Blend Labs, Inc. ((BLND)) has held its Q1 earnings call. Read on for the main highlights of the call.
Blend Labs, Inc. recently held its earnings call, reflecting an overall positive sentiment. The company has made significant strides in transitioning to a software-focused model, generating substantial cash flow, and achieving strong sales momentum with large customer deals. Despite facing challenges such as macroeconomic volatility and a slight decrease in economic value per funded loan, the positive aspects of the earnings call significantly outweigh the negatives.
Shift to a Software-First Model
Blend Labs is making a strategic transition to a software-focused company by divesting its title insurance business and forming strategic platform partnerships. This shift is expected to drive higher profit margins and improve capital efficiency, positioning the company for sustainable growth.
Record Free Cash Flow
In a demonstration of strong financial performance, Blend Labs achieved a record free cash flow of $15.5 million in Q1 2025. This achievement is particularly noteworthy given the challenging market conditions, underscoring the company’s ability to generate cash effectively.
Strong Sales Momentum
The company reported signing 11 new or expanded deals in Q1, nearly tripling the number from the same period last year. Additionally, Blend Labs secured 10 new or expansion deals early in Q2, highlighting its robust sales momentum and market presence.
Large Financial Institution Deal
Blend Labs announced its largest deal ever, a $50 million renewal and expansion with a top financial institution. This deal showcases the company’s capability to scale with its customers and underscores its strong market position.
Increase in Platform Revenue
Platform revenue saw a 12% year-over-year growth, marking the third consecutive quarter of such growth. Q1 platform revenue reached $26.8 million, surpassing the midpoint of guidance, indicating a positive trajectory for the company’s core business.
Expansion of Rapid Products
The launch of the Rapid Home Lending Suite, which includes refinance and home equity lending solutions, has shown early success. This expansion is evidenced by a higher economic value per funded loan, contributing to the company’s growth strategy.
Positive Non-GAAP Operating Income
Blend Labs achieved a non-GAAP operating income of $1 million, with a non-GAAP operating margin of 4%, aligning with the high end of guidance. This reflects the company’s operational efficiency and financial discipline.
Economic Value Per Funded Loan Decrease
There was a slight decrease in economic value per funded loan to $93, just below the guidance of $94. The company forecasts a trough of $88 in the near term, indicating a cautious outlook in this area.
Volatile Macro Environment
The first quarter experienced volatility due to rate fluctuations, with ongoing uncertainty into Q2 2025. This volatility affects economic impacts from tariffs and potential benefits from banking deregulation, posing challenges for the company.
Forward-Looking Guidance
Looking ahead, Blend Labs provided guidance for Q2 and the full year 2025. The company anticipates platform revenue for Q2 to be between $30.5 million and $32.5 million, projecting a 10% year-over-year growth. They expect Q2 platform non-GAAP operating income to range from $3.5 million to $5 million. For the full year, platform non-GAAP operating expenses are projected to be between $85 million and $90 million. Blend Labs aims to achieve the “rule of 40” by the end of 2025, focusing on simplifying operations by selling its Title 365 business to enhance operating leverage and support growth initiatives.
In conclusion, Blend Labs, Inc.’s earnings call highlighted a positive outlook with significant achievements in its transition to a software-first model and strong financial performance. Despite facing macroeconomic challenges, the company’s strategic initiatives and robust sales momentum position it well for future growth. Investors and stakeholders can look forward to Blend Labs’ continued focus on operational efficiency and market expansion.