Summary
Blend Labs reported first quarter fiscal 2022 revenue of $71.5 million, up 124.4% from $31.9 million in the prior-year quarter. Gross profit was $28.9 million, up 37.4% from $21.0 million. Gross margin fell to 40.4% from 65.9%. The operating loss widened to $69.7 million from $27.2 million. Net loss attributable to Blend Labs was $72.1 million, wider than the $27.1 million loss a year earlier. Diluted EPS was -$0.32, compared with -$0.60, so the per-share loss narrowed. Operating cash flow was -$45.8 million, down from -$20.4 million. Capital expenditures were $0.27 million, down 11.3% from $0.30 million. Deferred revenue was $14.17 million, and remaining performance obligations were $64.58 million. Operating margin was -97.5%, down from -85.4%.
Operational metrics show a company growing its customer base while the mortgage market shrinks. Blend added 8 new accounts for a total of 351 customers. About one-third of the customer base uses one or more Consumer Banking products, and roughly two-thirds use two or more software products. Total consumer banking transactions grew by more than 100,000 year-on-year to approximately 155,000 in the first quarter of 2022. Mortgage transactions on the platform decreased 16% from the prior-year quarter. Industry dollar volumes as reported by Fannie Mae decreased 44% over the same period. The company estimates that U.S. mortgage origination volumes fell 44% in the first quarter. Management anticipates a more pronounced decline of approximately 41% in 2022 mortgage origination volumes against 2021, compared with a 35% decline predicted at the end of March.
Blend reaffirmed its full year 2022 revenue guidance, which includes Blend Platform segment revenue of $140 million to $150 million and a consolidated total that carries the same outlook as before. The full year outlook assumes U.S. mortgage market origination volumes decline by approximately 41% from their 2021 level. It also assumes a high-single to low-double digit decline in full year Mortgage Banking revenue from full year 2021 levels, as market share growth mitigates industry volume declines. Consumer Banking and Marketplace revenue is expected to grow more than 100%, helped by the expected transition of revenue from the Title365 segment to the Blend Platform segment as customers move to the Blend Title solution. That transition is anticipated to commence in mid-2022.
The quarter also highlighted cost and market risks. In April 2022, Blend committed to a workforce reduction plan that eliminates approximately 200 positions, or approximately 10% of its current workforce. The plan is focused on streamlining title operations and general and administrative functions. The company estimates approximately $6.7 million in charges, including approximately $6.5 million in cash expenditures and approximately $0.2 million in stock-based compensation. Execution, including cash payments, is expected to be substantially complete in the second quarter of 2022. The eliminated positions represent annualized compensation expense of approximately $35.4 million, with cost savings expected to start in the third quarter of 2022. The mortgage market remains the biggest swing factor. Rising interest rates, rising inflation, and uncertain worldwide political and economic conditions have pressured transaction volumes. The Federal Reserve raised the federal funds rate by one quarter percentage point in March 2022 and again by another half percentage point in May 2022, while indicating it expects to raise that interest rate again in the future. The Mortgage Bankers Association forecast indicates residential mortgage originations are expected to steadily decline in 2022 and 2023 before leveling out in 2024. Blend expects Title365 closed orders to decrease in future periods as the legacy business migrates to the software-enabled platform.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $71.5M | $81.0M | -11.7% | — | — |
| Gross profit | $28.9M | $34.9M | -17.4% | — | — |
| Gross margin | 40.4% | 43.1% | -2.8 pp | — | — |
| Research & development | $35.1M | $28.7M | +22.2% | — | — |
| Sales & marketing | $22.3M | $28.0M | -20.2% | — | — |
| General & administrative | $37.1M | $34.3M | +8.1% | — | — |
| Total operating expenses | $98.6M | $94.8M | +4.0% | — | — |
| Operating income (loss) | -$69.7M | -$59.9M | -16.5% | — | — |
| Operating margin | -97.5% | -73.9% | -23.6 pp | — | — |
| Net income (loss) | -$72.4M | -$70.9M | -2.1% | — | — |
| Net margin | -101.3% | -87.6% | -13.7 pp | — | — |
| Diluted EPS | -$0.32 | -$0.57 | +$0.25 | — | — |
Risks
Rising mortgage interest rates and projected mortgage origination declines are pressuring transaction volumes. The U.S. Federal Reserve raised the federal funds rate in March 2022 and May 2022 and indicated further increases; for the three months ended March 31, 2022, mortgage transactions on the platform decreased 16% year over year, while industry dollar volumes decreased 44%.
Title365 revenue is highly concentrated in a few customers and title transaction volume has been lower than anticipated since the acquisition. For the six months from the Title365 closing through December 31, 2021, the top five Title365 customers accounted for 83.1% of segment revenue, with Mr. Cooper accounting for 58.8%.
The company has experienced rapid growth but does not expect to grow at historical rates in future periods. For the quarter, total revenue increased 124% due primarily to Title365 inclusion, while Blend Platform revenue increased only 3% year over year, with Mortgage Banking revenue decreasing 7%.
The company identified a material weakness in internal control over financial reporting in connection with the audit for the year ended December 31, 2021. Failure to remediate or additional weaknesses could result in misstatements or delayed reporting.
In April 2022 the company committed to a Workforce Reduction Plan eliminating about 200 positions, or approximately 10% of the workforce, with estimated charges of approximately $6.7 million. Risks include execution delays, higher-than-expected charges, and failure to achieve projected annualized cost savings of approximately $35.4 million.
The company expects significant growth through acquisitions and partnerships, including Title365, and faces integration and management risks. The MD&A states that Title365 title insurance and other services revenue will face significant headwinds to growth and a decline due to projected mortgage industry origination volume decline.
The market for cloud-based banking software is intensely competitive, with point solution vendors, back-office software providers, and in-house systems. Competitors may have greater resources and offer discounted pricing, which could reduce demand, pricing, or margins.
The sales process is lengthy and unpredictable, involving prolonged evaluations against competitors. Sales cycles generally range from six to nine months for smaller financial services firms and twelve to eighteen months or more for larger firms, creating revenue timing risk.
The Workforce Reduction Plan may harm employee morale, culture, and retention, and the company faces intense competition for highly skilled employees in the San Francisco Bay Area. Volatility in the trading price of Class A common stock could reduce the perceived value of equity awards.
A December 2021 Log4j vulnerability highlighted exposure to third-party and open-source software risks; the company cannot guarantee all vulnerabilities have been patched in every dependent system. Cyberattacks are increasing in frequency and sophistication, and remote work has heightened these risks.
Revenue under usage-based arrangements depends on customer self-reporting of completed transactions, which may be untimely or inaccurate. This can impair revenue estimation and forecasting, especially as usage-based arrangements represented 48% of Blend Platform segment revenue for the three months ended March 31, 2022.
Nima Ghamsari beneficially owned approximately 70% of total voting power as of December 31, 2021 and could hold approximately 89% if all equity awards were exercised as of March 31, 2022. This concentrated control limits stockholder influence and may affect market price.
SaaS KPIs
All quarters →Non-GAAP Loss from Operations
Summary, forecast, risks and KPIs are extracted from Blend Labs, Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.