Blend Labs, Inc.

Thank you for standing by. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the BLENDS live stream. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thanks. I would now like to turn the conference over to Winnie Ling. You may begin.

Good afternoon, and welcome to Blend's third quarter 2024 earnings conference call. My name is Winnie Ling, and I'm the head of legal and people for the company. Joining us today are Nima Gamsari, co-founder and head of Blend, and Amir Jafari, our head of finance and administration. After Nima and Amir deliver their prepared remarks, we'll open up the call for questions. You can find the supplemental slides on our investor relations webpage at investor.blend.com. During the call, we'll refer to certain non-GAAP measures that are reconciled to GAAP results in today's earnings release and in the appendix to our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial measures we discuss today, including our profitability, refer to non-GAAP. Also, certain statements made during today's conference call regarding Blend and its operations, in particular, its guidance for the fourth quarter of 2024, may be considered forward-looking statements under federal securities laws. The company cautions you that forward-looking statements involve substantial risks and uncertainties, and a number of factors, many of which are beyond the company's control, could cause actual results, events, or circumstances to differ materially from those described in these statements. please see the risk factors we've identified in our most recent 10-K, 10-Qs, and other SEC filings. We're not undertaking any commitment to update these statements if conditions change, except as required by law. With that said, I'll now turn the call over to Nima.

