Blend Focuses on Growth in Quest to Return to Profitability
11/10/23
Blend Labs, a leading mortgage technology and cloud-based banking platform based in San Francisco, is determined to regain profitability after reporting a net loss of $418 million in the third quarter. Despite the loss, Blend’s executives remain optimistic about the company’s potential for growth and its path to profitability in 2024. Let’s explore the reasons behind Blend’s optimism and its strategic efforts to achieve profitability.
Financial Performance and Outlook
Blend Labs reported a 27% decrease in revenue from a year ago, amounting to $405.9 million for Q3. While this is still a significant loss, it is an improvement from the previous year’s loss of $1.327 billion. Blend has accumulated $1.31 billion in cumulative losses since 2012. To address this, Blend expects a non-GAAP net operating loss of $14 million to $17 million for the remaining quarter of 2023. According to the Mortgage Bankers Association’s forecast, there is a 5% decline in mortgage originations in the final quarter, influencing Blend’s projected revenue from $345 million to $405 million.
Focus on Growth and Innovation
Blend Labs is approaching profitability by driving growth and expanding its product offerings. The company aims to deepen its existing mortgage relationships while introducing new and enhanced products. Blend’s mortgage suite generated $86 in revenue per funded loan during Q3 2023, representing an increase from $77 in the same quarter the previous year. The rise is attributed to the strong adoption of Blend’s mortgage add-on products and the expansion of mortgage relationships with existing clients.
Strategic Partnerships and Product Expansion
In pursuit of growth, Blend has pursued strategic partnerships and product expansions. The company recently launched Blend IMB Essentials, a new edition of its mortgage suite tailored to retail independent mortgage banks (IMBs). Blend also expanded its partnership with MeridianLink Inc., a provider of software platforms for financial institutions and consumer reporting agencies. This collaboration enables users to access Blend’s unified platform and consumer banking origination software, speeding up applications and onboarding processes. The integration with MeridianLink Consumer further strengthens Blend’s position in the market and its ability to cater to the diverse needs of its customers.
Cost Optimization and Workforce Reduction
Blend has taken steps to optimize costs and streamline operations. The company has significantly reduced operating expenses from $49.67 million in Q2 2022 to $6.02 million in the second quarter of this year. Additionally, Blend underwent a series of workforce reductions, including layoffs, to align with its plan for profitability. From an initial employee count of 577, Blend grew to 2,276 after acquiring Title 365. However, with several rounds of layoffs, including an upcoming one in Q1 2024, Blend’s workforce will be reduced to about 640 employees in the United States. These measures will aid in lowering expenses and aligning the company’s structure with its growth strategy.
Optimism for Future Profitability
Blend Labs’ optimism regarding its future profitability can be attributed to several factors. Firstly, the company’s focus on growth through the deepening of mortgage relationships and introducing new products indicates a commitment to expanding its market share and driving revenues. Additionally, the increasing revenue per funded loan showcases the success of Blend’s additional mortgage products and the satisfaction of its existing clientele. Furthermore, Blend’s strategic partnerships and expanded product offerings position the company for future success. Lastly, the cost optimization efforts and workforce reductions demonstrate Blend’s commitment to aligning its operations with its long-term profitability objectives. Combining these factors, Blend Labs is confident in its ability to achieve profitability and sustain its growth trajectory in 2024.
