Blend Labs, Inc.

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 .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 slide. Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial measures we discussed 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 security 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. 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 outlook is improving with renewed willingness to invest in our 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 mortgage 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 -in-class origination experiences across a whole suite of solutions. We've invested in creating a broad customer base that brought us to 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 origination, 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 RN. Amir will talk about the positive financial impact of this later, but 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 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 background this call, and instead I'm going to focus on what we can control. 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 NextGen 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 that. 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 starting to invest in their mortgage businesses again. And one of our recent wins was Pentagon Federal Credit Union for our mortgage product, 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 intermittent 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 and 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 Blend Close. For instance, South State Bank, a $44 billion bank with over a million customers, recently adopted Blend Close, cutting their loan processing time from seven days to just 48 hours and enabling customers to close their loan digitally from the company's website. And that's 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 Blend are happy to be part of this journey. Switching gears to consumer banking, on the product side, we recently refreshed our deposit 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 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 openings. 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 challenge of 2023 and early 2024, consumer banking is building solidly on our success. We'll 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.

Thank you, Nima, and good afternoon, everyone. I'm pleased to be joining you today to discuss our financial results for the third quarter. Our third quarter marks another period of strong execution. We returned to -over-year revenue growth. Our consumer banking business accelerated even faster. We achieved a new high for our economic value per funded loan, and our RPO landed above 100 million, another record for blend. And last, but certainly not least, we achieved operating profitability one quarter out of our target. There's a lot to talk about, but before I jump into the results, let me just remind you that, unless otherwise stated, including our references to profitability, all results are non-GAAP. Total company revenues in the third quarter were 45.2 million, ahead of the high end of our guidance and representing an 11% -over-year growth. We reported platform revenue of 33.1 million, which exceeded the high end of our guidance by 7% and grew 16% -over-year. Our mortgage suite revenue was $21.5 million, representing a 6% -over-year growth and a 17% sequential growth, in line with the expectation we shared in our last call that industry originations would be higher in the third quarter. In consumer banking, revenue grew 54% -over-year to a total of $9.5 million. Our pace of growth is now well ahead of the 35% CAGR target we shared at our investor day. We also generated $2 million of professional services revenue, down slightly from the $2.1 million we generated during the same period last year. And we reported title revenue of $12.1 million, ahead of the midpoint and near the high end of our guidance for the quarter. Moving on to gross profit, total company non-GAAP gross profit was $26.3 million. Our non-GAAP blend platform segment gross margins were 75% compared with 71% a year prior. We reported non-GAAP software gross margins of 80% compared with the 79% we reported both a year prior and in our second quarter. Over the long term, we expect our software business to be generating at least 80% margins, so we're back on the right track here. Our non-GAAP title margins came in at 12% for the third quarter, compared with 17% we reported a year prior. While our title margins are up -over-quarter, there is still room for improvement. The -over-year pressure came from a mixed shift in title transactions we expect to normalize over time. Non-GAAP operating costs for the third quarter totaled $26.3 million, compared with $38.2 million in the previous year. We continue to benefit from the efficiency programs implemented over the past year and our commitment to simplifying the business as part of our platform-first strategy. We added more efficiency in the business as we simplified our focus and our margins increased across the board. Along with a strong quarter for revenue, we achieved non-GAAP operating profitability in the third quarter, a full quarter ahead of our target. In generating non-GAAP income from operations, we significantly exceeded the high end of our guidance range, which was for a non-GAAP loss from operations of $4 million. This is an important moment for Blend. Now that we've reached this milestone, our focus will be on sustainable, profitable growth and generating excess returns to reinvest in our business and create even more shareholder value. Free cash flow for the quarter was negative $1.4 million, which compares to negative $25.9 million in the same quarter last year. Having achieved non-GAAP operating profitability earlier than our target, we're also closing in on generating positive free cash flow. Although we are not sharing guidance on positive free cash flow just yet, it is important to note that our non-GAAP operating profit was our first step in being able to transition and focus on being free cash flow positive. With our focus on prioritizing longer commitment and larger pre-purchases in our contracts, as well as better revenue and expense alignment, we're confident we're right on the cusp of reaching this milestone next. We ended the quarter with approximately $124 million of cash, cash equivalents, and marketable securities inclusive of restricted cash. We believe the strength of our balance sheet is also a differentiator and allowing us to focus on achieving our strategic initiatives with a focus on innovation. Shifting gears, I'd like to share our latest thinking on our market share as we continue to evolve this metric to ensure accuracy. We determined that the best way to do this is to no longer rely on third-party estimates and to shift our measurement of the market to the Home Mortgage Disclosure Act data, also known as HMDA. No measurement is perfect, and there still are some small limitations here that