Blend Labs, Inc. Q1 FY2025 earnings call

Three themes were highlighted: the continued shift to becoming a software-first company, the Rocket Mr. Cooper deal as an industry catalyst, and the strong momentum in Q1. With the simplified Blend initiative, the company is transitioning to a software-focused model. They announced an exclusive process for the potential sale of their title insurance business, which aligns with the software-first strategy and offers benefits like ongoing software revenue, improved profit, and capital efficiency. The Rocket Mr. Cooper deal validates the digital mortgage experience vision. In Q1, platform revenue was near the high end of the range, platform operating income was near the high end, and there was positive free cash flow of $15.5 million (a record). There were 11 new or expanded deals in Q1, nearly three times more than the same period last year, and 10 new or expanded deals in Q2 so far. A $50 million renewal and expansion deal with a top financial institution was a significant milestone. Five customers launched the Rapid Home Lending Suite this quarter. The home equity market is growing double digits, and rapid refinance and home equity solutions are capitalizing on trends. On the consumer banking side, there were multiple deposit and consumer lending deals, including a partnership with a top 25 credit union. The business deposit account opening product was launched, solidifying the unified platform for the financial services industry. The pipeline for Q2 and beyond is nearly double that of last year.

In the first quarter of 2025, platform revenue in February was $26.8 million, which was above the midpoint of the guidance and grew 12% year over year, marking the third consecutive quarter of year-over-year growth. Mortgage suite revenue stood at $14.6 million. Consumer banking suite revenue was $9.6 million, registering a 45% year-over-year growth. Professional services revenue was $2.5 million. The platform non-GAAP gross profit for the first quarter was $19.5 million, representing a platform gross margin of 73%. Operating expenses in February were $18.5 million, a decrease of $9 million compared to the same period last year. Non-GAAP operating income for the first quarter was $1 million, with a non-GAAP operating margin of 4%. The remaining performance obligations (RPO) for the first quarter set a new record for Blend Labs, Inc. at $158.1 million. The economic value per funded loan for February was $93, slightly below the guidance of $94.

For Q2, platform revenue is guided to be between $30.5 million and $32.5 million, with the midpoint representing a 10% year-over-year growth. The Q2 platform non-GAAP operating income is expected to be between $3.5 million and $5 million. The full year 2025 platform non-GAAP operating expenses are expected to be in the range of $85 million to $90 million. HMDA originations for Q2 are expected to range from 1.15 to 1.25 million.

Volatility in macroeconomic conditions, potential impacts from tariffs and banking deregulation, uncertainty around industry M&A trends, and risks associated with the sale of the title insurance business.

Q: Dylan Becker asked about digital investment and the dual benefit of higher ARPU products.

A: Nima Ghamsari stated that the product is tailored for specific loan types, driving higher pull-through. Features like showing payment comparisons and taking through intent to proceed and rate lock drive higher conversion.

Q: Aaron Kimson asked about the $50 million expansion, the evolution of the relationship, and the RPO timeline.

A: Nima Ghamsari said the relationship started years ago, added multiple products, and typically about half of the RPO is collected in the next twelve months.

Q: Ryan Tomasello asked about reinvesting for growth.

A: Nima Ghamsari mentioned investing in areas like rapid refi, rapid home equity, AI, and go-to-market, with an OpEx guide for the year.

Q: David Unger asked about the capital deployment philosophy post title.

A: Amir Jafari said reinvesting in AI, go-to-market, and the partner ecosystem with an ROI mindset.

Q: Joseph Vafi asked about contribution per loan on the core product.

A: Amir Jafari said partnership margins are high and contribution profit will be a guiding light for business growth.

Q: Seth Gilbert asked about RPO drivers on the consumer banking side and the $50 million deal timing.

A: Amir Jafari said the $50 million deal is in Q2, not in Q1 RPO, and focus is on customer love and value accretive solutions.

Q: Ryan Tossemi asked about sales organization scalability.

A: Nima Ghamsari said sales has been ahead of expectations, with focus on existing customers and expanding product lines, and more on go-to-market models to come.