Welcome, everyone, and thank you for joining our third quarter earnings call. I'm excited to start by announcing that this quarter marks our first positive non-GAAP operating income quarter as a public company. Over the past few quarters, I've emphasized our commitment to building for the long haul while achieving profitability, regardless of macroeconomic conditions. And this quarter, we delivered on that promise, which I'll expand on shortly. And despite mortgage rates remaining high, around 7% on the prevailing 30-year mortgage, we're seeing a positive sentiment shift in the industry. The mortgage industry's outlook is improving with renewed willingness to invest in their businesses, And this optimism is reflected in both our pipeline and growth within our existing customer base. Lastly, our consumer banking business also continues to grow meaningfully, surpassing our previously shared growth target of 35% and reaching over 50% growth this quarter compared to the same time last year. And we're now on the precipice of eight figures of quarterly revenue in consumer banking. This steady growth is fueled by our success with existing customers and the addition of new ones each quarter. In short, I would characterize Q3 with one word, momentum. Profitability is a milestone, but it's not only our ultimate goal. We aim to reshape the industry, and we're still at the beginning of that journey. And we're executing on that vision every single day. Just this past week, we closed two significant deals. The first was with a leading mortgage servicer, and the second was a consumer banking deal with a top 10 bank by assets. We're also closing in on another top 10 bank to join our mortgage platform. So as you can see, we're committed to leveraging this momentum for efficient, profitable growth over the long haul. Diving into the quarter, let's begin by discussing profitability, how we achieved it, and why we're well-positioned for the future. Philosophically, we're transitioning to a simpler software-focused model. Our strength lies in our platform, which enables best-in-class origination experiences across a whole suite of solutions. We've invested in creating a broad customer base that processes millions of applications annually, and our Blend Builder platform allows us to innovate faster and more cost-effectively for our customer base. This combination is part of our unique advantage, helping us create frictionless, low-cost origination experiences like, for example, our next-generation rapid refi solution, and bring them to market regardless of the macroeconomic environment. But this is just one piece of the puzzle, us building these solutions. The platform also enables our partners to build net new value for our customer base. In Q3, we entered into strategic partnership and homeowners insurance resignation, which is a key part of the mortgage journey, allowing our customers to have an amazing experience through this partner with minimal operational complexity and cost on our end. Amir will talk about the positive financial impact of this later. We aim to take this blueprint and enable partners to do this broadly across our software base. As more partners build on Blend, they can create new value for our customers and share in this value creation with us as well. We expect to see an acceleration in these partnerships going forward as we open up our platform to more partners. These things together are what ultimately create operational leverage for us. You're seeing the outcome of years of work to create that first real quarter of platform profitability in a really tough market, and we hope to continue this momentum going forward. Now let's shift to the mortgage industry. As I mentioned earlier, we're seeing renewed life and momentum in a mortgage customer and prospect base. While rates remain high and volumes are muted, we're seeing optimism for what's ahead. And now that we've delivered our first profitable quarter in this tough market, I'm not going to dwell on the macro on this call. And instead, I'm going to focus on what we can control, our products, our pipeline, and our customer base, areas where we're committed to being the best. Starting with our products, our customers rely on us to invest ahead of the curve. Our piloted next-gen refi solution, which we're calling Rapid Refi, is an example of just that. It's a solution that we've been developing this year to support the return of refinance volume at scale. This solution is designed to be the most integrated, frictionless experience we've ever created, and the goal is to drive higher conversion and higher retention for our customer base, which are two very important goals for them. As a result, the demand for this has been strong. Our hope with solutions like this is that the increased value we drive to our customers, better unit economics for them, will in turn turn into increased revenue and unit economics for us for every loan. And for prospects who are not on Blend yet, it gives them another entry point to get started with us. Speaking of our pipeline, our mortgage prospect base is maturing along the lines we discussed in prior calls. It reflects the broader optimism we're sensing in the industry. I can tell that people are trying to invest in their mortgage business again. And one of our recent wins was Pentagon Federal Credit Union for our mortgage products, which brings us to seven of the top 10 credit unions by number of member accounts as customers of ours. Our Q4 pipeline is also strong and includes a range of independent mortgage banks, servicers, and mid to large-sized banks and credit unions. Institutions that were largely dormant through 2023 are now preparing for the future are poised to close this year strong adding more large logos as the industry looks ahead to 2025 and a brighter future our customer base it's no secret they went through significant challenges in 2023 and with some of them using that time to implement new technology for their consumers but most of them holding off now that the industry is achieving profitability again we expect that adoption will only accelerate going forward and we're seeing that in our data where we're seeing increased implementation of our built-in features like our Spanish language intake and also our revenue generating add-ons like BlendClose. For instance, South State Bank, a $44 billion bank with over a million customers, recently adopted BlendClose, cutting their loan processing time from seven days to just 48 hours and enabling customers to close their loan digitally from the comfort of their home. This kind of adoption strengthens our partnership with those banks, enhances customer value for every loan that they do, and over time helps us grow our unit economics. Together, the combination of our products, our pipeline, our customer base, those are the things that make me so excited about the future. I recently returned from the Mortgage Bankers Association Annual Conference, and the energy and tone reminded me of 2019, a time before COVID when there was a real responsibility for transforming the mortgage industry, building new things, rolling out new technologies, and we at Blender are happy to be part of this journey. Switching gears to consumer banking, on the product side, we recently refreshed our deposit and member onboarding solution. We've integrated things like mobile carrier authentication, passwordless login, seamless cross-sell features, allowing consumers to open accounts in just a few taps. This kind of smooth, transparent experience, frictionless experience, is what today's consumers expect, and our hope for our institutions is that it will ultimately lead to more and deeper consumer relationships for them. As a result of this innovation, our consumer banking pipeline is strong. In recent weeks, we signed Pentagon Federal Credit Union for home equity lending and another top 300 financial institution by customer accounts for deposit account opening. And this is just the beginning for Q4, with a pipeline that includes two top 10 banks for home equity lending, a large regional bank for unsecured lending, and ongoing growth across credit unions of all sizes. And our customer base is feeling the benefits of partnering with Blend. We're delivering real value to our customers through this work. For example, the passwordless authentication that I mentioned earlier drove significant conversion increases for BCU, conversion being so important to them, and that's one of the largest credit unions in the country by customer accounts. And another recent customer, Andrews Federal Credit Union, recently went live on our platform within weeks, a deployment they described as one of their easiest with any technology partner. To top it all off, One of our largest credit union customers is now fully rolled out with onboarding for every new online member and plans to expand to all channels next year. We're going to keep executing on our consumer banking suite and building on the momentum we have now. This is just the beginning for Blend in this space. And while we're on the precipice of eight figures of quarterly revenue in this area, our customers need more from us over the next decade. And we intend to innovate here and deliver on that in a methodical, high ROI way. We're going to lead the charge on what great looks like for origination software. To summarize the quarter, profitability was a key milestone, but it's just one step on a very long journey for us. We expect to continue to grow profitably supported by our platform and our momentum in both mortgage and consumer banking segments. And while we're seeing the mortgage industry start to recover from the challenges of 2023 and early 24, consumer banking is building solidly on our success. will maintain this momentum through customer expansion, pipeline development, and innovation, the same ingredients that have gotten us this far. With that, I'll turn it over to Amir to walk through the financials.