Summary
Blend Labs reported total revenue of $65.5 million for FY2022 Q2, up 104.4% from the prior-year quarter. First-half revenue was $137.1 million, up 114.4% year over year. The quarter included a full period of Title365, which the company acquired in June 2021. Organic trends were mixed. Total banking transactions on the Blend Platform rose 5% from the prior-year quarter, but mortgage transactions fell 25% as industry origination volumes dropped 37%. Consumer banking transactions grew by more than 138,000 year over year to about 215,000 in the quarter. The customer base reached 354, and 71% of customers used two or more Blend products, up from 59% in the prior-year quarter.
Gross profit rose 28.2% to $25.3 million, but gross margin fell to 38.5%, down 22.9 percentage points from the prior-year quarter. The operating loss was $471.4 million, driven by a non-cash impairment of Title365 intangible assets and goodwill. Net loss attributable to Blend Labs was $441.4 million, and diluted loss per share was $2.06. Operating cash flow was negative $92.6 million for the first half. Deferred revenue was $12.0 million, up 4.9% from the prior-year quarter. Remaining performance obligations fell 42.2% to $50.7 million, which points to weaker forward visibility.
Management is cutting costs. The April Plan eliminated about 200 positions, roughly 10% of the workforce, with $6.4 million in charges and savings starting in the third quarter. The August Plan eliminated about 220 more positions, with expected charges of $4.0 million and annualized compensation expense of about $27.3 million; savings are expected to begin in the fourth quarter. The company ended June 30, 2022 with $450.5 million in cash, cash equivalents, and marketable securities. Total debt outstanding was $225.0 million under a term loan, and a $25.0 million revolver was undrawn. The large net loss and negative operating cash flow show the cost actions are necessary.
Full-year 2022 consolidated revenue guidance is unchanged at $230 million to $250 million. The Blend Platform range was lowered to $135 million to $145 million from $140 million to $150 million, reflecting expectations of a larger mortgage industry volume decline. The Title365 range was raised to $95 million to $105 million from $90 million to $100 million, pointing to better than expected growth in home equity and default product lines. The main risks are macro and mortgage specific. The Mortgage Bankers Association expects overall mortgage originations to decline through 2022 and into the first half of 2023. Rising interest rates, inflation, housing affordability, and uncertain economic and political conditions have already pressured refinance activity. Title365 also faces integration and migration risk, and the impairment shows how quickly the value of that unit can change.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $65.5M | $71.5M | -8.4% | $32.1M | +104.4% |
| Gross profit | $25.3M | $28.9M | -12.5% | $19.7M | +28.2% |
| Gross margin | 38.5% | 40.4% | -1.8 pp | 61.5% | -22.9 pp |
| Research & development | $35.5M | $35.1M | +1.1% | $20.9M | +70.0% |
| Sales & marketing | $22.4M | $22.3M | +0.4% | $18.3M | +22.8% |
| General & administrative | $36.5M | $37.1M | -1.7% | $20.2M | +80.7% |
| Total operating expenses | $496.7M | $98.6M | +403.6% | $59.3M | +737.1% |
| Operating income (loss) | -$471.4M | -$69.7M | -575.9% | -$39.6M | -1089.4% |
| Operating margin | -719.3% | -97.5% | -621.8 pp | -123.6% | -595.7 pp |
| Net income (loss) | -$477.2M | -$72.4M | -559.0% | $5.8M | -8376.1% |
| Net margin | -728.1% | -101.3% | -626.9 pp | 18.0% | -746.1 pp |
| Diluted EPS | -$2.06 | -$0.32 | -$1.74 | $0.00 | -$2.06 |
Risks
Rising interest rates and declining mortgage origination activity are pressuring demand. For the three months ended June 30, 2022, mortgage transactions on the platform decreased 25% versus the prior-year quarter, and the MBA expects overall mortgage originations to decline in 2022 and into the first half of 2023.
The Title365 reporting unit triggered an interim quantitative impairment analysis as of June 30, 2022, and the company recorded impairment charges for goodwill and customer relationship intangible assets. The FY2022 Q2 operating loss widened to $471.42 million from $39.63 million in the prior-year quarter, and MD&A expects Title365 revenue to decline due to projected mortgage industry origination declines.
A small number of key customers account for a large share of revenue, especially in Title365 where the top five customers were 83.1% of segment revenue and Mr. Cooper was 58.8% for the six months from closing through December 31, 2021. Lower title transaction volume or loss of a key customer could significantly harm the title business.
Gross margin declined 22.9 percentage points to 38.5% in FY2022 Q2 versus the prior-year quarter. MD&A expects cost of revenue as a percentage of revenue to increase in the near term due to the anticipated decline in mortgage industry origination volume.
Remaining performance obligations decreased 42.2% in the current quarter versus the prior-year quarter, to $50.69 million from $87.70 million. The shift toward usage-based arrangements, which represented 52% of Blend Platform segment revenue for the six months ended June 30, 2022 versus 24% in the prior-year period, generally allows customers to terminate at any time.
A material weakness in internal control over financial reporting was identified in connection with the audit of the year ended December 31, 2021. Failure to maintain effective internal controls could result in material misstatements, restatements, or failure to meet reporting obligations.
Sales cycles are lengthy, generally six to nine months for smaller financial services firms and twelve to eighteen months or more for larger firms. The company also relies on customer self-reporting of completed transactions, which can make revenue estimation and forecasting difficult.
The April 2022 plan eliminated approximately 200 positions, and the August 2022 plan eliminated approximately 220 additional positions. The August plan is expected to reduce annualized compensation expense by approximately $27.3 million, but the company may not achieve projected cost savings or may face unintended consequences.
The workforce reductions and competition for talent may harm the company's ability to hire, retain, and motivate employees. As of December 31, 2021, a majority of Blend Platform segment employees had been with the company for fewer than 12 months.
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 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.