Good afternoon, and welcome to Blend's First Quarter 2024 Earnings Conference Call. My name is Winnie Ling, and I'm the Head of Legal & People 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'll open up the call for questions moderated by our Investor Relations lead, Bryan Michaleski. You can find the supplemental slides on our Investor Relations webpage at investor.blend.com. During the call, we'll 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 second quarter of 2024, 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're not undertaking any commitment to update these statements if conditions change, except as required by law. With that said, I'll now turn the call over to Nima.

Thank you, Winnie, and good afternoon, everyone. Amir and I have a lot to share today, given the company's recent strategic announcement, as well as several important business highlights since our last earnings call. We'll first discuss the investment we received from Haveli last week, which involved $150 million capital infusion, as well as the beginning of a partnership that will deliver value across our business and, most importantly, to our customers. This has several strategic outcomes for us, including the elimination of interest costs and the improvement of our balance sheet, which, for the first time as a public company, is debt-free. With this investment, we've enhanced our financial flexibility and can focus on what we've always done best, which is innovating for our customers in the Mortgage and Consumer Banking space now and for the foreseeable future. We also made progress in some important customer deployments, including the official go-live of Navy Federal Credit Union new membership and deposits that occurred last month. Early data points indicates that was a very successful launch, and our financial results for the rest of the year will be inclusive of the Navy Federal Credit Union partnership. Beyond them, we're also working on a robust pipeline of other deployments that is active and growing, including another top 10 credit union that's in the process of a mortgage rollout. On top of that, I'm happy to announce that team signed a new 7-digit contract with a credit union last week, and Blend is going to help them streamline their deposit account opening experience. We've been thinking through how to tailor our solutions to better fit the needs of specific segments, in particular, credit unions that come in different sizes, yet collectively serve a large swath of customers. This deal is a direct result…

Thank you, Nima, and good afternoon, everyone. I'm pleased to be joining you today to discuss our financial results for the first quarter. We started the year strong. I'm encouraged by the momentum of our go-to-market efforts. We are managing to grow our pipeline across our business, while executing to complete deployments faster for our customers. While the economic headlines may be reading that higher rates are here to stay for a bit longer, our customers are busy getting ready, building out their technology suite with Blend as the core solution to enable automation and scale as markets stabilize and prepare for the next rebound. We continue to make sure our business is poised to do the same. 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 first quarter were $34.9 million, near the high end of our guidance. We reported Platform revenue of $23.8 million, also near the high end of our guidance range. Our Mortgage Suite revenue was $15.1 million, in line with our expectations for the seasonally low first quarter of the year. As you heard from us before, determining our market share amidst changing estimates of the total origination size has proven to be challenging. With this quarter, we have evolved our thinking and modified the presentation of our share slightly here to incorporate the different forecasts available to us until we have the Home Mortgage Disclosure Act data available, which we expect to be later this year. The main takeaway here is that our market share has remained relatively stable amidst a challenging mortgage industry for the past year. We calculate that we ended the second half of the year with a market share of 20.2%. Additionally, incorporating the various…

[Operator Instructions] Our first question today comes from Dylan Becker with William Blair.

I guess, to start off, Nima, obviously, a lot of emphasis on the capital injection and kind of the flexibility that affords the business. I guess, what's the right way of thinking about what that enables you guys to utilize those savings towards, whether that's reinvesting in product, go to market to capitalize on the consumer opportunity? Maybe help us digest kind of what this helps unlock.

Yes. So, I think, part of it is the new capital and then, to your point, the interest expense as well was quite significant in terms of the savings there. And so, I think, what we're looking at is growing the business on 2 fronts, 1 is investing more in the platform, investing more in our Mortgage product and the Consumer Banking products, and the underlying platform itself that allows our customers to get more value from our suite. But on top of that, yes, we're also going to invest in more in the go-to-market side. We're seeing our pipeline grow. I haven't seen a pipeline this strong and, I think, maybe because the macro is stabilizing a little bit. I haven't seen a pipeline this strong in a long time, probably since COVID times. And so, we want to make sure that we're there for our customers. We want to make sure our customers get ready for when interest rates come down, have better automation in place so they can take advantage of the lower interest rate environment themselves. And so, yes, I think those are kind of the primary areas that we'll look at. But just to reiterate, we're also still committed and we believe we can achieve the non-GAAP operating profitability by the end of the year as well.

