional costs incurred in connection with acquisition activities, and non-recurring transition and integration costs.

Income taxes. We exclude non-cash non-recurring tax benefits from our non-GAAP financial measures. These tax benefits consist of the changes in the valuation allowance resulting from acquisitions and from changes in U.S. tax law requiring capitalization and amortization of research and development costs for tax purposes.

In addition, our non-GAAP financial measures include measures related to our liquidity, such as free cash flow, unlevered free cash flow and free cash flow margin. Free cash flow is defined as net cash flow from operating activities less cash spent on additions to property, equipment, internal-use software and intangible assets. Unlevered free cash flow is defined as free cash flow plus cash paid for interest on our outstanding debt. Free cash flow margin is defined as free cash flow divided by total revenue. We believe information regarding free cash flow, free cash flow margin and unlevered free cash flow provide useful information to investors as a basis for comparing our performance with other companies in our industry and as a measurement of the cash generation that is available to invest in our business and meet our financing needs. However, given our debt service obligations (including the existing $225 million term loan under our credit agreement due in June 2026) and other contractual obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenditures.

It is important to note that the particular items we exclude from, or include in, our non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry. In addition, other companies may utilize metrics that are not similar to ours.

The non-GAAP financial information is presented for supplemental informational purposes only and is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. There are material limitations associated with the use of non-GAAP financial measures since they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. Please see the reconciliation tables at the end of this release for the reconciliation of GAAP and non-GAAP results. Management encourages investors and others to review Blend’s financial information in its entirety and not rely on a single financial measure.

About Blend

Blend is the infrastructure powering the future of banking. Financial providers — from large banks, fintechs, and credit unions to community and independent mortgage banks — use Blend’s platform to transform banking experiences for their customers. Blend powers billions of dollars in financial transactions every day. To learn more, visit www.blend.com.

Blend Labs, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

84,555

 

 

$

124,199

 

Marketable securities and other investments

 

160,406

 

 

 

229,948

 

Trade and other receivables, net of allowance for credit losses of $198 and $436, respectively

 

19,583

 

 

 

22,718

 

Prepaid expenses and other current assets

 

18,645

 

 

 

19,231

 

Total current assets

 

283,189

 

 

 

396,096

 

Property and equipment, net

 

4,451

 

 

 

5,742

 

Operating lease right-of-use assets

 

9,411

 

 

 

11,668

 

Intangible assets, net

 

2,114

 

 

 

2,127

 

Deferred contract costs

 

2,233

 

 

 

1,691

 

Restricted cash, non-current

 

7,294

 

 

 

5,358

 

Other non-current assets

 

9,662

 

 

 

10,082

 

Total assets

$

318,354

 

 

$

432,764

 

Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

2,121

 

 

$

1,260

 

Deferred revenue

 

10,056

 

 

 

8,695

 

Accrued compensation

 

9,867

 

 

 

10,059

 

Other current liabilities

 

14,768

 

 

 

15,459

 

Total current liabilities

 

36,812

 

 

 

35,473

 

Operating lease liabilities, non-current

 

8,135

 

 

 

11,091

 

Other non-current liabilities

 

3,356

 

 

 

5,478

 

Debt, non-current, net

 

219,005

 

 

 

216,801

 

Total liabilities

 

267,308

 

 

 

268,843

 

Commitments and contingencies

 

 

 

Redeemable noncontrolling interest

 

44,754

 

 

 

40,749

 

Stockholders’ equity:

 

 

 

Preferred stock, $0.00001 par value: 200,000 shares authorized and no shares issued and outstanding as of September 30, 2023 and December 31, 2022

 

—

 

 

 

—

 

Class A, Class B and Class C Common Stock, $0.00001 par value: 3,000,000 (Class A 1,800,000, Class B 600,000, Class C 600,000) shares authorized; 247,946 (Class A 238,045, Class B 9,901, Class C 0) and 240,931 (Class A 230,210, Class B 10,721, Class C 0) shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

