Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Blend Labs, Inc. First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Amir Jafari, head of finance and operations. Please go ahead.

Good afternoon, and welcome to Blend Labs, Inc.'s Financial Conference Call for the First Quarter of 2025. I'm Amir Jafari, head of finance and operations. Joining me today is Nima Ghamsari, co-founder and CEO of Blend Labs, Inc. Before we start today's call, I'd like to note that some of the statements on our call will be forward-looking. We will also 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. Unless otherwise stated, all financial measures we discuss today, including our profitability, refer to non-GAAP. Also, certain statements made during today's conference call regarding Blend Labs, Inc. and its operations, in particular, its guidance for the second quarter and full year 2025, and expectations about our markets, our strategic initiatives, product development plans, and operational targets 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-Q, and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. We will provide a transcript of this call and supplemental slides for the quarter on our Investor Relations website. I'll now turn the call over to Nima.

Good afternoon, everyone, and thank you for joining. There are three themes I want to cover today. First, our continued shift towards becoming a software-first company. Second, the Rocket Mr. Cooper deal as a catalyst for the industry. And third, how that shift is helping fuel the strong momentum in Q1 for Blend Labs, Inc. Starting with our simplified Blend initiative, we began our journey to become a software-focused company, enhancing customer value, and improving our unit economics by transitioning to strategic platform partnerships rather than building non-core services ourselves. As a significant step in this evolution, we are pleased to announce that we are in an exclusive process with a leading title and mortgage services provider for the potential sale of our title insurance business. This move aligns with our commitment to fully embrace a software-first model and will be the final step in our journey to simplify Blend Labs, Inc. This potential transaction is envisioned to have three key benefits. First, similar to our successful partnerships in homeowners insurance and income verification, the intended structure includes an ongoing software revenue stream for Blend Labs, Inc. While this results in lower reported revenue than a typical title transaction, it will drive higher absolute profit dollars, be accretive to our gross margin, and have better capital efficiency, similar to our other partnerships. Second, this allows us to strategically exit the capital-intensive title agency business while maintaining some unit economics that will be beneficial in a macro recovery. But most importantly, it accelerates our vision for a more cost-effective, software-driven title insurance experience that's embedded directly into the Blend Labs, Inc. platform. We'll share more details about this embedded solution in the coming quarters. Ultimately, this move reinforces our core objective, to leverage the power and reach of our platform and…

Thank you, Nima. We have kicked off Q2 2025 with execution and focus. We have created momentum across our business, and the announcement of the sale process for Title 365 will be the final step in our journey to simplify Blend Labs, Inc., which we expect will amplify our operating leverage while allowing us to focus with conviction on our goals for Q2 2025 and the strategic initiatives that will propel us into Q2 2026 and beyond. Every change we have announced is a positive change that will propel profitable growth and deliver value to our customers and shareholders. Our results in February illustrate this. But before I discuss our results, I'd like to speak to the overall macro along with the Mr. Cooper acquisition by Rocket. Starting with the macro, we recognize that Q1 was volatile. We saw a similar situation in September and October of last year as volumes increased as rates dipped, only to see things reverse quickly as the rate volatility remained. Unlike Q2 2024, Q2 2025 also has uncertainty around the potential economic impacts from tariffs, offset by potential benefits from banking deregulation. We've always been clear that we cannot predict outcomes related to the macro, and we do not plan to change our approach. With this being said, it's important for us to know that volatility typically leads to spikes in originations. We saw this in the industry before in Q2 2007 and Q2 2008, and today, we see a backlog of demand that has been building since Q2 2022. With this, we are focused on being the leading platform for financial institutions and delivering innovation through our suite of solutions. The launch of Rapid Refi in February 2025 is a great example of this. As for the acquisition of Mr. Cooper by Rocket,…

At this time, I would like to remind everyone, in order to ask a question, your first question comes from the line of Dylan Becker with William Blair.

Hey, Nima. Amir. Appreciate the question here. Nice job, guys. Maybe, Nima, starting with you, we touched a lot on the call too. Of kind of the need and impetus for digital investment in a period of uncertainty. I wonder how you're thinking about kind of the dual benefit of some of these higher ARPU products with rapid refi and the home loan piece tying into kind of how your customers are thinking about the opportunity for retention in that volume recovery scenario. And really how that kind of sheds light or maybe both confidence in their ability to continue investing ahead of potentially what's to come here?

