Good afternoon, and welcome to Blend's Third Quarter 2023 Earnings Conference Call. My name is Winnie Ling, and I'm Head of Legal for the company. Joining us today are Nima Ghamsari, Co-Founder and Head of Blend; and Amir Jafari our Head of Finance and Administration. After Nima and Amir deliver their prepared remarks, we will open up the call for questions moderated by our Investor Relations, Lead, Bryan Michaleski. You can find the supplemental slides on our Investor Relations web page at investor.blend.com. During the call, we will refer to certain non-GAAP measures, which are reconciled to GAAP results 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. Also certain statements made during today's conference call regarding Blend and its operations, in particular, its guidance for the fourth quarter and fiscal year 2023 may be considered forward-looking statements under 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. Please see the risk factors we've identified in our most recent 10-K, 10-Qs and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. I'll now turn the call over to Nima.

Thank you, Winnie, and good afternoon everyone. Many of you joined us for our inaugural Investor Day in September, during which we shared a deeper look into our growth trajectory and the significant upside that exists, as we continue scaling our Builder Platform to more customers and into more markets. As we stand today, we have a market-leading platform, an incredibly loyal and resilient customer base and an efficient business model that we believe has set our company up for success now and in the long-term. For today's discussion, I want to emphasize how we've leveraged this foundation in our third quarter to better serve our customers and to do so with greater efficiency. Starting with our third quarter highlights, I'm pleased to share that we achieved another strong quarter amidst a very challenging environment. We delivered $40.6 million in total company revenue well within the narrowed guidance range, we provided at our Investor Day. We credit this to double-digit year-over-year revenue growth in Consumer Banking, as we continue deployments and ramp-ups on our Builder Platform. In fact as of Q3, over one-third of our customers are now live or in active deployment with Builder enabled consumer banking products. In addition to these active deployments, we expanded our pipeline to 60 opportunities up from the 40 we reported last quarter representing opportunities in both our mortgage suite and our consumer banking suite. On the mortgage side specifically, our business once again outperformed the broader origination market declines driven by the continued utilization growth of our mortgage product add-ons, including verification of income and our closing product. In Q3 alone, we deployed a dozen revenue-generating mortgage products or feature enhancements, which we expect to continue to benefit the economic value we receive per loan. Our continued market outperformance in the loan…

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 against a challenging economic backdrop and an important way point towards our ultimate goal of non-GAAP operating profitability by next year. Before I jump into the results, let me just remind you that, unless otherwise stated all results are non-GAAP. Total company revenues in the third quarter were $40.6 million, ahead of the midpoint of our original guidance and in line with our updated outlook from our Investor Day in late September. We reported platform revenue of $28.6 million which also fell within our revised guidance range. Our mortgage banking suite revenue declined by 11% year-over-year to $20.3 million despite the origination environment declining 14% over the same period as measured by the Mortgage Bankers Association. This continues a trend of seven consecutive quarters of outperformance against broader market declines. Our mortgage suite economic value per funded loan rose to $86 from $77 in the same period last year, representing continued growth in utilization of our value-accretive add-on products. As a reminder, we first disclosed economic value for funded loan at our Investor Day in September, representing the contractual rates for mortgage and add-on products multiplied by the number of loans funded or transactions completed by our customers in the period divided by the total number of loans funded by customers in that same period. We continue to believe the progress on this front is an encouraging sign our customers are realizing the benefit of ROI positive enhancements to their mortgage origination process via Blend and are growing their adoption of these at an incredibly rapid pace. We saw a slight shift in our market share. We attribute…

Thanks Amir. We're exiting this quarter focused on maximizing the value we deliver to our customers and optimizing our business to be a lasting partner for them for the future. I am incredibly proud of the progress we've made on our 2023 priorities and the execution towards our profitability goals. We're even more excited about the opportunities ahead of us and I look forward to sharing the evolution of these priorities with you all early next year. As a preview, you can expect to see the same effort on capital stewardship, innovation, and operating leverage that you saw from us this year to continue to stay in focus in 2024. While the outlook for origination mortgages may be uncertain, we continue to build our business to excel throughout any macroeconomic cycle and we'll continue to optimize our model to allow us to emerge through the cycle as a stronger organization. With that thank you again for joining. Bryan, we are now ready for questions .

Thank you, Nima and Amir for your remarks. We'll now turn to the Q&A portion of the call. [Operator Instructions] Our first question comes from David Unger from Wells Fargo. David, please go ahead.

Hi. Can you hear me?

We can hear you?

Okay. Thanks. Appreciate the time today guys. So as we look ahead to 2024, I just wanted to think through a couple of things. First, I wanted to focus on head count planning seeing some great progress in terms of OpEx saves. Particularly, I just had to learn about the go-to-market team and the focus there in terms of cross-selling strategy et cetera I'll start that question. Thank you.

Yeah. David is that a question about head count or does our overall strategy and where we're focusing next year on the main market side?

Head count planning, I know we've seen sales across the different lines, but the go-to-market team has been doing a great job and particularly interested in that strategy in sales and marketing.