2

 

 

 

2

 

Additional paid-in capital

 

1,318,037

 

 

 

1,286,815

 

Accumulated other comprehensive loss

 

(402

)

 

 

(708

)

Accumulated deficit

 

(1,311,345

)

 

 

(1,162,937

)

Total stockholders’ equity

 

6,292

 

 

 

123,172

 

Total liabilities, redeemable noncontrolling interest and stockholders’ equity

$

318,354

 

 

$

432,764

 

Blend Labs, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Revenue

 

 

 

 

 

 

 

Software

$

26,505

 

 

$

28,161

 

 

$

77,590

 

 

$

90,345

 

Professional services

 

2,137

 

 

 

1,808

 

 

 

6,087

 

 

 

5,801

 

Title

 

11,949

 

 

 

25,384

 

 

 

37,065

 

 

 

96,270

 

Total revenue

 

40,591

 

 

 

55,353

 

 

 

120,742

 

 

 

192,416

 

Cost of revenue

 

 

 

 

 

 

 

Software

 

5,675

 

 

 

6,809

 

 

 

16,964

 

 

 

24,151

 

Professional services

 

2,937

 

 

 

3,084

 

 

 

8,448

 

 

 

11,371

 

Title

 

9,916

 

 

 

24,350

 

 

 

33,921

 

 

 

81,650

 

Total cost of revenue

 

18,528

 

 

 

34,243

 

 

 

59,333

 

 

 

117,172

 

Gross profit

 

22,063

 

 

 

21,110

 

 

 

61,409

 

 

 

75,244

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

18,826

 

 

 

34,240

 

 

 

67,174

 

 

 

104,846

 

Sales and marketing

 

14,494

 

 

 

20,518

 

 

 

48,190

 

 

 

65,297

 

General and administrative

 

15,819

 

 

 

32,140

 

 

 

56,146

 

 

 

105,714

 

Amortization of acquired intangible assets

 

—

 

 

 

275

 

 

 

—

 

 

 

8,411

 

Impairment of intangible assets and goodwill

 

—

 

 

 

57,857

 

 

 

—

 

 

 

449,680

 

Restructuring

 

9,122

 

 

 

5,936

 

 

 

24,254

 

 

 

12,316

 

Total operating expenses

 

58,261

 

 

 

150,966

 

 

 

195,764

 

 

 

746,264

 

Loss from operations

 

(36,198

)

 

 

(129,856

)

 

 

(134,355

)

 

 

(671,020

)

Interest expense

 

(8,210

)

 

 

(6,158

)

 

 

(23,726

)

 

 

(17,442

)

Other income (expense), net

 

2,632

 

 

 

3,281

 

 

 

8,746

 

 

 

3,378

 

Loss before income taxes

 

(41,776

)

 

 

(132,733

)

 

 

(149,335

)

 

 

(685,084

)

Income tax (expense) benefit

 

(44

)

 

 

(14

)

 

 

(168

)

 

 

2,717

 

Net loss

 

(41,820

)

 

 

(132,747

)

 

 

(149,503

)

 

 

(682,367

)

Less: Net loss attributable to noncontrolling interest

 

60

 

 

 

6,619

 

 

 

1,095

 

 

 

42,764

 

Net loss attributable to Blend Labs, Inc.

 

(41,760

)

 

 

(126,128

)

 

 

(148,408

)

 

 

(639,603

)

Less: Accretion of redeemable noncontrolling interest to redemption value

 

(1,452

)

 

 

(7,847

)

 

 

(5,100

)

 

 

(46,297

)

Net loss attributable to Blend Labs, Inc. common stockholders

$

(43,212

)

 

$

(133,975

)

 

$

(153,508

)

 

$

(685,900

)

 

 

 

 

 

 

 

 

Net loss per share attributable to Blend Labs, Inc. common stockholders:

 

 

 

 

 

 

 

Basic and diluted

$

(0.18

)

 

$

(0.57

)

 

$

(0.63

)

 