Great question, and thank you for the question. I'd say a couple things. One, the product is designed to make it it's designed to be the easiest, most frictionless way to do a refinance, and it's very tailored. So if you're a veteran and you have a VA loan, versus you're a first-time homebuyer and you have an FHA loan, or you're a conventional, Fannie Freddie loan. It's designed to be very tailored to a specific situation, and that's what drives the higher pull-through for our customers. What that means in practice is that they can do more things in that flow that they couldn't do when we didn't have that level of specificity personalization. So for example, we show the homeowner who is now looking to refinance their old monthly payment and their new monthly payment side by side to be able to compare, look at those and say, oh, wow. I can save $200 a month in this scenario. So that's one example. We can also take them all the way through things like intent to proceed and rate lock, which are critical moments in a mortgage workflow and drive higher conversion as well because you're not leaving that to a phone call later, a day later, or two days later, having a human have to do that. And then the consumer's gone off to something some other place and getting a call from some other lenders while they're waiting to hear from you. And so with those things in place, that's exactly why lenders are putting this in place now because they want to be able to take advantage of the recovery and get as much of that. They've done millions of loans in the past few years at high interest rates. They know those consumers want to refinance to save money. Tough economic times. And this is precisely built for that exact purpose.

Very helpful. Thank you. And then, maybe switching over to Amir. Appreciate the portfolio and platform kind of simplification here, the title business and some of the incremental color. On kind of the margin contribution of the additive pieces here. How should we think about if we take a step back what this kind of means for the evolution of the financial profile of Blend Labs, Inc. as a higher margin, potentially faster growth business even if we look at kind of that like-for-like contribution component? Thank you.

How you doing? Break it down into the following. I think for us, this notion of simplification has actually always been surrounded by the desire to accelerate and be able to grow. We've made the statements around wanting to become growth-oriented, which we have. It was evident in Nima's comment. We want to do it from a perspective of profitability. So to break that down, with simplification, you can think about the following. The expansion of what we will do across our partnerships and what you're seeing today, that will allow us to not grow what you've historically talked about with regards to economic value, but really also where we're taking you today in terms of some of the new supplemental information for contribution profit. And then further, almost to the point that Nima just made a second ago, as you see some of our solutions like rapid refi come to the market, that will again be not just an accelerant to the top line, actually allow us to have not just top line growth, but also grow profitability. So the portfolio and the approach that we want is to be able to continue to deliver leverage the innovation that we have, through our platform, capture as much of that the in essence, the value that we deliver, expand not just in essence our revenue base through economic value performed alone, but by adding new logos and then making it just be as profitable as possible.

Very helpful. Thank you, Bill. Appreciate it.

Your next question comes from the line of Aaron Kimson with Citizens.

Thanks. The $50 million expansion is really impressive. Can you talk a little bit about the evolution of that relationship? If the customer is using products beyond mortgage, and what the timeline is to realize that $50 million in RPO. It looks like in the in the 10-Q that the language is the same around realizing RPO as in prior quarters? Thanks.

Yeah. The relationship started years ago. And, you know, it's been a good one where we started with just mortgage. Added home equity, then they added Blend Close and Blend Income, and then they added a consumer product to that mix. And, you know, now they rolled that out to all their channels or they're rolling that out to all their channels, which is what prompted this renewal. And so it's been a really great, you know, long-time partnership where we build we do what vertical software companies have to do to be successful, which is if that first initial entry point becomes super successful, the customer loves you, and they want to do more business with you. And everything that you do that provides value, they take a really serious look at. Because they trust you. They trust us. And I think that's sort of a great this is a great case study for us. Of one that we've built that long-standing successful trustworthy relationship with this customer, but I think there's many more to come. Of customers that want to do more things with us, but have had to put the brakes on it during turbulent times in the markets. And so I'm very excited about this. And then as far as RPO, we haven't shared, you know, how much of that contract. But I think, typically, what we say is about half of our RPO is to be collected in the next twelve months. And so I don't know, Amir, if you want to add anything on the RPO side.

