Blend Labs, Inc.

Thank you for standing by and welcome to the Blend Labs Inc. Second Quarter 2025 earnings call. 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 this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. I would now like to turn the call over to Meg Donnelly, Head of Investor Relations. Please go ahead.

Good afternoon, and welcome to Blen's financial results conference call for the second quarter of 2025. I'm Meg Nettley, Blen's head of investor relations. Joining me today is Nina Gamsari, our co-founder and CEO, and Amir Jafari, our head of finance and administration. Before we start today's call, I'd like to note some of the statements on our call will be forward-looking. We also refer to certain non-GAAP measures which are reconciled to GAAP measures 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'll 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 third quarter, and full year 2025, and expectations about our markets, our strategic investments, product development plans, and operational targets may be considered forward-looking statements under the 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. Will you see the risk factors we've identified in our most recent 10-K, 10-Q, and other FCC filings? We are not undertaking any commitment to update these statements if conditions change, except as required by law. All comparisons made in the course of this call are against continuing operations for the same period in the prior year, unless otherwise stated. Lastly, we'll be providing a copy of our prepared remarks on our website by the conclusion of today's call. and an audio replay will also be available soon after the call. I'll now turn the call over to Nima.

Hello, everyone. This is our second quarter earnings call, and it's the middle of 2025, but it feels like an annual call since this is our fourth consecutive quarter of solid results. We've now posted four quarters of year-over-year total revenue growth and four quarters of non-GAAP operating profitability. I did want to take a moment to acknowledge the news we released earlier today regarding the leadership transition. I want to thank Amir for his contributions. He took us on the hard work of navigating the company through a challenging period and has set us on a path towards a brighter future. We wish him great success in his future endeavors. Our strong results today are a reflection of the hard work we did in 2023 and the first half of 2024 to get our house in order and refocus on our strength as a platform company with our simplified blend strategy. We turned the corner around the middle of 2024 and entered 2025 ready to execute. there are three key areas I'd like to highlight where we feel very confident and excited for the future. One, expanding our market share with new logos. Two, expanding take rate with existing customers. And three, growing consumer banking to our revenue base. Our sales momentum accelerated in Q2 with 23 newer expanded deals, which is double Q1. This growth was driven by a healthy mix of new customer acquisitions and deep product expansions from existing customers, reinforcing Glenn's position as a long-term multi-product platform partner. In addition to the large expansion deal we previewed in May, we signed one additional seven-figure expansion. This figure also includes three net new logos in the Independent Mortgage Bank, or IMB, vertical, where we built a dedicated business unit that brings innovation and go-to-market under a single leader, allowing us to focus on this vertical and capture market share ahead of a market rebound. Taken together, these customer wins and expansions have propelled our remaining performance obligations balance, or RPO, to a new record for Blend of $190 million. Our sales momentum is helping us drive market share gains. For the customers we've signed over the last 12 months, these new logos represent more than 80 bits of 2024 market volumes based on the Home Mortgage Disclosure Act, or HMDA, data. Growing share directly translates into Blend revenue growth as new customers ramp. Of the 17 mortgage customers we've signed in the last 12 months, six are already live and ramping on our platform. But even more exciting than our trend in new customers is our trend on churn. Our customer base always comes first, and we consider customer satisfaction and retention as essential to our success. Looking back, it's no secret that 2023 was a rough year for the mortgage industry, which was unprofitable and cutting costs by any means necessary. That year, we received churn notices from a decent number of customers, going out of business or cutting costs. But in 2024, that number declined by 70%. And so far this year, seven months in, we have received zero churn notices from customers. The foundation of any vertical SaaS business is its customer base, and I feel momentum qualitatively, and I see momentum quantitatively in these numbers. Getting to this point in the cycle wasn't easy, but now that we're here, we have a great foundation for the future to build market share with newly signed customers. Looking forward, on our last earnings call, I talked about the wave of customer inquiries you received in the wake of the announcement that Rocket Mortgage is acquiring Mr. Cooper. Lenders understand that consumers are looking for simplicity and personalization that comes from tech-enabled solutions. LEND can help lenders achieve this goal, and we're seeing both existing customers and prospects who are choosing to invest now to stay competitive rather than wait for the cycle to turn and potentially get caught flat-footed. To put some quantification around this, our current pipeline, consists of a range of customers representing more than 4% of the 2024 Hongdae market share. In addition to growing our market share with new logos, we can also grow revenue by providing more