Digital Lending Software Firm Blend Shares Key Updates

The team at Blend (NYSE:BLND) says they have always believed that their customers are “best positioned” to win in a downturn when “leveraging technology that helps save costs, grow market share, and innovate faster.”

Today they are seeing this “play out in practice with their Q1 earnings results.”

The headline is: they’re growing their mortgage market share alongside their customers, they claim to have “outperformed their total company revenue guidance, and they expect to see continued positive momentum in Q2 and beyond.”

Blend says it credits this outperformance “to their valued customers, who have shown their strength and resilience during an extremely challenging period painted by compressed margins and heightened competition.”

Despite the market headwinds, they mortgage customers “continue to increase utilization, and are winning market share as a result.”

Blend saw ongoing adoption of their Mortgage Suite add-ons, “allowing more customers to benefit from their cost-saving features like soft credit pull capabilities and automated condition management.”

This increased utilization is “helping to drive the growth of their total funded loan volume. Blend’s mortgage banking software processed 23.2% of the total market originations based on Mortgage Bankers Association data in the second half of 2022, up from 14.5% in the second half of 2021.”

This growth “included two of our larger lenders, including Atlantic Coast Mortgage, who recommitted to Blend after using one of our competitors but coming back to them for the richer set of capabilities we offer and the benefits our platform delivers to them.”

They’re also “making early strides in growing their consumer banking suite.”

They closed the quarter “with $5.2 million in revenue, up from $3.9 million in Q1 2023, and expanded our partnership with Navy Federal Credit Union.”

As noted in a blog post, this is “one of their largest deals ever, at a critical time for institutions striving to grow deposits.”

Navy Federal will soon “power a multi-channel digital account-opening process for new membership through the Builder platform, all made possible by Blend Builder.”

They are also evolving their model by “accelerating their time to value for customers, and by helping them serve their consumers better and cheaper than would otherwise be possible.”

They believe Blend Builder will “provide a meaningful benefit here, as they leverage the power of Composable Origination to simplify and accelerate our deployments.”

As mentioned in the announcement:

“On our total company revenue, we came in well ahead of expectations. We achieved $37.3 million, beating the top end of our guidance by 7%. We believe this validates the strength of our deepened wallet share, even with a small outperformance on loan volume. The growth in our Consumer Banking Suite also benefited from a stronger than expected home equity volume in the last month of the quarter.”

The firm added:

“Our revenue momentum is also contributing to our accelerated path to profitability which is essential not just for Blend as a company, but for our customers, team members, and shareholders. The cost improvements we made earlier this year have strengthened our operations, without compromising investments in our customer base and product innovation. And this quarter, we’re beginning to see these cost improvements make a big impact on our bottom line.”

They further noted:

“We came in well ahead of our expectations on operating expenses improvements, with a sequential improvement of $11m from last quarter or $21m from the same period last year. We have over $307M in cash to continue to fund our operations, giving us ample runway and liquidity based on our current outlook.”

Their software gross margin “was approximately 75% in the first quarter, up from 72% for the same period last year.”

Their gross margin improvements “reflect the continued cost optimization programs we’ve implemented, the benefit of higher margin Consumer Banking revenues, and the continued expansion of their mortgage product through innovation and the enablement of additional feature sets.”

Looking ahead, they’re conservatively optimistic “about the tailwinds we’re observing.”

They expect Q2 platform revenue “to be even better than Q1, and have increased our Q2 revenue guidance to reflect this.”

They’re making material, visible progress “towards their path to profitability.”

The firm concluded:

“We are dedicated to our mortgage customers, who are showing their strength through these tough times. And we believe Blend Builder is the infrastructure to create massive value across the banking software stack for our customers. Our customers need the innovation, speed, and cost efficiency of our technology now more than ever. We are a critical partner in helping them grow market share, and we won’t stop until every aspect of the way banks originate products becomes digital and data driven.”

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