Blend Labs, Inc. Q3 FY2025 earnings call

Nima highlighted that the team's strong execution led to 5 consecutive quarters of non-GAAP operating profitability. The company signed 14 new deals and expansions, with a key example being a 7-figure expansion with a top 20 U.S. bank for solar home equity lending, demonstrating the platform strategy. There's a flywheel effect between consumer banking and mortgage products, with consumer banking creating engagement leading to mortgage opportunities and vice versa. The Blend Customer Forum in September showed customer urgency for AI, with Blend Intelligent Origination as a new operating model for lending. Key strategic priorities for 2026 include driving take rate in the Mortgage Suite with products like Rapid Refi and Blend Close, expanding the Consumer Banking Suite by standardizing solutions, and investing in AI and Rapid products for future growth.

In the third quarter of 2025, total revenue was $32.9 million, which was ahead of the midpoint of guidance and down 1% year-over-year. The Mortgage Suite revenue declined 18% year-over-year due to strategic transitions to higher-margin partnership models, some churn, and a large renewal with lower pricing. The Consumer Banking Suite revenue increased 11% quarter-over-quarter driven by go-live deployments on large customer wins and ramping usage at larger customers. Non-GAAP gross profit was $25.6 million with a non-GAAP gross margin of 78%, up from 76% in the prior quarter. Non-GAAP operating income was $4.6 million, exceeding the high end of guidance, and representing a non-GAAP operating margin of 14%. The Consumer Banking Suite accounts for 39% of total revenue, up from 29% a year ago.

For the fourth quarter of 2025, total revenue is expected to be between $31.0 million and $32.5 million. Mortgage Suite revenue is projected to be flat to slightly down quarter-over-quarter, while Consumer Banking is expected to be down mid-single digits quarter-over-quarter, partially offset by revenue from large customers that went live in Q3. Fourth quarter non-GAAP operating income is expected to be between $2.5 million and $3.5 million. evPFL for Q3 was $86, and it's expected to be approximately $83 to $84 in Q4. No formal guidance for 2026 is provided yet, but it's noted that lower mortgage rates in 2026 are expected to drive industry growth, offsetting market share headwinds in mortgage.

There is a potential headwind from the roll-off of Mr. Cooper's business. Macro environment uncertainties and the cyclical nature of the mortgage industry pose risks. Also, the impact of Mr. Cooper on consumer banking revenue, with a tough prior year comparison due to a large customer going live late in 2024 that is now at steady state.

Q: Aaron Kimson asked about the tone of conversations with financial institutions (FIs) post-Rocket-Cooper deal.

A: Nima Ghamsari said big mortgage servicers are thinking through their strategies, and large lenders are calling for AI to stay competitive, aiming to be more automated and of higher quality after potential rate drops.

Q: Ryan Tomasello inquired about the revenue impact of Mr. Cooper and market share.

A: Jason Ream stated there will be a share headwind due to Mr. Cooper's volume decline, with most of the revenue from Mr. Cooper protected under contract until the second quarter of 2028.

Q: Joseph Vafi asked about the big renewal and renewal risk.

A: Nima Ghamsari said there's no renewal risk in the rest of the pipeline, and normalizing for the one renewal, the value per loan is up year-over-year, viewing the one renewal as a short-term headwind for long-term partnership.

Q: Michael Turrin asked about efficiencies and margin.

A: Jason Ream said efficiencies come from lower-cost geographies and a lean mindset, with investment decisions being judicious based on ROI, not just following macro market changes.

Q: Michael Ng asked about the long-term trajectory of evPFL and the mix of consumer banking vs mortgage.

A: Nima Ghamsari said she's bullish on the long-term, focusing on growing evPFL with existing customers and both consumer banking and mortgage segments have significant upside potential.

Q: Faith Brunner asked about Rapid products adoption and AI monetization.

A: Nima Ghamsari said there's strong adoption of Rapid products, with customers focused on quick home equity and refi solutions. AI is a new operating model with long-term upside, still in early stages but showing great potential for customers.