value to our existing customers and in turn expanding our take rate with existing customers. As we help our customers succeed, we'll succeed and pass this down to shareholders. Within our mortgage suite, the main way we measure take rate is economic value for funded loan, or EVPSL. which represents the per-loan contractual rates we receive for mortgages and mortgage-related products. In the second quarter of 2025, our EVPFL was $88, which was in line with the forecast we provided in May. Our EVPFL is now near trough levels after our strategic move to simplify blend and shift a set of formerly direct services, including home insurance, income verification, and finally title, to a lower revenue but higher margin partnership model. We said in May that we expected the second quarter to be the trough for EVPFL, So Amir will talk in a minute about some of the near-term headwinds that may adversely impact third and fourth quarter numbers. Over the longer term, we continue to expect an upward trend in EVPFL as existing customers add new products and new customers launch with multi-product solutions. In the medium term, we believe the rollout of rapid refi has the best potential to drive EVPFL expansion in our mortgage suite. We launched rapid refi in February 2025 and discussed the product in some detail in our last earnings call. We believe Blend's rapid refi solution is the industry's fastest, most automated, and hyper-personalized refinance solution. Customers are willing to pay more for rapid refi because it drives better customer conversion, engagement, and loyalty. The product is especially appealing to customers looking to prepare in advance of a market rebound. When volumes do recover, the mixed shift towards our rapid refi product has the potential to add an extra kicker to our EVPSL. Our focus today is on signing new customers so that we, both Blend and our customers, already if and when a refi wave comes. In the first half of 2025, we signed four customers with rapid refi, and we're just getting started. The other key product for driving EVPFL over the medium to long term is BlendClose. BlendClose's product revenue nearly doubled this quarter compared to the second quarter of 2024. Key closed adoption is becoming widespread, especially as a low-friction add-on. We're finding that customers often want to include blend close and expansions, indicating it's viewed as an essential next step in mortgage modernization. In addition to rapid refi and blend close, our new ecosystem approach, as part of our simplified blend strategy, is an avenue for long-term easy PFL expansion. One example of this is Upfront Title. We announced our Upfront Title partnership with DOMA in July. Upfront Title is a solution that integrates a faster and more cost-effective title product directly into the blend platform. Since our pilot launch in 2024, we've already seen strong adoption with two major lenders, a top five bank and a top five servicer, and we have a large pipeline of interest. And beyond that, we have more that we're building behind the scenes that should increase our value to our customers and therefore drive up value per unit that we capture. I'll talk more about AI later, but this is an area where I see hundreds of dollars of opportunity per loan for us and our customer base. Shifting gears, while we're working to gain share and expand our take rate within the mortgage suite, We're also seeing rapid growth in our consumer banking suite. Consumer banking represented 36% of total revenue in the second quarter of 2025, up from 28% one year ago. This mix shift is driven by the segment's rapid growth. Year-over-year growth in the second quarter was 43%. Out of the 23 wins and expansions we posted for the second quarter, 18 included core consumer banking or home equity products. Continued growth of our consumer banking suite is highly strategic to us, not only because of the revenue uplift, but also for diversification of revenue streams, which makes our business more stable over the long term. The pipeline for consumer banking continues to expand as well. Our open pipeline is up 18% year over year at the end of the second quarter. Before turning the call over to Amir, I wanted to summarize where we are today and where we're going in the future. We've been through the gauntlet, but we're coming out the other side stronger, and we're committed to driving value for our customers and sustainable growth for shareholders. Our recent new customer wins, our progress on value added products, and our growing consumer banking business all give us confidence on the path forward. We're energized, excited, and staying ready to capitalize as volumes recover. One final topic I'd like to preview with you is the potential for AI to shape the future of the industry. Blend is uniquely positioned as a technology leader with deep relationships in an industry that has historically been burdened with highly manual and time-consuming processes. Legacy loan resignation processes have many stare and compare moments, starting with initial documents that are submitted all the way up to post-close when quality control teams pour over the data once again. It's tedious, repetitive, and subject to human error, making it an excellent candidate for AI. Blend is currently piloting a new AI tool that fits across documents, data, and origination guidelines. The AI tool can identify gaps and potential discrepancies with lightning speed and efficiency. We view it like having the smartest underwriter sitting in the room and checking everything upfront on every loan. By saving time and the painful back and forth process, we believe we can potentially save customers thousands of dollars while also capturing better economics for Blend. We'll be moving forward with the pilot and rollout and hope to share more in coming quarters. With that, I'll turn the call over to Amir.