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01/11 16:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: while there are positive developments like strong consumer banking growth and AI-driven efficiencies, concerns arise from declining market share and revenue headwinds from the Mr. Cooper deal. The Q&A section reveals uncertainties around revenue impact and market share growth, with management avoiding specific guidance. These factors balance each other out, leading to a neutral sentiment prediction for the stock price over the next two weeks.
Total Revenue $32.9 million, down 1% year-over-year. The decline was driven by a decrease in Mortgage Suite revenue due to strategic transitions to lower revenue but higher-margin partnership models, churn, and lower pricing from a large renewal.
Mortgage Suite Revenue Down 18% year-over-year. The decline was attributed to strategic transitions to higher-margin partnership models, churn, and the effect of a large renewal with lower pricing.
Consumer Banking Suite Revenue Up 11% quarter-over-quarter. The increase was driven by go-live deployments on large customer wins and ramping usage at larger customers, across both core consumer banking products and home equity lending products.
Non-GAAP Gross Margin 78%, up from 76% last quarter. The increase reflects improved operational efficiency.
Non-GAAP Operating Income $4.6 million, representing a non-GAAP operating margin of 14%. This exceeded the high end of guidance and reflects disciplined cost management.
Free Cash Flow Negative $5 million for the quarter, bringing year-to-date total free cash flow to positive $1.5 million. The negative cash flow in the quarter was due to specific expenses like Blend Forum and lower capitalization of software development expenses.
Cash, Cash Equivalents, and Marketable Securities $82.3 million as of September 30, 2025, inclusive of restricted cash. This reflects a strong balance sheet position.
Economic Value Per Funded Loan (evPFL) $86 for Q3, in line with guidance. The metric reflects near-term headwinds due to strategic transitions and market conditions.
Market Share (Mortgage) 18.6% in 2024, down from 21.7% in 2023. The decline was driven by churn notices from customers during peak cyclical pressures in the mortgage industry.
New customer wins: Signed 14 new deals and expansions, including a 7-figure expansion with a top 20 U.S. bank for solar home equity lending.
Product innovation: Rapid Suite and AI products are gaining traction, with customers showing strong interest in AI-driven solutions for mortgage origination and home equity lending.
Consumer Banking Suite: Now represents 39% of total revenue, up from 29% a year ago, driven by high-margin non-interest income and sticky deposits.
Pipeline growth: Pipeline activity is up approximately 60% year-over-year, with multiple 7-figure consumer banking deals and top 10 bank opportunities in mortgage.
Market share: 2024 HMDA market share declined to 18.6% from 21.7% in 2023, primarily due to churn notices and cyclical pressures in the mortgage industry.
Profitability: Achieved fifth consecutive quarter of non-GAAP operating profitability, with Q3 non-GAAP operating income of $4.6 million and a 14% margin.
Cost structure: Streamlined operations over the past few years, resulting in a simpler, more profitable, and scalable platform.
Strategic transitions: Shifting from lower-margin services to higher-margin partnerships, impacting near-term revenue but improving long-term profitability.
AI and Rapid products: Investing in AI and Rapid Suite to address high-cost issues in mortgage origination and enhance customer value.
Mortgage Business Revenue Decline: The mortgage suite revenue declined by 18% year-over-year due to strategic transitions to lower revenue but higher-margin partnership models, churn, and lower pricing from a large renewal. This poses a risk to short-term financial performance.
Customer Churn: The company experienced churn from four small customers and anticipates further churn from Mr. Cooper, which will impact revenue and market share. The churn from Mr. Cooper alone is expected to reduce market share by approximately 100 basis points in 2026.
Economic Value Per Funded Loan (evPFL) Pressure: The evPFL metric has been declining due to strategic transitions and market conditions, with further declines expected in Q4 2025. This could impact profitability in the near term.
Seasonality and Market Conditions: Seasonal declines in mortgage volumes and challenging market conditions, including high costs of mortgage origination, are impacting revenue and operational efficiency.