we are aware of. For example, this data does not include some small lenders and it can only be presented for annual periods instead of the semiannual increments we've shown previously. Despite this, we believe this bottoms-up data set represents the best way we can understand how our business is performing within the market in a detailed way. Based on the HMDA data, in 2023, Blend achieved a 21.7 share of HMDA originations, a 120 basis point increase from 2022. However, given heightened industry churn in 2023, especially among some small lenders and independent mortgage banks, we expect that Blend's 2024 HMDA share will be somewhere in the range of .7% to 20.2%. We're confident this trend is behind us and expect a minimal impact from 2024 churn due to the strong customer retention, a robust pipeline, and recent customer wins like PenFed. Furthermore, our churn has stabilized to the low levels that we have seen in the prior years, and customer health is recovering. When comparing this minimal churn to this year's customer wins and deals in our pipeline that we believe have a high probability to close by the end of this year, we believe we're back in a position of gaining share again. This gives us confidence we can achieve the market share targets on an equivalent basis that we shared at investor day over the next two years. Detailed historical HMDA transaction data is available in the latest disclosures. Moving on to some recent developments, we entered into a strategic partnership to help fuel the next phase of growth in our platform business. As part of the agreement, Blend's home insurance agency operations have been acquired by Covered Insurance Solutions, a premier provider of embedded insurance solutions, and we've granted Covered a license to integrate their solutions directly into our platform. In return, we received cash consideration, an annual platform fee during the term of the license, and a share of the future revenue in connection with the insurance solutions provided through our platform. This partnership transitions Blend's insurance services from an exclusively in-house model to one that leverages a specialized partner to provide an even more comprehensive insurance marketplace. We expect to deliver the same -in-class experience to our customers while removing the costs we previously incurred to operate this business. Now almost every dollar earned by Blend in this business flows to the bottom line. With a simpler cost structure, we expect our overall profitability to increase, starting as soon as the fourth quarter of this year. As we continue to focus on simplifying Blend and our cost structure while executing on ways to enhance our platform, we expect to announce similar future partnerships. We're finding we can accelerate our goals by bringing in the right partners. Shifting gears, our mortgage suite economic value per funded loan increased by over $2 compared to last quarter and approximately $13 year over year, reaching $99, just shy of our $100 target for the end of 2024. With the transaction I noted above, there will be a reduction in the insurance business contribution to our economic value per funded loan. However, each transaction's contribution profit will ultimately increase because of it. This shift will drive a slight decline in our economic value per funded loan in Q4, with an expected level of around $95 by year end. To reiterate, the decrease in economic value is fully offset by the gain in contribution profit, allowing us to simplify our operations while expanding our operating leverage. These points underscore our focus on the core business, centered around our platform and software applications. In addition, we expect that our ongoing expansion and execution of our suite of value add offerings will more than offset the trade-offs in economic value, and thus we are keeping our combined fully utilized value unchanged from the $170 we shared with you at our investor day. When we report earnings for the fourth quarter, we plan to issue new short-term and long-term targets that both reflect the impact from the insurance partnership as well as the inclusion of rapid refi for the first time. This is an incredibly positive milestone for Blend on several vectors. One, it allows us to operate with more leverage as we simplify Blend. Even more relevant, though, is that we have executed against the strategy we shared at investor day on our vision of building a partner ecosystem with positive unit economic opportunities. Last but not least, we will continue to execute against these goals as we drive further leverage in our operating profit through similar motions. Moving to another important metric for us. In the third quarter, our remaining performance obligations landed at $107.4 million. This is our record for Blend. It represents an increase of $48.5 million compared to the third quarter of 2023, when RPO was $58.9 million. This marks the sixth consecutive quarter where our RPO balance increased year over year, with Q3 growing by 82% compared to the same period last year. RPO in the third quarter also returned to quarter over quarter growth, with the balance increasing by 20 million compared to Q2 of 2024, as we've been busy negotiating and closing a number of important renewals and new deals. Given the strength of our pipeline for deals closing in the fourth quarter and some of the newly signed customers committed to large multi-year deals, our current outlook for RPO exiting 2024 is to exceed $110 million. Lastly, let me move on to our outlook for the fourth quarter of 2024. We expect platform revenue to be between $29 million and $31 million in Q4, with the midpoint representing a 16% year over year growth. We expect our title business revenue to be between $10.5 million and $11.5 million, with the midpoint representing an 8% growth year over year. Our total company revenue outlook is expected to be between $39.5 million and $42.5 million for Q4, with the midpoint representing a 14% year over year growth. Our guidance is based on our own internal assessment of customer level growth, as well as our own outlook of Q4 origination activity based on application volume observed to date through our customer base. Despite the Fed's 50 basis point cut in September, mortgage rates haven't gone down. We're waiting to see what the impact of the Fed's decisions this week will have both on the federal funds rate as well as the mortgage rates in the next few months. But for now, we're cautious about origination activity in the fourth quarter and our platform revenue guidance reflects this. Our total non-GAAP net operating income is expected to be between $0 and $3 million for Q4, as we expect to maintain our third quarter non-GAAP operating profit into the seasonally low fourth quarter. With that, I want to thank you again for joining. We are now ready to take questions.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit yourself to one question and one follow up. Your first question comes from a line of Seth Gilbert with UBS. Please go ahead.