Sure. That makes perfect sense. And you did call out as well in, I think, your prepared remarks around the consumer suite and kind of the high velocity and high ROI that you guys are offering there -- delivering there, I guess. I guess, what's the -- how are you thinking about the opportunity or the potential here to see that dynamic snowball. It seems like the pipeline is growing very healthily there. But the implications of customers driving adoption and seeing kind of incremental share gains and benefits and how that can have kind of a drag-along effect from the broader ecosystem as it's one that seems to have some pretty healthy momentum behind it.

Yeah. I mean, I do think actually, interestingly, even though we have such momentum there, it's kind of masked because as lending markets tighten up when rates go up and people are worried about people's personal balance sheets and doing less personal loans and less home equity lines, the banks and credit unions are doing fewer than they were maybe a year or 2 years ago. But despite that, we're growing that business because, to your point, we're just getting more customers. And I actually think it is -- I'm seeing early indications of it starting to snowball already. People want to be digital. There are very few solutions that work at the top of the market and all the way down to the smallest community bank and credit union. And we have a solution that, I believe, is best in class and gets a consumer through the funnel the fastest in the most digital and automated way. And we're kind of starting to see that snowball happening in the pipeline numbers and the actual rollouts, the Consumer Banking transactions. We don't disclose this right now, but we're trying to see those numbers really start to grow internally. So, we're excited to just keep building on that momentum. And actually, 1 of the maybe last points I'll make on this is, the most interesting part of any of these businesses is not necessarily the initial use case that we got with. As you get customers successful in any vertical software company, they come to you with the next thing that they want support with, or the next thing they want help with. And so, it does become a geometric curve over time, because then you have -- you sign 10 customers and then you add, those 10 products live with them, they come to you with 10 more things while you go sign 10 or 15 more customers on top of that, and so suddenly these things become multiplicative. I believe that our platform is best positioned to take advantage of those things. And so, we're excited about the future.

Our next question comes from David Unger with Wells Fargo.

Can we please double-click on the key operational best practices you plan to explore at the partnership? Anything initially pop out to you? Obviously, you've made a number of great efficiency saves in the past couple of years, but would love to hear more about the next strategic review. C-Amir Jafari What we plan to do is really just to double-down on the momentum that we've been creating, David. So, first and foremost, I'm going to carry from what Nima mentioned. On the go-to-market side being incredibly, just intuitive in terms of where we need to spend and ensuring that we get the right ROI that serves our customers and also serves what we're solving for will be a key area, making sure that we build and leverage. Really what we've said a few times now is that builder actually unlocks opportunities for how we build internally, how we deploy at a faster rate, but also how our customers think about their future deployments. That's another area. These are probably the 2 biggest kind of, I would say, opportunity areas for us. And then, just to close it out on the G&A side, just know that that's an area that we're going to continue to kind of keep focused on and be best-in-class in terms of what we do. Just a follow-up from me. I know you're not giving the full-year guidance, but can you -- it's obviously difficult to forecast for us in the Street, but can you just step through the potential shape for the rest of the year just based on your internal forecasts, volumes, market share?

Yes. Absolutely. I think, to your point, you probably said it better than I will. One, there's very little visibility when you think about the full year, and we see a lot of this volatility back and forth. And so, what we do is, we try to stay focused on the things that we can control. I'll speak to market share in just 1 second. I think what's really important for us as we share this is the following, though. Putting aside what's happening on a macro basis, which again what we control is what we deliver for our customers, you're seeing that come to fruition with our economic value per funded loan. You're seeing what the progress has been on the RPO side, which is really how we're, in essence, able to sign new logos and really expand on the historical practices that we've had from a contract standardization perspective. And then, from a Consumer Banking, to be able to see an uptick in terms of just the overall pipeline that we spoke to about a quarter ago and really what Nima referenced this quarter, that is how we're seeing this year kind of come together. We're seeing strong execution so far. We want to continue down this path. And then, David, to your point though, about macro, we see this kind of band of events that can happen. We see a lot of data points coming into us. We always say to you though that we're not economists. What we try to really just become very focused on is what's happening at our customers, the data that we have visibility to with regards to applications, where they're continuing to win and how we kind of help them do so, so that we can be balanced in market share, but then really again just take advantage of the unit economics, which again, come across in things like our economic value per funded loan.

