Blend Labs, Inc. Q4 FY2024 earnings call

• 2024 was a pivotal year where Blend sharpened focus, delivered value to customers, and accelerated to sustain profitability. Q4 revenue up 15% YOY with second consecutive quarter of non-GAAP operating income profitability.
• Added new customers like a top US bank and PHH Mortgage. Consumer banking grew 42% in 2024, surpassing the 35% target.
• Shift to software-centric platform by partnering with external providers (e.g., Truework for income verification, Covered Insurance Solutions for homeowners insurance).
• Launched Rapid Refi and Rapid Home Equity solutions with early positive results.
• Plan to incorporate AI into platform, starting with Doc AI for post-closing operations.
• Focus on simplifying operations, expanding partner ecosystem, and driving innovation.

Total company revenues in the fourth quarter were $41.4 million, representing 15% year-over-year growth. Platform revenue was $30.1 million, up 16% YOY. Mortgage suite revenue was $18.2 million, up 6% YOY. Consumer Banking revenue grew 48% YOY in Q4 to $9.5 million, and 42% for the full year, exceeding the 35% target. Title revenue was $11.3 million. Non-GAAP gross profit was $25.1 million, up 26% YOY. Blend Platform segment gross margin was 75%, software gross margin 79%, title margin 21%. Non-GAAP operating costs were $19.9 million, down from $33 million YOY. Non-GAAP operating income was $5.2 million in Q4.

• Q1 2025 platform revenue expected $25M - $27M, midpoint 9% YOY growth.
• Blend platform non-GAAP net operating income expected -$1M to $1M.
• First quarter free cash flow margin expected to exceed 18%.
• Increased projected CAGR for consumer banking to 40% from 35%.
• Expect to exit 2025 with positive Rule of 40 for platform segment.

• Macro-economic uncertainty affecting mortgage origination volumes.
• Churn from past market turmoil still impacting mortgage business.
• Dependence on partner ecosystem and potential issues with partnerships.
• Uncertainty in rate environment affecting demand for Blend solutions.

Q: Dylan Becker with William Blair asked about customer budgets and growth algorithms.

A: Nima Ghamsari stated customers are leaning into AI to build scalable businesses, and Blend's platform helps with efficient operations. Amir Jafari discussed rapid products like Rapid Refi and Home Equity contributing to economic value for funded loan.

Q: Seth Gilbert with UBS asked about consumer banking growth drivers and non-GAAP net operating income guidance.

A: Amir Jafari said consumer banking growth is tied to execution, and the non-GAAP net operating income guide is specific to the blend platform with qualitative and quantitative aspects.

Q: Aaron Kimson with JMP asked about composable origination functionality and IMB unit strategy.

A: Nima Ghamsari explained Blend Builder's role in enabling flexibility for large financial institutions and the strategic rationale for the IMB unit to focus on serving IMBs separately.

Q: Joseph Vafi with Canaccord Genuity asked about logo discussions and Rapid product revenue contribution.

A: Nima Ghamsari said pipeline is up 50% YOY, Rapid products are already generating revenue with early ramp-up expected.

Q: David Unger with Wells Fargo asked about headcount plans and pipeline strength.

A: Amir Jafari mentioned focus on efficient headcount investment and pipeline strength with 50% YOY increase.

Q: Ryan Tomasello with KBW asked about Next Gen Refi revenue uplift and consumer banking down-market push.

A: Nima Ghamsari said Next Gen Refi and Home Equity products have higher ROI, and consumer banking down-market push involves different go-to-market approach with partnerships.