Blend reports $133.98 million loss in Q3, layoffs of 100 positions

The loss reflects a $57.9 million impairment of intangible assets and goodwill related to the Title365 segment

Blend Lab‘s third-quarter loss of $133.98 million was driven by a decline in mortgage banking and its title insurance business revenue, which occurred despite its consumer banking revenue more than doubling from the same period last year.

The loss also reflects a $57.9 million impairment of intangible assets and goodwill related to the Title365 segment, resulting in a full write-off of these assets as of September 30, 2022. 

Despite the loss, Nima Ghamsari, Blend’s co-founder, highlighted its increasing mortgage banking market share and product diversification, which brought in revenue for the California tech firm. 

Blend platform’s revenue posted $36.1 million in the third quarter of 2022, up by almost $1 million, or approximately 3%, from the same period last year. The slight increase was the backdrop against a 63% decline in mortgage market volume in the same period, as measured by the Mortgage Bankers Association, the firm said. Compared to the previous quarter, revenue dropped by 44.9% from $65.5 million.

“Our market share of total funded mortgage originations in the first half of this year approached 20% for the first time,” Ghamsari told analysts. “This achievement in a declining mortgage origination volume environment is a good indicator that we’re aligned with customers who are well positioned to weather the downturn.”

Within the Blend platform, mortgage banking revenue was $19.9 million, down by $7.4 million, or 27%, year over year. The consumer banking and marketplace revenue was $15.3 million, up by $8.7 million, or 132%, from the same period last year. The migration of software-enabled title revenue, primarily from the transition of Mr. Cooper‘s title firm to the Blend platform, led the jump, according to executives.

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The complete migration of its Title365 – a firm acquired from Mr. Cooper in 2001 – automates the flow of title orders from the customer’s loan origination software and passes the orders through the Blend Platform. 

The Title365 segment revenue was $19.3 million, down by $35.2 million, or 65%, year over year. This reflected the increase in interest rates and the corresponding decrease in refinance transactions year-on-year, as well as the transition of Mr. Cooper title volume to the Blend platform. 

“Our consumer marketplace revenue has grown significantly, as I noted in the outset, driven by the transition of Mr. Cooper to software enabled-title by integrating them into our platform, along with home equity and personal loan growth,” Ghamsari said. 

More than a third of its customers used one or more of its consumer banking products in the third quarter, according to the executive.

The tech company is also focused on cutting costs as rates continue to rise. It eliminated less than 100 positions, or 6% of its workforce, on Thursday, primarily within its title business — “reflecting anticipated lower origination and refi volume for the rest of the year and into 2023,” Marc Greenberg, head of finance of Blend, told analysts.

Greenberg added that has Blend cut more than 500 positions, including backfills, since early this year, which is expected to yield $69 million in annual savings. 

“We expect the bulk of cost savings associated with our workforce reductions, executed over the course of the last several months, to materialize starting in the first quarter of 2023. Our goal to reduce our quarterly non-GAAP net operating loss by 50% by the end of next year remains unchanged,” Greenberg said. 

Looking ahead, the firm plans on expanding its offshoring of certain functions, driving down vendor spend and technology investing. Executives forecast revenue for the Blend Platform to come in at between $134 million and $136 million, and the Title 365 segment revenue to come in between $101 million and $104 million. 

“Our blend platform revenue expectations reflect lower expected mortgage volumes offset somewhat by continued growth in consumer banking and marketplace revenue, including the migration of software enabled title revenue,” Greenberg added. 

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