Blend posts steep Q2 losses, cuts more jobs

Blend Labs cut hundreds of jobs after reporting a heavy loss in the second quarter that stemmed from an accounting adjustment for its Title365 unit. 

The San Francisco-based mortgage technology firm reported a $477.2 million net loss between April and June, the company said in an earnings report Monday. The figure is a sharp decline from the firm's $72.4 million net loss at the beginning of the year and a $5.7 million profit over the same time last year.

Blend posted a $391.8 million impairment of intangible assets and goodwill related to Title365, a noncash charge stemming from an assessment amid the market's current downswing, executives said in a conference call Monday.

"This business was purchased during a much more robust economic and mortgage refinance environment," said Nima Ghamsari, founder and head of Blend. "Title365 has strategic value to Blend and remains a leader in its business."

Blend cut 220 workers in August, it said. Combined with a round of layoffs in April that eliminated 200 positions, the company has cut a quarter of its workforce and is expected to save $60 million annually. Blend's reductions rank among some of the larger payroll cuts by mortgage lenders, servicers and vendors responding to declining origination volume.

Blend's revenue fell 5% to $65.5 million in the second quarter, compared to $71.5 million the quarter prior and $32 million at the same point last year. Title365 revenue fell to $31.9 million from $38.7 million the quarter prior, stemming from the market-wide refinance slide.

Revenue from the Blend Platform rose slightly to $33.6 million from $32.8 million the quarter prior, led by an 18% increase in consumer banking revenue. Mortgage banking revenue, part of the Blend Platform, dipped to $23.9 million from $24.5 million over the first quarter. 

"We grew our Blend platform revenue by approximately 5% year over year against a 37% mortgage market volume decline in the same period," Ghamsari said. 

The company affirmed its full-year revenue guidance between $230 million to $250 million, but adjusted each platform's projections by $5 million. Blend Platform revenue is expected to fall lower between $135 million to $145 million, while Title365 is projected to rise to between $95 million to $105 million because of increased performance by its default and home equity products. 

The firm is now using the more conservative Mortgage Bankers Association projections for mortgage volumes rather than Fannie Mae's, Marc Greenberg, Blend head of finance, said. 

"We are operating the company prudently as if mortgage industry unit volumes will remain at or near historic lows through 2025," Ghamsari said.

Other cost-cutting measures include reducing Blend's vendor costs by at least $6 million per quarter in 2023, executives said, and off-shoring work to India with two operational hubs.

As of the end of June, 71% of customers are using multiple Blend solutions, an increase from 59% at the same time last year, according to the company. The firm's income verification and closing solutions as well as home equity products are in high-demand, Ghamsari said. 

Blend counted cash, cash equivalents and marketable securities totalling $450.5 million in the second quarter, and total debt outstanding of $225 million, with a loan term due in 2026. The company also hasn't drawn a $25 million revolving line of credit, according to executives.

The fintech has stumbled since going public last July as the refinance boom began its steep decline, impacting the Title365 business it bought from Mr. Cooper. It traded at $20.90 per share when it debuted on Wall Street just over a year ago. 

The company's stock opened at $3.10 a share following the earnings report and call, and rose to $3.57 by midday.