Hey, thanks guys. And thanks for the question. Maybe I'll start with consumer banking. You mentioned a lot of success with consumer banking on the call, maybe specifically a top 10 bank by assets. So I was curious, can you help us understand a little bit more about that deal as it relates to consumer banking? Are they starting small with one product or starting with a few products? And then maybe on the same topic more broadly, are you able to comment at all about this split of consumer banking, maybe top three products by revenue or by growth rates just to help us understand what products are having success? Thank you.

Yeah, sure. Thanks Seth. This is Nima. The first question of how that customer came on, are they starting small? Actually, they happened to already use us for mortgage and they're expanding into consumer banking. They signed with us for mortgage probably three or four years ago and we've been working to try to get into the other side of their business for a long time. And so it's a really good team win for us. They also expanded their mortgage work with us, which is on top of that in this deal, which is also very positive. And that's kind of the trend that we're seeing with some of our existing customers who existed four or five years ago where over time our solutions mature. They're taking another hard look at our consumer bank solutions because keeping those things to be the latest and greatest technology internally, if this one had an internal build, it's a lot of work. It's a lot of energy, very expensive. And so yeah, that's one that we're very excited about. And we have a few others in pipeline, some that are not customers at all, net new logos on both mortgage and consumer banking. And so we'll continue to keep you posted on how those develop. And then for your second part of the question, the parts of the business that are the biggest and fastest growing, they sort of align to the time that we released them. So the earliest released consumer banking product was home equity lending. So it's our largest business line and that's also growing pretty well. We have a lot of both good deals that have been closed and good deals in pipeline. I think we actually have a decent chunk of the top 10 in home equity lenders by volume as customers. But then the next one is the product that was released a few years ago after that, our deposit account opening new membership product. And so that one is, I mentioned this on the call, but on a pre-recorded remarks earlier. And that's one that we're more excited about because it's getting more and more traction. We had a customer finally go full bore on their entire online channel that does tens of thousands of these things on a regular basis. So that's the area that we're seeing continued growth as well in the next frontier for us as a company.

Your next question comes from the line of Dylan Becker with William Blair. Please go ahead.

Hey, Neema. Hey, Amir. Really nice job here, guys. I guess maybe starting with you, Neema, given we've seen kind of the rates retrench a bit here, you did talk about positive sentiment continuing from customers. So I wonder to what extent that's driven by a lot of these kind of newer offerings you're introducing that's helping incentivize adoption and maybe how you think about that business leverage on the per-funded loan side to help contribute to growth on top of whatever kind of the trajectory of volume recovery might look like in the 2025 and beyond.