Well, you shared on the disclosures that we've provided. They're consistent. Got it. And then just a follow-up. Yesterday, you announced business deposit account opening. How does business deposit account opening compare to retail deposit account opening from a product development perspective and then a pricing perspective? Can you talk about this a little bit about the competitive landscape there as well?

Yeah. Sure. And the impetus for this came from our customers because they liked us for the consumer account opening, and it turns out a lot of consumers are also small business owners. And they had to go and jump through a bunch of hoops to open their business account with the institution that we were working with. And so wanted to make it a simple, frictionless experience focused on individuals or groups with, you know, small business types and be able to make that a consumer-like consumer quality experience. So the feel of the experience is very similar but there's different components. You have to do different things around under knowing your business, making sure you're doing the right checks with various government and regulatory lists that you have to check before you can open an account for that business. You'll be able to support multiple different account types. They're not there's different kinds of businesses that are registered in different ways. And so while it's actually all the same DNA and a lot of the same components, it's so many different things under the hood that are powering that. And we just it then having all these things on one platform, that's what our customers love is that they don't have to think about those 500 different things that they might have to think about across mortgage and home equity and consumer and deposit accounts. And for the consumer, they certainly don't care. What they want is they want their mortgage and their checking account, they want their personal account and their small business account to be open at the same time. And so we want to make that as easy as possible for both our customer and their customer, remember. Thank you, guys.

Your next question comes from the line of Ryan Tomasello with KBW.

Hi, everyone. Thanks for taking the questions. Given the significant milestones you guys have achieved here, obviously, cash flow generation, the simplification. Curious how you're thinking about maybe leaning a bit more into investing for growth again. Obviously, not something that you haven't been doing, but just given the simplification, the efficiencies you stripped out, just how should we be thinking about, you know, reinvesting from here to really capitalize on the opportunity?

Yeah. Great question. I you know, it's interesting because these past few quarters are the first time. I feel like because we've gone through these simplification steps, because we've reached profitability, because we now have a very high free cash flow quarter behind us. That we've earned the right to go and say, we're gonna go invest in growth again. And so, you know, for me, where I'm looking is things like rapid refi and rapid home equity. Those are such so complex but such beautiful solutions. Those are the kinds of things that we have been building the last few quarters and the last few months. And we want to keep investing in. I'd say one area that wasn't covered on this that we'll probably cover on future calls is AI. The one of the things that our customers do a lot is look through lots of documents and investor guidelines and regulations and those are things that AI can help them with because it can do that extremely well. And so that's maybe one area you'll see us invest in, do some we'll share some more details on that in the coming quarters. And then also on go-to-market on our sales team, making sure that we have enough coverage to make our these accounts that are successful with us make them continue to be successful with us first and foremost. Bright green, loving us, but wanting to also as we have new solutions in place, want to make sure that they're aware of those. And so we've also given an OpEx guide for the year. And so all this will fall within that OpEx guide that we gave for the year.

Great. And then on the product evolution, you know, as you already highlighted business account opening, helps round out the products further. But I'm curious you're thinking about additional expansion of the product set from here. You know, for example, I think you've talked about commercial loan origination being a potential opportunity down the road. So I'm curious if that's something still on the cards today. Where it stands on a list of priorities. And then also, international, not to kind of get our head of our skis here, but, you know, just touching on things that you guys have highlighted in the past. Thanks.