$

(2.95

)

Weighted average shares used in calculating net loss per share:

 

 

 

 

 

 

 

Basic and diluted

 

246,410

 

 

 

235,267

 

 

 

244,057

 

 

 

232,717

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

Net loss

$

(41,820

)

 

$

(132,747

)

 

$

(149,503

)

 

$

(682,367

)

Unrealized gain (loss) on marketable securities

 

181

 

 

 

835

 

 

 

229

 

 

 

(1,512

)

Foreign currency translation gain

 

106

 

 

 

55

 

 

 

77

 

 

 

160

 

Comprehensive loss

 

(41,533

)

 

 

(131,857

)

 

 

(149,197

)

 

 

(683,719

)

Less: Comprehensive loss attributable to noncontrolling interest

 

60

 

 

 

6,619

 

 

 

1,095

 

 

 

42,764

 

Comprehensive loss attributable to Blend Labs, Inc.

$

(41,473

)

 

$

(125,238

)

 

$

(148,102

)

 

$

(640,955

)

Blend Labs, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Operating activities

 

 

 

 

 

 

Net loss

$

(41,820

)

 

$

(132,747

)

$

(149,503

)

 

$

(682,367

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

9,042

 

 

 

27,951

 

 

39,798

 

 

 

81,511

 

Depreciation and amortization

 

600

 

 

 

929

 

 

1,856

 

 

 

10,153

 

Impairment of intangible assets and goodwill

 

—

 

 

 

57,857

 

 

—

 

 

 

449,680

 

Amortization of deferred contract costs

 

682

 

 

 

1,133

 

 

2,427

 

 

 

3,560

 

Amortization of debt discount and issuance costs

 

790

 

 

 

747

 

 

2,279

 

 

 

2,187

 

Amortization of operating lease right-of-use assets

 

835

 

 

 

1,025

 

 

2,450

 

 

 

2,661

 

Release of valuation allowance and change in deferred taxes

 

—

 

 

 

—

 

 

—

 

 

 

(2,864

)

Gain on investment in equity securities

 

—

 

 

 

(2,884

)

 

—

 

 

 

(2,884

)

Other

 

(1,285

)

 

 

501

 

 

(4,657

)

 

 

1,960

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Trade and other receivables

 

1,709

 

 

 

3,423

 

 

3,029

 

 

 

7,162

 

Prepaid expenses and other assets, current and non-current

 

2,415

 

 

 

(4,173

)

 

(1,496

)

 

 

3,824

 

Deferred contract costs, non-current

 

234

 

 

 

701

 

 

(542

)

 

 

2,222

 

Accounts payable

 

(1,028

)

 

 

(752

)

 

861

 

 

 

(3,610

)

Deferred revenue

 

(1,914

)

 

 

(2,087

)

 

1,361

 

 

 

1,891

 

Accrued compensation

 

5,126

 

 

 

4,177

 

 

(192

)

 

 

(4,387

)

Operating lease liabilities

 

(1,027

)

 

 

(822

)

 

(2,944

)

 

 

(2,663

)

Other liabilities, current and non-current

 

(246

)

 

 

(5,464

)

 

(1,657

)

 

 

(11,121

)

Net cash used in operating activities

 

(25,887

)

 

 

(50,485

)

 

(106,930

)

 

 

(143,085

)

Investing activities

 

 

 

 

 

 

Purchases of marketable securities

 

(8,324

)

 

 

(46,463

)

 

(203,281

)

 

 

(96,218

)

Maturities of marketable securities

 

80,146

 

 

 

78,096

 

 

277,855

 

 

 

139,872

 

Additions to property, equipment, internal-use software and intangible assets

 

(31

)

 

 

(446

)

 

(505

)

 

 

(1,610

)

Net cash provided by investing activities

 

71,791

 

 

 

31,187

 

 

74,069

 

 

 

42,044

 

Financing activities

 

 

 

 

 

 

Proceeds from exercises of stock options, including early exercises, net of repurchases

 