I think the sentiment shift is sort of twofold. The first half of 23 and pretty much all of 22, our customers were just fighting to become profitable. And they, in the mortgage businesses, and now that they're profitable, finally in the back half of 24, it allows them that breathing room to be able to invest in the future. And so a lot of the solutions that we built and matured during that time, like BlendClose, which helps with their operating efficiency or additional features that we even developed that could help them in those areas as well, they didn't have the resources, the capacity to be able to onboard those capabilities. And some of those things do expand our unit economics and some of those things don't. But for us, it's about making sure we're driving the most ROI for the customer. And so I do think that there's a lot of sort of continued demand for those capabilities. The biggest part of our sort of per-funded loan growth is not from us necessarily going and raising prices for customers. That's something that happens sort of naturally over time, with slight increases over time. It's really them adopting new functionality like BlendClose. And so we've seen that in the last year. That's driven a lot of the growth. It has real results and benefits for our customers, for the mortgage industry. And so we're excited to continue to invest in things like that to drive them, drive them ROI, drive them the benefits they need to make their businesses better and more profitable going forward.

Okay, that's really helpful. Maybe if we think too, obviously about the consumer strength, if you could kind of touch on part of the competitive differentiation, obviously we've talked a lot about the BlendBuilder platform. I think that's one that would be helpful for investors. As you see, obviously, notable success and momentum here. And then we've talked about kind of the platform and ecosystem opportunity on the mortgage side. But it feels like there's ample room to continue building that on the consumer front as well, too. So any color or commentary thoughts there would be helpful.

Thanks. Yeah, I think the simplest version of how I think of us is differentiated is that we build, when you're a financial institution, you're trying to offer really great long-term sticky relationships with consumers. And we're, I think, really the only viable platform that serves across those product lines that a financial institution can offer. I don't know of any other platforms that can help them offer a frictionless mortgage and a frictionless account opening as part of that, where they can offer a better rate if you bring over deposits or whatever it may be. And so us making that overall experience for the financial institution and dealing with their new members or new customers frictionless, like that is so important to them. Or that's how they drive the economics of their business. And we need to be a platform to be able to do that because there are so many components that go into that. Some parts that we're going to build ourselves, like the core deposit account opening experience, the core new membership experience, the core auto lending experience. And there's pieces around that, like what we talked about, the covered insurance deal, that sort of allow us to make those experiences more beneficial to our customers, more beneficial to consumers. And that's work that's being done because we have a platform, not by us, but by partners who want to drive value to this ecosystem. And so in the combination of those two things is what's making us really special. And then within each of those product lines, for what it's worth, we end up being the best as a point solution in those product lines too. And the best means opening, and I talked about this a little bit in my remarks, making opening an account so frictionless, pulling in data from as many sources as possible, a few taps to open an account. That is so important. If you don't want to tell a financial institution, hey, onboarding a new member and checking for fraud and bringing on their deposits from another bank, it's going to take them 20 minutes. You want that to be a one to two minute experience so that the consumer can get the real value they're showing up to the institution for.

Your next question comes from the line of David Unger with Wells Fargo. Please go ahead.

Great. Thank you for taking the questions. I'm wondering how potential consolidation in your end market, now that we have potentially more favorable regulatory environment, could impact your go to market motion. I'm just thinking through the dynamics of potentially higher rates and offsetting that with a potentially more favorable regulatory environment.

Thanks. That's interesting. The rates are definitely higher today than they were yesterday. I'm really excited that our customer base, the mortgage industry in particular, has taken the time to really spend the last two years to get their business to a scalable model where I'm sure they're not happy about these rates going up. But they're still set up for success in a lower volume environment. I think that's one part of it. I haven't had anybody call me and say, hey, we were going to invest, but now we're not going to invest in this thing. In fact, we had a pretty good deal signed today. So that's part of it. On the consolidation side, we've seen quite a bit of that over the last couple of years. Mostly smaller players, but some bigger ones also consolidating. I think consolidation, if it does happen, is actually favorable to blend in a lot of ways because we tend to play at the higher end of the market. So if that does start to happen and smaller entities get consolidated into larger entities or two large entities, one that uses blend gets consolidated with another one, that's pretty favorable to us. So we're keeping an eye on it. I haven't heard him. It's too soon to tell on how much that's going to pick up if there's a more consolidation friendly administration. But we'll keep an eye on it.