Yeah. And I, you know, I think both as a general rule of thumb, I think this sector, banking, and lending, has been underserved by tech vendors. And you layer that in with the recent I guess, evolution of AI which is now 10 times or a hundred times as powerful as it was even two years ago, there's so much opportunity in even the US banking space. Where we will continue to look at opportunities with our customers, and our customers are the ones who pull us in these directions as opposed to us pushing into specific areas. And so we'll continue to look at opportunities with them while maintaining focus. I mean, one of the things that is probably underrated in business and in product companies like ours is we want to make sure that products that we're delivering today like the rapid refi, the rapid home equity, the consumer accounts, consumer lending, want to make sure that those are the best in the world, that we have a repeatable and scalable motion about not just selling it, but building new features, rolling those features out. So we want to really perfect those before we go and spend time on things. So those are, I'd say, expansion areas in the future that we'll do when the time is right. We'll make sure that we deliver on the things that we say we're gonna deliver. We don't want to be another vendor who under serves the industry. We want to be a real partner. And so we'll do we'll deliver on things that we say we're gonna deliver on, and then we'll go from there. I think international is another great one where both commercial originations and international, those are things that our Blend Labs, Inc. builder platform are capable of doing when the time is right. So we've set ourselves up nicely for those things to be able to enter those markets without huge, you know, massive investments. And then I touched on this earlier, but I also believe that banking is in particular because you're moving bits around and not atoms. In banking. Or is it particular area where AI could be very powerful for our customers. And so you know, I get the pleasure of being able to work on some of those newer areas for our company.

Great. Thanks for taking the questions.

Your next question comes from the line of David Unger with Wells Fargo.

Great. Thank you for taking the questions. I just want to double click on the reinvesting efficiency comment just now. I'm wondering if how we should think about any change in the capital deployment philosophy once you get proceeds from title as that layers on top of positive free cash flow? Thanks.

Hey, David. Thanks for the question. Let me compliment a little bit of what Nima shared. For us from an investment perspective, everything that Nima mentioned as you think about it, we're measuring we do to make sure that we're doing these things with efficiency. It's things like the magic number to make sure that our AE deployment so we're gonna continue to reinvest. To your point around post title and the and title efficiencies and consideration components. This has been on our radar. It's been on our mission. It's evident in what we're doing. I think for us, the spectrum in the areas that we want to double click on are the following. One, Nima mentioned AI. In terms of not just what he's seeing, Srini himself and others, what we can do for our customers and prospects with regards to AI and product expansion. That'll always be in our DNA. Second, go to market. It's down the lines of what you heard Nima say. It's not just the AEs. It's about awareness. It's about making it so that our implementation and our approaches enriching our partner ecosystem to be the strongest, that's gonna be the area that we reinvest in. And just continue to deploy capital. And we'll always deploy capital in a very ROI mindset.

Appreciate that. And you read my mind. I was actually gonna ask you about AI and engagement with customers, but I guess I'll ask it from a different angle in terms of have you been using it internally to help drive efficiency gains in the business? Thanks.

Yeah. And, you know, AI is evolving so quickly that a year ago, some of these efficiency tools were not that great. And now they're really good. And so we are adopting in areas where we think it's really good. And using that to also help us envision how it can help our customer base because it's similar actually, it's interesting. It's so similar to how these institutions can be more efficient. It's our job to be able to productize that, package that up nicely for them so they can use it as part of their current work as part of their back-office workflow, want to make their lives a lot easier with the things that we build for them, whether it's with AI or other modern technologies. I actually wanted to touch on one thing that Amir mentioned around partnerships. And why we've invested so much in partnerships as opposed to our own building our own things. In every area. Part of it is focus. Like I said, being the best in the world of the two or three things you do really well, is materially better than being just really good at those things. And then second of all, you know, maybe this is on me. I underestimated how maybe I forgot because I live this every day how special how much I appreciate our customers and how special they are. So many institutions ranging all sizes, the biggest ones in the world, smaller ones that are trying to be to keep up and be innovative and drive their segment of the market or their niche in the right ways. And that's really appealing to our partners. And the reason that that's so important for us if we can only do two or three things and be the best in the world at those, and the partners they do that one or two things, and they're the best in the world at those things. And they want they're motivated to and want to integrate into our platform. That just creates even more value for our customers. If we always work backwards from the value for our customers, everything will work out in the end. Customers are willing to stick with us longer, try new products with us, the partners building more things, building more market share, and contributing something to us as a partner of theirs. And, you know, for us as Blend Labs, Inc., it allows us to grow efficiently as Amir was mentioning.

I appreciate all the detail. Thank you very much.

Your next question comes from the line of Joseph Vafi with Canaccord.

