Summary
Blend Labs closed its fiscal 2021 second quarter with revenue of $32.1 million, an increase of 46.3% from the prior-year quarter. The six-month revenue total reached $63.9 million, up 70.4% from the same period a year earlier. Growth came from higher transaction volume on the company's cloud banking platform. Total banking transaction volume exceeded 520,000 in the quarter, up 51% year over year. The six-month period produced 1,015 banking transactions, compared with 535 in the prior-year six-month period. Management pointed to 32 of the top 100 U.S. financial services firms by assets under management as customers, up from 31 at the end of 2020, and 28 of the top 100 U.S. non-bank mortgage lenders, up from 24 at the end of 2020.
Profitability presented a split picture. Gross profit was $19.7 million, up 48.6% from the prior-year quarter, and gross margin improved to 61.4%, up 1.0 percentage point from the prior-year quarter. Operating loss was $39.6 million, and the operating margin was -123.6%, down 28.7 percentage points from the prior-year quarter. The GAAP net result for the quarter was income of $5.8 million, while the six-month period recorded a net loss of $21.3 million. On a non-GAAP basis, loss from operations was $26.3 million, compared with $16.4 million in the prior-year quarter, reflecting higher stock-based compensation and acquisition-related costs.
Cash generation remained negative. Operating cash flow was -$32.7 million in the quarter. For the first six months, operating cash flow was -$53.1 million, down 33.6% from the prior-year six-month period. Capital expenditures were $0.22 million in the quarter and $0.52 million for the six months, down 3.0% from the prior-year six-month period. Deferred revenue was $11.5 million at June 30, 2021, on a current portion basis, and remaining performance obligations were $87.7 million. The company said it expects to continue incurring operating losses for the foreseeable future as it invests in the business, and it may require additional capital.
The quarter also brought major strategic moves. Blend closed its acquisition of 90.1% of Title365 on June 30, 2021. Because the deal closed on the last day of the quarter, Title365 contributed no revenue or expenses to the reported three-month and six-month results. Customer wins included Mr. Cooper, KeyBank, Bilt Technologies, and BECU. The company also deepened relationships with Utah Community Credit Union, Fairway Independent Mortgage, and BMO Harris Bank. Blend completed its initial public offering on July 20, 2021, selling 20,000,000 shares of Class A common stock at $18.00 per share and receiving net proceeds of $325.7 million. On August 17, 2021, it sold an additional 2,468,111 shares and received net proceeds of $41.4 million. To fund the Title365 purchase, the company entered a credit agreement with a $225.0 million term facility and a $25.0 million revolving facility. The term facility was funded on July 1, 2021, and the revolving facility is undrawn.
Guidance points to a much larger business in the full fiscal year 2021. Blend expects revenue of $226 million to $232 million. Pro forma revenue, which includes Title365 as if the acquisition closed on December 31, 2020, is expected to be $365 million to $371 million. Management said the revenue growth rate should increase in the near term because of Title365, then decline in periods after the next twelve months following the close. Cost of revenue as a percentage of revenue is expected to increase in the near term. Risks include failure to retain or acquire customers cost-effectively, customers failing to maintain utilization of the platform, loss or reduction of key customer relationships, intense competition, difficulty managing growth, a limited operating history, challenges integrating Title365 or realizing its benefits, and changes in market interest rates. The company also noted that COVID-19 has disrupted operations and could continue to affect demand and the economy.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $32.1M | — | — | — | — |
| Gross profit | $19.7M | — | — | — | — |
| Gross margin | 61.5% | — | — | — | — |
| Research & development | $20.9M | — | — | — | — |
| Sales & marketing | $18.3M | — | — | — | — |
| General & administrative | $20.2M | — | — | — | — |
| Total operating expenses | $59.3M | — | — | — | — |
| Operating income (loss) | -$39.6M | — | — | — | — |
| Operating margin | -123.6% | — | — | — | — |
| Net income (loss) | $5.8M | — | — | — | — |
| Net margin | 18.0% | — | — | — | — |
| Diluted EPS | $0.00 | — | — | — | — |
| Customers | 18 | — | — | — | — |
Risks
On June 30, 2021, Blend completed the acquisition of 90.1% of Title365, which contributed no revenue or expenses in the three and six months ended June 30, 2021. Integration and management of the acquired business may divert management attention, fail to realize anticipated benefits, or expose Blend to additional liabilities.
In connection with the Title365 acquisition, Blend entered a credit agreement with a $225.0 million term facility and a $25.0 million revolving facility; the term facility was funded on July 1, 2021 and fully drawn. MD&A states that other expenses are expected to increase as a result of interest expense related to this debt financing.
Revenue increased 46.3% in the quarter and 70.4% year to date versus the prior-year periods, but management states it does not expect to grow at historical rates in future periods. MD&A also expects the revenue growth rate to decline after the next twelve months following the Title365 acquisition.
Blend had a net loss of $21.3 million for the six months ended June 30, 2021, and operating loss widened to $66.8 million year to date from $43.9 million in the prior-year period. Operating cash flow was negative $53.1 million for the six months ended June 30, 2021, down 33.6% from the prior-year period.
For 2020, Blend's top five customers accounted for 34% of revenue, and 18 customers generating more than $1 million in annual revenue represented 53% of revenue. Many customers do not have long-term contractual financial commitments and may reduce or cease use of the platform.
Increased interest rates may reduce consumer borrowing and mortgage or refinance volume, which could lower transactions enabled through Blend's platform and adversely affect its transaction-based revenue. A substantial majority of transactions enabled through the platform are mortgage loans and refinances.
Blend's sales cycles are lengthy and unpredictable, generally ranging from six to nine months for smaller financial services firms and twelve to eighteen months or more for larger firms. The company may spend substantial time and money on sales efforts without assurance of a sale.
Blend faces intense competition from point solution vendors, providers of back office software with proprietary digital capabilities, and systems developed internally at financial services firms. Competitors may have greater resources, established customer relationships, and lower pricing, which could reduce demand or pressure margins.
Blend relies on customer self-reporting for usage and overage fees, and usage-based arrangements generally can be terminated at any time by the customer. Usage-based revenue represented 24% of revenue for the six months ended June 30, 2021 compared with 12% for the six months ended June 30, 2020, increasing forecasting risk if customer reporting is inaccurate or untimely.
As of June 2021, a majority of Blend's employees had been with the company for fewer than 12 months, and it faces intense competition for highly skilled employees, especially in the San Francisco Bay Area. Failure to hire, retain, and motivate employees could impair growth and execution.
Nima Ghamsari holds all Class B common stock and, as of July 20, 2021, approximately 71% of total voting power, or approximately 89% if all equity awards held by him were exercised for cash. This concentrated control limits other stockholders' ability to influence corporate matters and may affect index inclusion and the market price of Class A common stock.
SaaS KPIs
All quarters →Non-GAAP Loss from Operations
Summary, forecast, risks and KPIs are extracted from Blend Labs, Inc.'s SEC filings for Q2 FY2021 (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.