Appreciate that. Just a follow up question. So we mentioned the investor a couple of times to repair remarks. I'm not trying to get ahead of any new guidance. But when you laid out the investor day presentation last year, a lot has happened since then. So I'm just wondering when we think through the different scenarios, how much surprise there's been to your forecast today versus when we look out to 2026, today versus when you provided those disclosures. Thank you.

David, there's a few areas that will call out and obviously we'll come back and revisit this in 2025 with you and the rest of the teams. But I would say for us, the areas that we're seeing surprises is one, obviously from a macro perspective, that's kind of continued. But to be consistent with what we've shared, we expected that and hence why we gave the ranges as we did for mortgage to on economic value for fund alone. We're ahead of where we had shared it investor day. And so we view that to be a positive. It's very much powered by what we talked about with blend close and we've gone into that in a fair amount of detail with regards to consumer banking and your reference to even this call. Some of the comments that we made from a prepared perspective is that consumer banking, the gross rate that we're seeing today versus the 35% category that we shared an investor day is also ahead of where we are. And then last but not least, our ability to touch on what Neema mentioned with regards to covered. It's this notion of being able to expand on the platform and a platform was a front run. It was a very kind of top of mind item for us that investor day in terms of being able to help share what the journey of fun is going to be in phase two. And so the execution of what we did not just with covered but overall and overall partner ecosystem, I think is a validation of what we want to be able to do in phase two. So those are all kind of the things that we're seeing as as as quote unquote surprises. Mainly positive.

Your next question comes from the line of Ryan Thomas, fellow is KBW. Please go ahead.

Thanks for taking the questions. You know, you mentioned throughout your remarks, the idea of opening up the platform to more partnerships similar to what you did here with the homeowners insurance product. Can you just give us a flavor of what that could look like over time? I mean, it sounds like this will enhance some of your marketplace services offerings in the mortgage suite. But any any color there would be appreciated.

Yeah, and you know, it'll probably enhance not just in the mortgage, but in the consumer banking suite, because you know, when you're opening a new account, you have to deal with broad vendors and partners in that space and anti money laundering. Or if you're doing auto lending, you might need gap insurance or auto insurance of some kind payment processing. In the mortgage space, you might need appraisals and in the home equity space, you might need automated valuations. There's so many things that are involved in doing a financial transaction with a financial institution that we won. There's some things that we think record us and that we want to build ourselves. But we'll really what I think what makes us really special is being this system that can help a financial institution offer any of those products and at the right time, the right place, the right offer to the right consumer. And so for us to be in all of those things is impossible. And this is sort of a natural evolution for Blend Builder for us where we've made it available to customers the last couple of years for customers to use the products that are on Blend Builder. And now it's how do we open that up to partners who want to build things on a toolkit like Blend Builder and make our products more value add to our customer base? I mean, that's a that's a win for everybody. It's a win for consumers because they get better experiences, win for our customers because they get more value per unit. And so when for us because they, you know, they're often willing to share in some of those economics with us and also do that work themselves about building whatever service it is that we would otherwise have to build. So I think that is a natural evolution for us, but it just took some time to get here because it's a pretty complex ecosystem.

And then regarding the title business, can you just give us an update on the current strategy there in terms of driving or adoption of the software enabled title solution? And I guess just broadly, you know, if that business continues to fit within the overall strategy for the company?

Yeah, I mean, I mean, title is still a critical part of the mortgage process, and so we are actively innovating in that space on the software side and hooking that into our operations there. It's a little too soon for us to share all that. So maybe stay tuned as we think through the right time to share that when we have enough results and things like that that we can share. But it's something that we're we think is an important part of the process often drives delays in the mortgage process. And so now we haven't our eyes not off the ball there. In fact, we're trying to figure out how do we work better with partners in that space to to make a more holistic ecosystem around our operations there.