Hey, guys. Good afternoon. Nice results. Nice progress. I thought maybe, Nima, we'd circle back to your comments. On Rocket and Mr. Cooper a bit. And appreciate the analogy. You know, going back in time when Rocket first launched, and just kind of wanted to drill down a little bit on the kind of similarities today. Number one, do you think that this announcement is more focused on the servicer market or more broad-based? And then could you kind of just remind us how you see your servicer share and greenfield in the mortgage service market? And then I have a quick follow-up. Thanks.

Yes. Good questions. I'd say, one, I definitely see this broader in the market. I mean, I fielded phone calls that week when the announcement was made from our customers. Really of all sizes and of all types. Banks, credit unions, INBs, other servicers. And so everyone is, you know, Rocket's, you know, a very admirable company, one of the largest in the space, if not the largest. And doing really big things. And it's the rest of the industry's job to make sure that they keep up and in some ways, surpass. Like, there are some things that institutions have that Rocket doesn't. So the INBs, they look at their retail force as a big strength for them. The credit unions look at their very loyal member base. The banks look at the fact that they touch so many households. And they serve a very specific segment of the market. Those are things that they all view as strengths, and they're trying to think how they how do they use those strengths to be better in their areas and maybe have unfair advantages. Then the second question about our servicer market share. The interesting thing about servicers is a lot of them have been sort of holding steady on the origination side. The originations are typically recapture of their existing book. And they're generally, they're better at refinance transactions or much better at refinance recapture than they are on purchase recapture. And so the reason that that's important and the reason I'm so excited about how well we're doing in the servicer space and some of the new ones we signed, and we have, you know, more like I said, in the pipeline. Is that they're the ones best positioned for when there's a refi wave. Now the refis will spread around to everyone, but the servicers have that regular monthly touchpoint with their customers. And so they've sort of been waiting on the sidelines for rates to come down in some ways. Now they have other exposures as well. But for their originations arm to be able to capitalize on lower rates. And so I think the servicers in particular will do extremely well in a lower interest rate environment as will the whole market. In agri. I think the market is sort of spring-loaded right now waiting for rates to come down. But servicers in particular, because they're so refi heavy, will gain a lot of market share during that time.

That's great. Thanks for that color, Nima. And just, you know, appreciate the color on EV per loan and the moving parts there with the partnership. And, you know, contribution per loan going up. Just also wanted to kind of circle back on contribution per loan on the core mortgage product? I know that maybe some of these new customers are gonna start there. Is there variability in that contribution margin on the core product versus some of the add-ons to trying to understand some of the moving parts there a little bit better. Thanks.

Hey, Joe. K. The variability is only in that so our partnership margins are extremely high for the type of offering that we provide. In terms of what you've seen from us now for a few years, the efficiencies that we've driven, you've seen it come through on the cost of revenue. Our contribution profit in aggregate is going to go up. We haven't disclosed that. It's not an area that we will speak to yet. Contribution profit, I think, for us, our goal this quarter was to start to illuminate it, to focus on it with you and the broader community as it pertains to partnerships, and then we'll continue to build on this. And so more to come from us as it pertains to our contribution profit. It's really gonna be the guiding light for how we think about the expansion and the growth of this business.

Great. Thanks for those comments, Amir. Thanks, guys.

Again, if you would like to ask a question, press 1 on your telephone keypad. And your next question comes from the line of Seth Gilbert with UBS.

Thanks for the questions. Maybe for the first one, I'd love to dig into RPO a little bit more. It was really strong, and wondering if you could dig into some of the drivers on the consumer banking side. Any products you call out or change in the competitive position? And just to confirm I heard this right, the $50 million deal that would be allocated to Q2 RPO. Right? So nothing in Q1 would be the result of that deal? Thank you.

Hey, Seth. Yeah. We're happy to me just start with, first and foremost on our appeal. Going backwards, the $50 million deal that Nima referenced, the massive win for us, yes, that is a Q2, so you're not gonna see that in the RPO that we disclosed in Q1. And then tied to Q1, we haven't disclosed any elements of RPOs that pertain to byproduct. I think where we want to double down, though, is the following. Our ability to gain traction. You heard good numbers that Nima shared. The number of wins that we have not just in Q1, the momentum that we're seeing in Q2. In the month of April alone, the traction that we saw, our ability to continue to, in essence, delight our customers, win, in essence, as many of the deals as we've been winning, and then to do so as we've done where the RPO that we're really adding is either tied to platform fees or the minimums. That's where you're seeing, in essence, the expansion. That's what we were excited about. Obviously, a record quarter for us that we were thrilled with.