Our next question comes from Ryan Tomasello with KBW.

Just on Consumer Banking. If you can elaborate more, Nima, on the go-to-market strategy there, in your prepared remarks, you talked about broadening the reach of that product beyond the top tier of SIS that you originally were focused on. What additional opportunities does that open up in terms of other categories of customer sets that you think this might resonate more with? And also, how you might look to lean more on systems integrators to expand the reach there? C-Nima Ghamsari Yes. So, on the topic of Consumer Banking, in the last probably 2 years, as we've been getting that product suite off the ground, just to give a little historical context, our entry point into mortgage, we started at the top of the market. And you kind of see that in the numbers with, like we mentioned, more than half of the top 10 credit unions by assets as customers of ours, a number of the large net regional and super regional banks as well as some of the largest mortgage -- independent mortgage banks as being customers. And once we did that, once we had the success there, we turned that into a repeatable practice that we took to the rest of the market because we want to make sure that this technology can be in any consumers' hands and any lenders' hands. And so, we're taking the same playbook here. The last couple of years, we spent a lot of time with the top 20, 30, 40 financial institutions on the Consumer Banking side to make sure that we could build a product that would scale to the very top of the market. I think one thing that -- you cover a lot of companies, you probably noticed that a lot of them don't -- when…

Yes. Let me start with the last one because I think you asked about system integrators. I think those are areas, in particular international, where the SIS could be particularly helpful. And on the commercial side, no update there, but it is an area of opportunity and we see a lot of demand from our customers around that. And we just want to make sure we're measured and focused in what we do and when we deliver something, it's the best in the market. We're not going to deliver something that we think is just average or above average. So, when the time is right, we'll explore that solution and go to market with that solution. And then, on the first part of your question on what kinds of solutions are we replacing when we go in the door here. Oftentimes it is some sort of rip and replace in the sense that they had something in place. It's typically very lightweight. So for example, if you go to your local regional bank or community bank or community credit union, you might go to their website and you have a few fields you can fill out to open a new account. And then, they'll tell you to walk into a branch. Or to get a personal loan, you'll fill out a lead form. Or a credit card, maybe they'll have a little bit more technology in place, but they won't issue their credit card digitally. And so, it'll typically be a lighter weight approach to these products. And they lean a lot on people internally, which, I think, is good from a relationship aspect, but not great from a reach of what customers want, consumers want, and not great from an efficiency standpoint for the bank or credit union. So, a lot of times it's replacing a solution like that. Now, also we're starting to see -- we launched a customer in Q1 that was a rip and replace of a more modern competitor, because investing in these products is, it's an ongoing effort. It takes a lot of energy. And I think, our platform, the Blend Builder platform, makes it possible for us to be not just in these markets, but like I said earlier about commercial banking, we want to be the best in these markets in every one of these product areas over time. And so, we got to take that measured approach, but we're starting to see some of that as well.

Our next question comes from Joseph Vafi with Canaccord Genuity.

Congrats to the whole team here on good progress operationally and on the balance sheet as well. Great progress. Just one, just listening to your prepared remarks, Nima. I mean, there was a lot of credit union in there, both on mortgage and deposits. And I think, you might have actually stated that maybe you've tailored those solutions a little more to the credit union market. But maybe, without giving away any secret sauce or anything, why are we hearing so much about the credit union channel right now? I know that there's a war for deposits, and credit unions have kind of been losing ground compared to other financial institutions. But this was kind of maybe less discussed back, I guess, when you did your IPO. Now all of a sudden there's a lot of credit union action. Just be helpful to get a view of this particular market. And then I'll have a follow-up.

Yes. And, I think, some of this comes down to timing, Joe. We have 4 of the top 10 banks by assets as customers too, and many more of the top 50. So, I don't want to say that our solutions only work for credit unions, but maybe the reason why now with credit unions is, 1, it is a historically underserved space by technology providers, and I do believe that they want to continue to grow and they're member-owned organizations and so they want to continue to serve their members in the best way possible. And one nice thing that's common among every credit union I've talked to is, they are all very focused on member experience. And so, some of these questions, they come down to prioritization and so they prioritize member experience first, whereas we have also a number of the top 10 independent mortgage banks as customers as well. And so, you layer all these things together and they'll have differing priorities sometimes. And right now, the credit unions all have priorities around that member experience. And so, that's really good for us, good for our product suite, and we're going to make sure we make them aware that we have this amazing solution that can change their business. And so, we're excited to work with a lot of them and take a leadership position in that industry.

