Mix stories large losses as cost-cutting continues
Blend Labs was hit especially hard by the mortgage market’s woes last year, posting a $763.8 million net loss over 2022.
The mortgage fintech is anticipating growth in the second half of this year, but in the meantime is providing revenue guidance on a quarterly rather than annual basis, executives said Thursday evening in an earnings conference call. The loss last year was a huge dropoff from the $169.1 million Blend lost in 2021, while a fourth quarter loss of $81.4 million was a 38% improvement from the prior quarter’s $132.7 million loss.
“While the results are disappointing in the absolute sense, our total revenue was within the original guidance we laid out last March, when no one knew quite how historic the mortgage origination downturn would be,” said Nima Ghamsari, head of Blend, during the call.
Company leaders also pointed to a large cost-cutting measure announced in January and undertaken this quarter in letting go 340 employees and reducing annual operating expenses by over $100 million. Blend’s non-GAAP operating expenses were $58.1 million in the fourth quarter, flat from the prior quarter’s $58.6 million figure but 21% down from the same time last year.
The fintech’s total annual revenues were also flat at $235.2 million in 2022, against $234.5 million in 2021. Revenues in the company’s platform fell slightly from $36.1 million in the prior quarter to $29.5 million to close the year, driven by a 23% decline in mortgage banking revenue and 70% fall in revenue in the Title365 segment.
Consumer banking was a bright spot for Blend last year, up 91% annually to $44.2 million over last year. The growth was driven in part by revenue from personal and home equity loans and a verification of income product, the company said. A new fee for the Blend Builder platform is also expected to grow consumer banking revenue, said Amir Jafari, the fintech’s new head of administration and head of finance.
Jafari replaced former head of finance Marc Greenberg, who resigned in January but is staying on to aid the company’s 10-K annual financial filing. Former Blend president Tim Mayopoulos has also already departed his position and Monday was appointed by the Federal Deposit Insurance Corp. as CEO of Silicon Valley Bank, N.A., the bridge bank for the failed depository. He’ll remain on Blend’s board of directors, the company said.
Blend had no exposure to any of the three banks that recently collapsed and is paying attention to its regional depository partners during the recent liquidity rush. Otherwise it is not impacted by the bank turmoil, Ghamsari said.
The fintech ended the year with cash and cash equivalents of $354 million and total debt outstanding of $225 million in a five-year term loan, and has not drawn on a $25 million revolving line of credit.
Executives pointed to a mortgage business gain in market share of 510 basis points between the end of 2021 and the first half of 2022, and a new product rollout in Composable Origination which allows firms to customize their loan processing with a “low-code, drag and drop” interface.
The firm is projecting revenue between $33 million to $35 million in the first quarter with estimates of originations bottoming out to begin this year.
“We’re not guiding to the full year to date, as you can expect, it’s really just driven by the overall uncertainty,” said Jafari.
Blend’s stock has fallen precipitously since its initial public offering during a booming refinance market in July 2021, when it opened at $20.90 a share. The stock opened at $1.10 Friday and by the afternoon had fallen to $0.80 per share.
Analysts at Keefe, Bruyette & Woods said a sale of the firm’s Title365 platform or a restructuring of its $225 million term loan would be “meaningful catalysts” for its stock, although executives did not hint at any such moves during their conference call.
“Despite these potential catalysts, we remain on the sidelines given BLND’s prolonged timeline to profitability, which we believe will weigh on the shares until breakeven comes more clearly into view,” their report said.