Blend Labs Earnings Call: Growth Amid Challenges

Blend Labs, Inc. ((BLND)) has held its Q3 earnings call. Read on for the main highlights of the call.

Blend Labs, Inc. Earnings Call: Balancing Growth with Challenges

The recent earnings call for Blend Labs, Inc. painted a picture of a company navigating both growth and challenges. The sentiment was generally positive, highlighting consistent profitability and robust pipeline growth, especially in consumer banking. However, this optimism was tempered by difficulties in the mortgage segment and anticipated market share headwinds due to the Mr. Cooper acquisition.

Consistent Non-GAAP Profitability

Blend Labs celebrated its fifth consecutive quarter of non-GAAP operating profitability. The company’s operating income not only met but exceeded the high end of their guidance, showcasing their ability to maintain financial discipline and deliver on their profitability goals.

Strong Pipeline Growth

The company reported a significant increase in pipeline activity, up approximately 60% year-over-year. This growth is driven by multiple seven-figure consumer banking deals currently in progress, indicating a strong demand for Blend’s services and a promising outlook for future revenue streams.

Consumer Banking Revenue Increase

Revenue from Blend’s Consumer Banking Suite saw an 11% increase quarter-over-quarter, now accounting for 39% of the company’s total revenue, compared to 29% a year ago. This growth underscores the company’s successful expansion in consumer banking, a key area of focus.

New Customer Wins and Expansions

Blend secured 14 new deals and expansions, including a significant seven-figure expansion with a top 20 US bank for solar home equity lending. These new partnerships highlight Blend’s ability to attract and retain major clients, further solidifying its market position.

Mortgage Suite Revenue Decline

Despite successes in other areas, Blend experienced an 18% year-over-year decline in Mortgage Suite revenue. This was attributed to a strategic shift towards lower revenue, higher-margin partnership models, and previous customer churn, reflecting the challenges within the mortgage sector.

Expected Market Share Headwinds

Looking ahead, Blend anticipates market share headwinds in 2026, primarily due to reduced volume from Mr. Cooper following its acquisition by Rocket. This forecast suggests potential challenges in maintaining market share in the mortgage segment.

Economic Value Per Funded Loan Pressure

The economic value per funded loan (evPFL) is expected to decrease to approximately $83 to $84 in Q4. This decline is driven by strategic transitions and prevailing market conditions, indicating a need for careful management of profitability metrics.

Forward-Looking Guidance

In its forward-looking guidance, Blend Labs projected total revenue between $31.0 million and $32.5 million for the fourth quarter of 2025, with non-GAAP operating income expected to range from $2.5 million to $3.5 million. The company remains focused on expanding its Consumer Banking Suite and integrating AI solutions, which are seen as significant growth opportunities. Despite an 18% decline in Mortgage Suite revenue, Blend’s strong pipeline and strategic focus on consumer banking offer a positive outlook.

In summary, Blend Labs, Inc. is navigating a complex landscape with a balanced approach. The earnings call highlighted consistent profitability and promising growth in consumer banking, while acknowledging challenges in the mortgage sector and expected market share headwinds. As the company continues to expand its consumer banking offerings and integrate AI solutions, it remains well-positioned for future growth.