(2

)

 

 

940

 

 

20

 

 

 

2,570

 

Taxes paid related to net share settlement of equity awards

 

(1,325

)

 

 

—

 

 

(4,857

)

 

 

—

 

Payment of initial public offering costs

 

—

 

 

 

—

 

 

—

 

 

 

(391

)

Net cash (used in) provided by financing activities

 

(1,327

)

 

 

940

 

 

(4,837

)

 

 

2,179

 

Effect of exchange rates on cash, cash equivalents, and restricted cash

 

(23

)

 

 

55

 

 

(10

)

 

 

160

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

44,554

 

 

 

(18,303

)

 

(37,708

)

 

 

(98,702

)

Cash, cash equivalents, and restricted cash at beginning of period

 

47,295

 

 

 

138,041

 

 

129,557

 

 

 

218,440

 

Cash, cash equivalents, and restricted cash at end of period

$

91,849

 

 

$

119,738

 

$

91,849

 

 

$

119,738

 

Reconciliation of cash, cash equivalents, and restricted cash within the consolidated balance sheets:

 

 

 

 

 

 

Cash and cash equivalents

$

84,555

 

 

$

114,380

 

$

84,555

 

 

$

114,380

 

Restricted cash

 

7,294

 

 

 

5,358

 

 

7,294

 

 

 

5,358

 

Total cash, cash equivalents, and restricted cash

$

91,849

 

 

$

119,738

 

$

91,849

 

 

$

119,738

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for income taxes

$

—

 

 

$

53

 

$

48

 

 

$

190

 

Cash paid for interest

$

7,364

 

 

$

8,889

 

$

21,464

 

 

$

18,558

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Vesting of early exercised stock options

$

230

 

 

$

530

 

$

1,244

 

 

$

3,673

 

Operating lease liabilities arising from obtaining new or modified right-of-use assets

$

—

 

 

$

660

 

$

327

 

 

$

977

 

Accretion of redeemable noncontrolling interest to redemption value

$

1,452

 

 

$

7,847

 

$

5,100

 

 

$

46,297

 

Blend Labs, Inc.

Revenue Disaggregation

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30,

 

 

 

2023

 

2022

 

 

Blend Platform revenue:

 

 

 

 

 

 

 

 

YoY change

Mortgage Suite

$

20,306

71

%

 

$

22,897

76

%

 

(11

)%

Consumer Banking Suite

 

6,199

22

%

 

 

5,264

18

%

 

18

%

Total Software revenue

 

26,505

93

%

 

 

28,161

94

%

 

(6

)%

Professional services

 

2,137

7

%

 

 

1,808

6

%

 

18

%

Total Blend Platform revenue

 

28,642

100

%

 

 

29,969

100

%

 

(4

)%

Title revenue:

 

 

 

 

 

 

 

Traditional

 

8,701

73

%

 

 

19,303

76

%

 

(55

)%

Digitally-enabled

 

3,248

27

%

 

 

6,081

24

%

 

(47

)%

Total Title revenue

 

11,949

100

%

 

 

25,384

100

%

 

(53

)%

Total revenue

$

40,591

 

 

$

55,353

 

 

(27

)%

 

Nine Months Ended September 30,

 

 

 

2023

 

2022

 

 

Blend Platform revenue:

 

 

 

 

 

 

YoY change

Mortgage Suite

$

60,371

72

%

 

$

76,627

80

%

 

(21

)%

Consumer Banking Suite

 

17,219

21

%

 

 

13,718

14

%

 

26

%

Total Software revenue

 

77,590

93

%

 

 

90,345

94

%

 

(14

)%

Professional services

 

6,087

7

%

 

 

5,801

6

%

 

5

%

Total Blend Platform revenue

 

83,677

100

%

 

 

96,146

100

%

 

(13

)%

Title revenue:

 

 

 

 

 

 

 

Traditional

 

27,492

74

%

 

 

89,895

93

%

 

(69

)%

Digitally-enabled

 

9,573

26

%

 

 

6,375

7

%

 

50

%

Total Title revenue

 

37,065

100

%

 

 

96,270

100

%

 

(61

)%

Total revenue

$

120,742

 

 

$

192,416

 

 

(37

)%

Blend Labs, Inc.