Joe, I know you mentioned you had a follow-up question. Just pause and see if you got one.

Yes, I do. Maybe just on the closed product. I know it sounds like -- it's doing really well. And you mentioned that you got an attach on 1 of your largest customers. It'd just be interesting to know kind of where close is on a penetration basis across your mortgage customer base and then just maybe drill down a bit into how the regulatory environment is helping this to go electronic. Are we fully there like in all states? Is this a process or is it kind of a done-deal already in terms of electronic close?

Well, there's good questions. It's a decent chunk of our customer base of the applications flowing through our product or closed loans flowing through our product that are now getting digital closings. But it's not even close to the majority. We don't want to share specific numbers on this, but it's a very fast growing part of our business. And so, I guess, on the regulatory side, we track what percent are eligible for fully digital closings and about -- not call it 90% of loans that we do through our platform are eligible for a fully digital closing. And even greater percentages than that are eligible for what is just a digital note, which allows for what's called a hybrid closing. And so, there's a lot of opportunity there. And it's big savings for our customers. I mean, it's big savings. These things are so operationally complex that things such as being -- having 1 signature be slightly off center by the consumer, off the line by the consumer, needs to go back to the consumer and be resigned after the closing. Those kinds of things cost money to handle and are a terrible experience on top of that. And so, it's a really important part of our product. And so, we're investing in things like that to make sure our customers get the benefit on 1 platform. And then, we're investing in things like, you saw in our press release, we updated the Spanish language intake form because 1 thing our customers are trying to do is, grow their business. And to grow your business, you want to serve a broader set of consumers. And so, that Spanish language intake form is super helpful to our customers in this time. We're also building more tools for loan officers on their mobile app. We added new capabilities in the last quarter as well there to make sure that loan officers could serve customers on the go even more than they could. And that's something a lot of our customers, in particular independent mortgage banks, appreciate. And so, I think, in aggregate, all these things, we just take the lens of, there are still so much to do and some of the things we'll offer has an additional fee, like the Blend Close product because there's so much complexity to it. And some of the things will be baked into the current per unit fees we have with our customers, like the digital closing or the mobile app for loan officers.

Our next question comes from Seth Gilbert with UBS.

Maybe just 1 for me. The free cash flow improvement was nice to see, and I'm wondering if you can talk about the upfront pre-purchase agreements that you mentioned that led to the strong free cash flow results. It's still a very hard macro environment, and so I'm wondering if discounting plays at all into this or if maybe there was a different strategy there?

On free cash flow, it's a few fronts. It's just really like, it's the discipline of what we've been sharing in multiple quarters really coming to fruition. As you saw the update that we shared obviously in Q4 in terms of our overall pipeline and execution, what you're seeing come to fruition is the ability for us to execute against that. What it translates to is not as much discounting at all. That's not the issue, as we're signing more and more customers that either have an element of their contract be what we consider a platform centric, which leads to the ability to collect that annually. It has more and more customers that are coming to us and, in essence, being able to give larger commits than they gave historically. That's both due to the Blend Platform, but it's also due to where they see the macro bringing those 2 together. Just a small example is with what we've done internally to just be better aligned from a cost perspective, when you think about variable to fixed, it's those types of motions and movements that are creating just our ability again to deliver on free cash flow.

Got it. Actually, 1 more, if I may. I was just curious if you could give an update on the $50 million run rate in Consumer Banking, saw -- at least in line with our model, so good result for Consumer Banking and $50 million run rate, just kind of curious as to how that's progressing. And is there any risk to this, given the macro?

No, actually that was just existing signed customers. So, I think, if anything -- I mean, there's always risk to anything, of course, because there is a macro that we're dealing with, then who knows, we had a pretty good-sized bank, almost got out of business last year and get acquired by another bank. So, there's always risks, I guess. But if anything, I think that there's -- we should hopefully see that number continue to grow as we sign new customers. And so, yes, we're hard at work on that, and we're going to -- we'll try to keep people updated as we get material updates to that number and as the year progresses, but yes, we're feeling like we're on track right now.

Seeing no further questions, this concludes today's earnings call. Thank you all for joining. Have a nice rest of your day.