California mortgage tech firm Blend Labs narrowed its loss in 2023 by expanding its consumer banking footprint and growing its mortgage consumer base.
The San Francisco-based company reported a non-GAAP net loss of $101.3 million in 2023, down from a non-GAAP net loss of $182.2 million in 2022, according to data shared in its fourth-quarter and full year 2023 earnings call.
Its non-GAAP net loss narrowed to $21.6 million in Q4 2023, down from a non-GAAP net loss of $49.3 million in the previous quarter.
“We delivered significant efficiencies across our business, allowing us to report ahead of our guidance for non-GAAP net operating loss and keeping us on track for our profitability target in 2024,” co-founder and CEO Nima Ghamsari told analysts.
The fact that the company achieved this momentum “despite 2023 being one of the worst years on record for mortgage industry origination volumes increases our confidence in our ability to navigate the year ahead as the market looks to stabilize,” he added.
In the fourth quarter, Blend closed eight new consumer banking deals, which included signing a multiyear consumer banking deal with Citizens Bank. And it added two new top 100 financial institutions by retail customer base to grow its mortgage customer base.
The economic value of Blend’s mortgage suite, per funded loan, rose from $81 to $91 during the year ending in Q4 2023, representing continued adoption of its mortgage add-on products, the company stated.
“Not only do we have customers gaining [market] share, we’re signing new customers and they’re using more of our products,” Ghamsari said. “There is, of course, some churn in a tough environment as there’s consolidation, and some customers have gone to lower-cost or free options to manage a low-margin environment, but this is more than offset by the other vectors of our growth.”
Granular details
Of its $36.1 million in fourth-quarter revenue, Blend’s platform segment generated $25.9 million and its title segment posted $10.2 million.
Within the Blend platform segment, mortgage suite revenue decreased by 3% year over year to $17.2 million, amid a mortgage market volume decline of 20% to 25% during the same period.
For full year 2023, Blend’s platform segment revenue totaled $109.5 million, a decrease of 10% compared to the year ending on Dec. 31, 2022. Title segment revenue totaled $47.3 million, a 58% decrease compared to the previous year.
Blend’s Q4 2023 operating expenses declined to $41.6 million, less than half of the $89.6 million spent in Q4 2022. For all of 2023, operating expenses fell to $237.4 million, down from $835.8 million, which helped offset the company’s non-GAAP net loss.
As of Dec. 31, 2023, Blend had cash, cash equivalents and marketable securities totaling $144.2 million, with total outstanding debt of $140 million in the form of Blend’s term loan.
“During the fourth quarter, Blend prepaid $85 million of its term loan balance and amended the maturity date to provide for a one-year extension to 2027, provided we meet certain conditions,” said Amir Jafari, Blend’s head of finance and administration.
No change in profitability goal
Achieving non-GAAP profitability has been a long-running goal for Blend since going public in July 2021.
Executives on the earnings call reaffirmed that Blend is on track to achieve this goal, as it foresees continued growth in consumer banking and improved economics in mortgage, regardless of the macroeconomic environment.
Blend expects its first-quarter 2024 revenue to be between $32.5 million and $35.5 million — and platform revenue should finish between $22 million and $24 million. Its title business is expected to post revenue of $10.5 million to $11.5 million.
This forecast reflects Blend’s expectation of an estimated 800,000 to 875,000 industrywide mortgage originations in Q1 2024.
Looking ahead, Ghamsari hinted that Blend is preparing its customers to scale in 2025, which will be a “very different market for mortgages.”
“We’re building a next-generation refinance flow during a historically bad time for refinance volumes. Why? Because the longer this high-rate environment lasts, the larger the backlog of customers will benefit by refinancing when rates ultimately come down,” Ghamsari said.