Reconciliation of GAAP to non-GAAP Measures

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30, 2023

 

GAAP

 

Non-GAAP adjustments(1)

 

Non-GAAP

 

Gross

Profit

Gross Margin

 

 

Gross

Profit

Gross Margin

Blend Platform

 

 

 

 

 

 

 

Software

$

20,830

 

79

%

 

$

8

 

$

20,838

 

79

%

Professional services

 

(800

)

(37

)%

 

 

210

 

 

(590

)

(28

)%

Total Blend Platform

 

20,030

 

70

%

 

 

218

 

 

20,248

 

71

%

Title

 

2,033

 

17

%

 

 

9

 

 

2,042

 

17

%

Total

$

22,063

 

54

%

 

$

227

 

$

22,290

 

55

%

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2022

 

GAAP

 

Non-GAAP adjustments(1)

 

Non-GAAP

 

Gross

Profit

Gross Margin

 

 

Gross

Profit

Gross Margin

Blend Platform

 

 

 

 

 

 

 

Software

$

21,352

 

76

%

 

$

24

 

$

21,376

 

76

%

Professional services

 

(1,276

)

(71

)%

 

 

148

 

 

(1,128

)

(62

)%

Total Blend Platform

 

20,076

 

67

%

 

 

172

 

 

20,248

 

68

%

Title

 

1,034

 

4

%

 

 

280

 

 

1,314

 

5

%

Total

$

21,110

 

38

%

 

$

452

 

$

21,562

 

39

%

 

Nine Months Ended September 30, 2023

 

GAAP

 

Non-GAAP adjustments(1)

 

Non-GAAP

 

Gross

Profit

Gross Margin

 

 

Gross

Profit

Gross Margin

Blend Platform

 

 

 

 

 

 

 

Software

$

60,626

 

78

%

 

$

30

 

$

60,656

 

78

%

Professional services

 

(2,361

)

(39

)%

 

 

803

 

 

(1,558

)

(26

)%

Total Blend Platform

 

58,265

 

70

%

 

 

833

 

 

59,098

 

71

%

Title

 

3,144

 

8

%

 

 

146

 

 

3,290

 

9

%

Total

$

61,409

 

51

%

 

$

979

 

$

62,388

 

52

%

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2022

 

GAAP

 

Non-GAAP adjustments(1)

 

Non-GAAP

 

Gross

Profit

Gross Margin

 

 

Gross

Profit

Gross Margin

Blend Platform

 

 

 

 

 

 

 

Software

$

66,194

 

73

%

 

$

40

 

$

66,234

 

73

%

Professional services

 

(5,570

)

(96

)%

 

 

687

 

 

(4,883

)

(84

)%

Total Blend Platform

 

60,624

 

63

%

 

 

727

 

 

61,351

 

64

%

Title

 

14,620

 

15

%

 

 

768

 

 

15,388

 

16

%

Total

$

75,244

 

39

%

 

$

1,495

 

$

76,739

 

40

%

Blend Labs, Inc.

Reconciliation of GAAP to non-GAAP Measures

(In thousands)

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

GAAP operating expenses

$

58,261

 

 

$

150,966

 

 

$

195,764

 

 

$

746,264

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Stock-based compensation(1) and amortization of warrant

 

8,815

 

 

 

27,499

 

 

 

38,819

 

 

 

80,040

 

Compensation realignment costs(2)

 

1,289

 

 

 

—

 

 

 

4,163

 

 

 

—

 

Amortization of acquired intangible assets(3)

 

—

 

 

 

275

 

 

 

—

 

 

 

8,411

 

Impairment of intangible assets and goodwill(4)

 

—

 

 

 

57,857

 

 

 

—

 

 

 

