Summary
Blend Labs reported first quarter 2023 revenue of $37.3 million, down 48% from $71.5 million in the prior-year quarter. Gross profit fell 45% to $15.9 million from $28.9 million. Gross margin was 42.5%, up 2.1 percentage points from 40.4%. The company posted a GAAP operating loss of $61.4 million, compared with $69.7 million a year earlier, so the loss narrowed. Net loss attributable to Blend Labs narrowed to $65.4 million from $72.1 million. Diluted EPS was negative $0.28, compared with negative $0.32. Operating margin was negative 164.5%, down 67.0 percentage points from negative 97.5%. On a non-GAAP basis, loss from operations was $30.7 million, compared with $39.5 million, and non-GAAP net loss per share was negative $0.15, compared with negative $0.20.
Operationally, Blend processed 182 mortgage banking transactions in the quarter, alongside 427 title closed orders. The company continued to take share; its mortgage banking software processed 23.2% of total market originations as measured by the Mortgage Bankers Association in the second half of 2022, up from 14.5% in the second half of 2021. Navy Federal Credit Union selected Blend Deposit Accounts, expanding its banking technology partnership with Blend. Blend also moved forward with its January workforce reduction plan, which eliminated approximately 340 positions. The company incurred approximately $11.7 million in charges tied to the plan and an additional $1.1 million for executive transition costs. The eliminated positions represent annualized compensation expenses of approximately $43.4 million, and Blend expects the plan's execution to be substantially complete in the second quarter of 2023. Management said its lower cost structure is driving improvements in operating performance.
Cash flow and backlog metrics showed strain. Operating cash flow was negative $46.7 million, down 1.8% from negative $45.8 million in the prior-year quarter. Capital expenditures were $0.3 million, up 13.4% from $0.27 million. Deferred revenue was $13.0 million, down 7.9% from $14.2 million. Remaining performance obligations were $43.9 million, down 32.1% from $64.6 million. As of March 31, 2023, Blend held cash, cash equivalents, and marketable securities of $306.9 million. Total debt outstanding was $225.0 million in the form of a five-year term loan, and the $25.0 million revolving line of credit remained undrawn. Accumulated deficit stood at $1,228.4 million. Management said it believes current cash, cash equivalents, marketable securities, and availability under the revolver will be sufficient to fund operations for at least the next 12 months.
Blend's guidance covers the second quarter of 2023 and includes a non-GAAP net operating loss of $26.5 million to $25.0 million. The outlook assumes an estimated 37% year-over-year decline in mortgage volumes from the second quarter of 2022 to the second quarter of 2023, as projected by the Mortgage Bankers Association. The industry backdrop stays difficult. The Mortgage Bankers Association expects overall mortgage originations to keep declining in 2023 before recovering in 2024. In the first quarter, mortgage transactions on Blend's platform decreased 52.0% from the prior-year period, while industry origination volumes decreased 58% over the same period.
Named risks include changes in mortgage interest rates, credit availability, real estate prices, inflation, and consumer confidence. Blend also points to the risk that it fails to retain or acquire customers cost effectively, that customers reduce their use of its products, that key customer relationships are terminated or scaled back, and that it cannot compete in highly competitive markets. Other disclosed risks cover managing growth, a limited operating history in an evolving industry, integration of the Title365 acquisition, restructuring actions that may not deliver the desired outcomes, and impairment charges on certain assets. The company noted that economic conditions and the financial condition of some financial customers remain highly uncertain.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $37.3M | $42.8M | -12.7% | $71.5M | -47.8% |
| Gross profit | $15.9M | $14.4M | +10.0% | $28.9M | -45.1% |
| Gross margin | 42.5% | 33.7% | +8.8 pp | 40.4% | +2.1 pp |
| Research & development | $26.3M | $33.2M | -21.0% | $35.1M | -25.2% |
| Sales & marketing | $17.6M | $20.0M | -11.9% | $22.3M | -21.4% |
| General & administrative | $20.7M | $33.4M | -38.1% | $37.1M | -44.3% |
| Total operating expenses | $77.3M | $89.6M | -13.7% | $98.6M | -21.6% |
| Operating income (loss) | -$61.4M | -$75.2M | +18.3% | -$69.7M | +11.9% |
| Operating margin | -164.6% | -175.7% | +11.1 pp | -97.5% | -67.0 pp |
| Net income (loss) | -$66.2M | -$124.2M | +46.7% | -$72.4M | +8.6% |
| Net margin | -177.3% | -290.3% | +113.0 pp | -101.3% | -76.0 pp |
| Diluted EPS | -$0.28 | -$0.35 | +$0.07 | -$0.32 | +$0.04 |
Risks
The business is substantially dependent on mortgage and financial services transaction volumes. For FY2023 Q1, total revenue decreased 47.8% to $37.34 million versus FY2022 Q1, MD&A reported a 52.0% decrease in mortgage transactions, and Title segment revenue decreased 68% to $12.63 million, with the MBA expecting further 2023 origination declines before recovery in 2024.
Rising interest rates have reduced consumer borrowing and mortgage refinance activity while increasing debt costs. Interest expense increased 36% to $7.6 million in FY2023 Q1, and the floating-rate Term Loan effective interest rate was 13.96% as of March 31, 2023.
A small number of customers drive significant revenue, especially in Title. For 2022, top five Title customers accounted for 79.7% of Title segment revenue, with Mr. Cooper alone at 57.0%, and lower than anticipated title transaction volume since the Title365 closing may continue.
On April 28, 2023, the company received NYSE notice of noncompliance with Section 802.01C because the average closing price of Class A common stock was less than $1.00 over a consecutive 30 trading-day period. Failure to regain compliance within six months could lead to delisting, reduced liquidity, and penny stock status.
As of March 31, 2023, accumulated deficit was $1,228.4 million, and FY2023 Q1 operating cash flow was negative $46.65 million, down 1.8% versus FY2022 Q1. MD&A states the company may require additional capital resources and the credit facility contains a minimum liquidity covenant and mandatory prepayment provisions.
The January 2023 workforce reduction plan eliminated approximately 340 positions, incurred approximately $11.7 million in charges plus $1.1 million for executive transition costs, and targets $43.4 million in annualized compensation savings. Execution risks include higher than anticipated charges, failure to achieve projected savings, or unintended business consequences.
Sales cycles are lengthy, generally six to nine months for smaller financial services firms and twelve to eighteen months or more for larger firms, and macroeconomic conditions including rising interest rates may impact them. The success-based model also relies on customer self-reporting of completed transactions, making revenue estimation difficult.
The ongoing integration of Title365 has resulted in greater than anticipated costs and management attention and may not achieve anticipated benefits, including cost savings and synergies. Prior impairments fully wrote off Title goodwill and customer relationship intangible assets, and further market capitalization declines increase the risk of another impairment charge.
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 FY2023 (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.