Dependence on Strategic Transitions: The company is transitioning to higher-margin partnership models and new product adoptions, which may take time to yield results, creating short-term financial and operational risks.
Regulatory and Economic Uncertainty: The company acknowledges substantial risks and uncertainties, including regulatory and economic factors, that could impact its operations and financial performance.
Customer Concentration Risk: The expected churn of Mr. Cooper's home equity business and its impact on consumer banking revenue highlights a dependency on key customers, posing a risk to revenue stability.
Profitability: Blend expects to continue its trend of non-GAAP operating profitability into the fourth quarter of 2025, marking a continuation of its five-quarter streak of profitability.
Pipeline Activity: The company reports a strong pipeline activity, up approximately 60% year-over-year, with multiple seven-figure consumer banking deals and sizable top 10 banks in mortgage being actively pursued.
AI and Rapid Suite: Blend is making targeted investments in AI and its suite of Rapid products, which are expected to solve significant customer problems and drive future growth. Customers are showing urgency in adopting AI solutions, which Blend sees as a key to reducing mortgage origination costs.
Consumer Banking Suite: The Consumer Banking Suite now represents 39% of total revenue, up from 29% a year ago. Blend aims to expand adoption with large accounts and accelerate speed to market by standardizing out-of-the-box solutions in 2026.
Mortgage Suite: Blend is focusing on driving adoption of high-value products like Rapid Refi and Blend Close to grow its take rate and long-term potential. The company is transitioning to higher-margin partnership models, which may impact near-term metrics but are expected to benefit long-term profitability.
Market Share: Blend anticipates further market share headwinds in 2026, primarily due to lower volume from Mr. Cooper. However, the company expects industry growth driven by lower mortgage rates in 2026 to offset these headwinds.
Revenue Guidance for Q4 2025: Blend expects total revenue for Q4 2025 to be between $31.0 million and $32.5 million, with Mortgage Suite revenue flat to slightly down and Consumer Banking revenue down mid-single digit percentages quarter-over-quarter.
Mortgage Volume for Q1 2026: Blend expects mortgage volume for Q1 2026 to be between 1.07 million to 1.17 million units, reflecting a sequential decline in line with normal seasonal patterns.
Share Repurchase: In the third quarter, we repurchased 1.6 million shares worth more than $5 million, bringing the year-to-date total to $9.2 million and leaving $15.8 million remaining under our repurchase authorization as of quarter end.
The earnings call presents a mixed picture: while there are positive developments like strong consumer banking growth and AI-driven efficiencies, concerns arise from declining market share and revenue headwinds from the Mr. Cooper deal. The Q&A section reveals uncertainties around revenue impact and market share growth, with management avoiding specific guidance. These factors balance each other out, leading to a neutral sentiment prediction for the stock price over the next two weeks.
The earnings call highlights strong consumer banking growth, improved gross margins, and a record RPO, indicating robust performance and future potential. Despite a slight decline in mortgage revenue, the strategic shift to high-margin partnerships and innovative products like Rapid Home Equity are positive indicators. The Q&A section reveals confidence in overcoming economic pressures and leveraging AI, though some uncertainties remain. Overall, the positive aspects outweigh the negatives, suggesting a likely stock price increase.
The earnings call highlighted strong financial performance with a 12% revenue growth and improved gross margins. Despite a slight miss in economic value per funded loan, the company has positive free cash flow and a robust share repurchase program. The Q&A section revealed optimism about product expansion and growth, with management focusing on strategic partnerships and AI integration. While there are some transition risks and competitive pressures, the positive guidance and strategic initiatives indicate a likely positive stock price movement over the next two weeks.
The earnings report shows strong financial performance with significant growth in consumer banking and improved profitability metrics. The Q&A section highlights positive sentiment from analysts, focusing on new product growth and increased guidance for consumer banking. However, some concerns were noted about management's lack of specific historical data and vague responses. Overall, the strong revenue growth, improved margins, and optimistic guidance suggest a positive stock price movement.
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