449,680

 

Restructuring(5)

 

9,122

 

 

 

5,936

 

 

 

24,254

 

 

 

12,316

 

Litigation contingencies(6)

 

—

 

 

 

—

 

 

 

(245

)

 

 

—

 

Transaction-related costs(7)

 

857

 

 

 

732

 

 

 

1,891

 

 

 

2,956

 

Non-GAAP operating expenses

$

38,178

 

 

$

58,667

 

 

$

126,882

 

 

$

192,861

 

 

 

 

 

 

 

 

 

GAAP loss from operations

$

(36,198

)

 

$

(129,856

)

 

$

(134,355

)

 

$

(671,020

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

Stock-based compensation(1) and amortization of warrant

 

9,042

 

 

 

27,951

 

 

 

39,798

 

 

 

81,535

 

Compensation realignment costs(2)

 

1,289

 

 

 

—

 

 

 

4,163

 

 

 

—

 

Amortization of acquired intangible assets(3)

 

—

 

 

 

275

 

 

 

—

 

 

 

8,411

 

Impairment of intangible assets and goodwill(4)

 

—

 

 

 

57,857

 

 

 

—

 

 

 

449,680

 

Restructuring(5)

 

9,122

 

 

 

5,936

 

 

 

24,254

 

 

 

12,316

 

Litigation contingencies(6)

 

—

 

 

 

—

 

 

 

(245

)

 

 

—

 

Transaction-related costs(7)

 

857

 

 

 

732

 

 

 

1,891

 

 

 

2,956

 

Non-GAAP loss from operations

$

(15,888

)

 

$

(37,105

)

 

$

(64,494

)

 

$

(116,122

)

 

 

 

 

 

 

 

 

GAAP net loss

$

(41,820

)

 

$

(132,747

)

 

$

(149,503

)

 

$

(682,367

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

Stock-based compensation(1) and amortization of warrant

 

9,042

 

 

 

27,951

 

 

 

39,798

 

 

 

81,535

 

Compensation realignment costs(2)

 

1,289

 

 

 

—

 

 

 

4,163

 

 

 

—

 

Amortization of acquired intangible assets(3)

 

—

 

 

 

275

 

 

 

—

 

 

 

8,411

 

Impairment of intangible assets and goodwill(4)

 

—

 

 

 

57,857

 

 

 

—

 

 

 

449,680

 

Restructuring(5)

 

9,122

 

 

 

5,936

 

 

 

24,254

 

 

 

12,316

 

Litigation contingencies(6)

 

—

 

 

 

—

 

 

 

(245

)

 

 

—

 

Transaction-related costs(7)

 

857

 

 

 

732

 

 

 

1,891

 

 

 

2,956

 

Gain on investment in equity securities(8)

 

—

 

 

 

(2,884

)

 

 

—

 

 

 

(2,884

)

Foreign currency gains and losses(9)

 

74

 

 

 

122

 

 

 

(83

)

 

 

349

 

Income tax benefit(10)

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,864

)

Non-GAAP net loss

$

(21,436

)

 

$

(42,758

)

 

$

(79,725

)

 

$

(132,868

)

 

 

 

 

 

 

 

 

GAAP basic net loss per share

$

(0.18

)

 

$

(0.57

)

 

$

(0.63

)

 

$

(2.95

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

Net loss attributable to noncontrolling interest(11)

 

—

 

 

 

(0.03

)

 

 

—

 

 

 

(0.18

)

Accretion of redeemable noncontrolling interest to redemption value(11)

 

0.01

 

 

 

0.03

 

 

 

0.02

 

 

 

0.20

 

Stock-based compensation(1) and amortization of warrant

 

0.03

 

 

 

0.11

 

 

 

0.16

 

 

 

0.36

 

Compensation realignment costs(2)

 

0.01

 

 

 

—

 

 

 

0.02

 

 

 

—

 

Amortization of acquired intangible assets(3)

 

—

 

 

 

—

 

 

 

—

 

 

 