Again, if you would like to ask a question, press star then the number one on your telephone keypad. Your next question comes from the line of Joe Vaffey with Canaccord. Please go ahead.

Thank you. This is what I was sending on for Joe. Thanks for taking our questions. Nima, maybe we can get an update on the refi piece. Any additional color you can provide there and the adoption adoption of the refi product.

Oh, yeah, it's one that we said I mentioned prepared remarks we started working on really this year. And, you know, we have a couple really actually initially the mortgage customers that are going live with it happening mortgage servicers because they are the ones who need to prepare the most for a refi way. But I think it's applicable to all our customers. They want to make the ability for a consumer to bring the rate and term down in the event of mortgage rates come down. They want to make that available to their customers and they want that to be high conversion, low cost and really frictionless so that they capture as many of those as they can. There's so much opportunity over the next few years that people have gotten mortgages seven and eight percent in terms of who's actually those there's two or three pilot customers that happen all the mortgage servicers that are kind of in the works of rolling out. What I really want to do before we take this broader to market is get real data on the specific ROI that they receive because that's going to help us understand so many things like what areas of product we have to tweak. What we should charge for a product like this, how we should take it to market with the rest of our customer base, who's the right persona. And so we're laser focused on those pilots. But I can tell you, especially coming back from Mortgage Bankers Association Conference that I talked about earlier. Man, the demand for that is so high. People are craving a fully automated solution like that. It's just so important. And I'm trying to hold off the demand while we get everything really lined up so that when we take it to those customers that are excited about it or prospects that are excited about it. We feel like it's going to drive the most value for them.

That's helpful. Thank you. And just a follow up here. With the mortgage outlook potentially improving and the momentum you're seeing on the consumer banking side, the acceleration there. How are you thinking about the size of your sales team? Could that be any area of investment as we look to next year? Thank you.

Yeah, I mean, especially as we, a lot of what we do is we start at the top. I've talked about this in previous calls. We start at the top end of the market. We prove out solutions that they can work at the biggest scale institutions and create value at the biggest scale institutions. And then we take that blueprint to the rest of the market. The number 100 to 1000 financial institution in the country. And so a lot of the wins that we talked about in our pipeline, while we do have some in that 100 to 1000 bucket, a lot of them are top 10, 50, top 20, top 50 accounts in the country. And so we're excited about getting those guys live. But to your point, one of the areas that we're looking at and looking very carefully at investing in, depending on how the pipeline looks and other metrics we track around sales efficiency is at mid market. That number 100 to 1000 financial institution where we think there's real opportunity to serve them in a repeatable scale of a way. But we may not have enough salespeople to serve 900 accounts right now. So we're looking closely at that. We haven't made any final decisions there. But I think there's an area of opportunity for us.

Your next question comes from the line of Seth Gilbert with UBS. Please go ahead.

Thanks guys. Just a quick one here. I saw a line in the press release about the impact of the negative impact of revenue in the short term from the sale with covered insurance solutions. Maybe you could just give us a quick update on that. And then also more specifically, was the 4Q guide impacted at all by the sale of the insurance business? Meaning, was it lowered by a million, $2 million or so? Thank you very much.

It's a few items to unpack and I'll try to go through them. One, it's accurate that in essence what we shared is that upon the sale of our homeowner insurance business to covered, that HOI business, what you're going to see is you're going to see a decline in that overall revenue. And that revenue, yes, that was factored into the guidance. It's also factored into the economic value for funded loan commentary that we gave as well. But the one piece that I want to make sure I reemphasize with you now and more so for the broader community is that what we're able to achieve is for the overall decline that you're going to see in revenue, you will see an equal size, if not greater incremental increase in profit on a per unit transaction, both at the onset and over time. So hence why I think this whole notion of the partner ecosystem, albeit there may be some short term changes that happen to the point you made, I think the broader aspect of what we're trying to achieve at Blend is through this whole notion of a simplified Blend, but also do it through tighter and higher operating leverage. That's what we're able to achieve with HOI. So there's two sides to that equation, that coin. I want to make sure I call out both.

Great, thank you.

Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. There are no further questions at this time. This concludes our question and answer session. Thank you for joining today's conference call. You may now disconnect.