Yep. Understood. And maybe for my second question, maybe it'd be helpful to just dig in a little bit more on the priorities, for the company. I mean, you kind of outlined some of them in the prepared remarks. You know, now we have the sale of title, you know, cleaning up that part of the business, preparing for the refi wave when rates lower. There's a bunch of new products within consumer banking. Maybe you could just help us with top three priorities as we think about 2025. Thank you.

Yeah. Sure. I'd I would say the number one priority for any vertical software company is to make sure that the existing products at the existing customers are really loved. And so that it's gotta be the number one priority. And so we're putting a lot of emphasis on that. Spending a lot of time with our customers. We just had our customer advisory board where it brought, you know, 12 key customers from two different parts of our business in two different days we did that at the New York Stock Exchange. It was very well received. We want to make sure we're always investing in our customer base and making sure they're getting the most from our products. And loving what they're getting without having to pay us an additional incremental dollar. So that's always priority number one. Priority number two is for those existing customers, helping them use the value accretive solutions that are already available from Blend Labs, Inc., but they're not using. So Blend Close would be an example. The new rapid products, rapid refi, rapid home equity, priority number two. Because once they're getting a ton of value on their existing products, these are natural add-ons that can drive incremental value to them. And so that's priority number two. And then priority number three, is once they have those two things, now we can go talk about other product lines with them. And so that could be, you know, for a consumer customer, we have consumer customers who are really happy and want to talk about mortgage. Have mortgage customers who are really happy and want to talk consumer. But we have to earn that right with the first two priorities, and in particular, the first priority which is make sure our existing mortgage and consumer customers are really, really happy with us. Because when they're happy and they're successful and they're making money as a business, that's when they want to invest more with us in the second two priorities.

Again, if you would like to ask a press star one on your telephone keypad. Your next question comes from the line of Ryan Tossemi with KBW.

Yeah. I was close. Just a quick follow-up, guys. Nima, you mentioned, you know, getting the go-to-market sales motion right and that being a big focus here, especially now that you're more inclined to reinvest. So maybe just help us understand, you know, what the scalability of the sales organization looks like today. And, you know, what do you think is needed there to really start hit its stride with the new expanded product set? Thanks.

Yeah. And, I would say our sales in Q1 and so far in Q2 have been, you know, far ahead of my expectations. So far this year. Now there's always room for improvement. There's always things we're looking to do there. I'd say I think given the size of our market, there's a question of how we go after the broader market. And some of it is we do really well with the top two hundred two hundred fifty financial institutions in the country because we have a relatively small Salesforce, that goes and talks to them and spends time with them on the ground. Maybe already has an existing relationship because they're an existing customer of ours. And then I think for the down market, beneath those top two fifty, which are still very large financial institutions, so I don't want to downplay the size of those institutions or looking at different models if there's partnership models that we can do to grow that, there's other internal models of building different kinds of teams. So we're looking at various things. We'll share more with you in the coming quarters, but yeah, I would say I'm very pleased with the pace and quality of the wins so far this year from the sales team. It all goes back to, like, what, you know, what I said with our priorities. And they're also the ones responsible in a lot of cases for making sure the existing customers with the existing products are happy. So I've been very happy with their focus on that as well. And, you know, I feel it from our customers. You know, the sentiment it sort of always drifts up to me. I always hear about things. And so the fact that I'm hearing it and feeling it from customers and, again, it's not like every day is without challenges or something interesting that happens, but, you know, in aggregate, it's really trending in the right direction. I'm proud of the team, and still a lot more work to do.

I will now turn the call back over to our host, Amir Jafari, for closing remarks.

Thank you for everyone's for joining. There are no further remarks from our side. Thank you. Moderator, we can end the call.

Ladies and gentlemen, that concludes today's call.