Yeah. It's a good question. Just to step back a little bit, in vertical software companies like Blend almost all of our success has begotten by other success. And so the first job of the go-to-market team is actually to ensure success of existing customers because those customers end up becoming the references for other banks and lenders to sign up with Blend. And whenever you release a new solution like Blend Income or Blend Close or consumer banking product, they become the first ones to want to sign up for it. So first and foremost, go-to-market is always around how do we make sure our customers are getting a lot of return on investment, are really successful and we have a great relationship with them. And then it's looking for opportunities to help grow and improve their business. And it could be the next product from blend that we're offering or could be market feedback they're giving to us. And so we've kind of designed our go-to-market team around making existing customers extremely successful, turning those in the case studies, turning those into upselling growth. And I think that's the same formula we're going to do for the next end number of years. As long as we have more product growth ahead of us, which we think we do that's the same formula do going forward and 2024 will be no exception.

Okay. Great. Thanks. And then obviously, the mortgage market is challenged. But just looking at the MB forecast it looks like hopefully this is the trough year. Just wondering the pipeline trends you're seeing with banking customers looking into next year? Thanks.

Actually, I mentioned that we have 60 opportunities in my prepared remarks that are in flight right now. It does range the full spectrum of IMBs to mortgage companies to credit unions to banks homebuilders. But I'd say the majority of where people are looking to transform is in the deposits and consumer loan space in the bank. And so we're seeing opportunity across the board. That's where we see the most opportunity. Deposit growth is so important for banks and credit unions right now given the market. And so that's where we're getting a lot of the primary revenue growth for next year.

Thanks, Nima.

Our next question comes from Dylan Becker from William Blair. Dylan, your line is unmute. Please ask your question.

Hi, guys. Appreciate you taking the question here. Maybe Nima starting with that as you're thinking about streamlining on the innovation front right kind of managing the cost structure here. How do you think about going deeper in value versus broadening kind of the capability set? I know Builder likely enables a lot of both. But wondering how you're thinking about the evolution and ensuring kind of product excellence with further revenue diversification across different product lines?

Yes. Going back to what I said to the earlier question I think making existing customers more successful almost always leads to more revenue for Blend. And so going deeper is always the first primary focus because it leads to either deeper add-ons or more revenue per unit on the core product. And that -- because you're happier customers who are getting more return on their investment. And so going deeper we've shown this historically our revenue per unit because we've gone deeper and deeper has grown materially in the last two or three years. That being said I think we are looking at -- sort of think about it on the cadence of maybe one approximate new product area a year that we'll go and expand into. That will be an expansive area a new market opportunity for us. And it could range from whether it's small business commercial these are not specific ones we're working on to AI products that we're looking at just something we're going to look at on a regular basis the leadership team and make sure we're focusing on where the market needs the most help in advancing their technology stack.

Our next question comes from Nikhil Vijay with KBW. Nikhil, your line should be unmated

Nikhil, if you're speaking we can't hear you.

Hi. Can you hear me now?

Yes. We can.

Sorry, about that. Thank you for taking my questions. Firstly, I just wanted to touch up on what you have discussed earlier regarding the potential to consider strategic actions to bolster the balance sheet with respect to the term loan or Title365 put option. Can you please provide any update on your thinking there in terms of the options or potential timing? And then I also have a quick follow-up on platform fees

Absolutely. We're going to reinforce the message we've shared Nikhil which is -- we continue to emphasize the potential that we have in terms of different actions that we can take. We're going to be opportunistic starting first and foremost with the actions that we're taking across this company to get us to the path of profitability, which actually allow us to have expanded opportunities in front of us. There's nothing for us to in essence comment on today on the term loan or on the put option beyond what we've already shared.

Got it. Understood. And then as a follow-up on the platform fees, can you briefly discuss the platform fees you have been implementing across the different platforms. Are there material enough to increase the recurring revenue mix of the business over time? And more broadly, can you also talk about your approach to recurring versus transaction revenue models going forward?

Yes. I think just to give a backdrop of what the platform fees are for with Blend Builder you still get the same amazing solutions that you could get out of the box previously with Blend. But for people who want to have access to a more powerful platform, you get more APIs, much more flexibility in the flows, get a lot more integration capabilities. And so it basically allows them to get a lot more from the same product that they would have been getting from us five years ago, because it's such a modern platform. And so, in terms of how material it's going to be to our overall revenue, we haven't shared that broadly but it is a meaningful value to our customers and we charge a fair amount for that value that we provide to our customers. What was the second part of the question, Nikhil. Was it about recurring versus transaction-based revenue? Maybe Amir, you can take that one.

Yes.

Yes. I think to expand on what Nima said there's a balance for us. Remember as we go into new products and new strategies not everything can actually follow a perfectly transaction-based approach. And this is part of the diversification that we rolled out in potentially. So for us again, we have not given specific guidance to mix as an example. But what we've shared consistent with our Investor Day is that there will be diversification. By the way, you're seeing this play out in our RPO stance and you'll continue to see it, because as you think about consumption versus in essence the reoccurring models. It's high to not just platform but our ability to drive different in essence unit economic monetization tied to new product initiatives. And you'll see that continue to play out in the near future.

Understood. Thanks for clarifying.

As a reminder, please raise your hand if you have a question for the call. Seeing no further questions, that concludes today's call.