0.04

 

Impairment of intangible assets and goodwill(4)

 

—

 

 

 

0.25

 

 

 

—

 

 

 

1.93

 

Restructuring(5)

 

0.04

 

 

 

0.03

 

 

 

0.09

 

 

 

0.05

 

Litigation contingencies(6)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Transaction-related costs(7)

 

—

 

 

 

—

 

 

 

0.01

 

 

 

0.01

 

Gain on investment in equity securities(8)

 

—

 

 

 

(0.01

)

 

 

—

 

 

 

(0.01

)

Foreign currency gains and losses(9)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Income tax benefit(10)

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.01

)

Non-GAAP basic net loss per share

$

(0.09

)

 

$

(0.19

)

 

$

(0.33

)

 

$

(0.56

)

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2023

 

2022

2023

 

2022

Net cash used in operating activities

$

(25,887

)

 

$

(50,485

)

$

(106,930

)

 

$

(143,085

)

Additions to property, equipment, internal-use software and intangible assets

 

(31

)

 

 

(446

)

 

(505

)

 

 

(1,610

)

Free cash flow

 

(25,918

)

 

 

(50,931

)

 

(107,435

)

 

 

(144,695

)

Cash paid for interest

 

7,364

 

 

 

8,889

 

 

21,464

 

 

 

18,558

 

Unlevered free cash flow

$

(18,554

)

 

$

(42,042

)

$

(85,971

)

 

$

(126,137

)

 

 

 

 

 

 

 

Revenue

$

40,591

 

 

$

55,353

 

$

120,742

 

 

$

192,416

 

Free cash flow margin

 

(64

)%

 

 

(92

)%

 

(89

)%

 

 

(75

)%

Notes:

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(1) Stock-based compensation by function:

2023

 

2022

 

2023

 

2022

Cost of revenue

$

227

 

$

452

 

$

979

 

$

1,495

Research and development

 

4,090

 

 

12,274

 

 

17,050

 

 

34,656

Sales and marketing

 

1,577

 

 

2,749

 

 

6,291

 

 

8,451

General and administrative

 

3,148

 

 

12,476

 

 

15,478

 

 

36,909

Total

$

9,042

 

$

27,951

 

$

39,798

 

$

81,511

(2) Compensation realignment costs relate to amortization of one-time cash bonus payment (paid in two installments in March and May 2023) to certain employees in lieu of previously committed equity-based awards, driven by an organizational initiative to standardize our equity compensation program.

(3) Amortization of acquired intangible assets represents non-cash amortization of customer relationships acquired in connection with the Title365 acquisition.

(4) Impairment of intangible assets and goodwill relates to charges recorded based on the results of the interim quantitative impairment analysis performed in the three months ended June 30, 2022 and in the three months ended September 30, 2022, in response to certain triggering events, such as a continued decline in economic and market conditions, decline in our market capitalization, and current and projected declines in the operating results of the Title365 reporting unit.

(5) The restructuring charges relate to our workforce reduction plans executed as part of our broader efforts to improve cost efficiency and better align our operating structure with our business activities.

(6) Litigation contingencies represent reserves for legal settlements that are unusual or infrequent costs associated with our operating activities.

(7) Transaction-related costs include non-recurring due diligence, consulting, and integration costs recorded within general and administrative expense.

(8) Gain on investment in equity securities represents an adjustment to the carrying value of the non-marketable security without a readily determinable fair value to reflect observable price changes.

(9) Foreign currency gains and losses include transaction gains and losses incurred in connection with our operations in India.

(10) Income tax benefit represents the non-recurring release of historical valuation allowance resulting from changes in U.S. tax law requiring capitalization and amortization of research and development costs for tax purposes.

(11) Net loss attributable to noncontrolling interest and accretion of redeemable noncontrolling interest to redemption value relate to the 9.9% non-controlling interest in our Title365 subsidiary.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231107007236/en/

Investor Relations Bryan Michaleski ir@blend.com

Media press@blend.com