Thank you for standing by. My name is Amy, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Blend Labs, Inc. Third Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to turn the call over to Meg Nunnally. You may begin.

Good afternoon, and welcome to Blend's Financial Results Conference Call for the Third Quarter 2025. I'm Meg Nunnally, Blend's Head of Investor Relations. Joining me today is Nima Ghamsari, our Co-Founder and Head of Blend; and Jason Ream, our Head of Finance and Administration. Before we start today's call, I'd like to note that we also refer to certain non-GAAP measures, which are reconciled to GAAP measures 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 results we'll discuss today, including our profitability, refer to non-GAAP. Also, certain statements made during today's conference call regarding Blend and its operations, in particular, its guidance for the fourth quarter of 2025, commentary regarding 2026 and expectations about our markets, our strategic investments, product development plans and operational targets may be considered forward-looking statements under federal securities law. 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, can cause actual results, events or circumstances to differ materially from those described in these statements. Please see the risk factors we have 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. All comparisons made in the course of this call are against continuing operations for the same period in the prior year, unless otherwise stated. Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call, and an audio replay will also be available soon after the call. I'll now turn the call over to Nima.

Thank you, Meg, and welcome, everyone. Our third quarter results demonstrate our team's strong execution and the increasing resilience of our business model. We delivered total revenue just above the midpoint of guidance and more importantly, non-GAAP operating income that exceeded the high end of our guidance. This marks our fifth consecutive quarter of non-GAAP operating profitability, a trend we expect to continue into the fourth quarter. For all of this, I want to personally thank the entire Blend team. This 5-quarter streak of profitability is not an accident. It's a direct result of their focus, their discipline and their deep commitment to our customer success. Their execution is what gives us the stability to invest in our future from a position of strength. This profitability is a result of deliberate work to right-size the business over the past few years and build a foundation for sustainable long-term growth. While our overall top line was steady, it reflects a tale of 2 dynamics. We saw continued strength and growth in our Consumer Banking Suite, which was offset by some headwinds to revenue in our mortgage business, but this was not a surprise to us. It reflects the intentional strategic transitions that we are navigating, specifically moving from lower-margin services businesses to higher-margin partnerships and managing the final roll-off of legacy customers that we've discussed in prior quarters. We expected and are managing these headwinds, and they are clearing the way for a healthier, more profitable future. I want to spend our time today on 3 topics. First, the quality of our new customer wins and the strength of our future pipeline. Second, the incredible energy and pull-through we're seeing from our customers around our Rapid Suite and AI; and finally, our key strategic priorities as we drive towards 2026. To…

Thank you, Nima, and to everyone on the call today, thank you for joining us. As this is my first earnings call with Blend, I'd like to reflect on my first 3 months here before I talk about our results. First, the team that I've been lucky enough to join is one of the best I've ever worked with, and they are passionate about making Blend successful. Second, we have a strong portfolio of products that will continue to improve under the leadership of product-focused executives like Nima and Srini. And lastly, the best word I can use to sum up our relationship with customers is partnership. I had the great fortune to be able to attend our annual customer forum only 1 month into my time at Blend and to talk to a number of our customers. While our customers, of course, have lots of requests and suggestions for our products, everyone I talk to believe that Blend is the best option in the market and that they are on a journey with us. That gives me great confidence in the foundation of this business and our right to win long term. I'm sure I'll talk more with many of you about that over the coming weeks and months. But for now, let's dive into our third quarter financial results and an update on market share trends. Total revenue in the third quarter of 2025 was $32.9 million, ahead of the midpoint of our guidance and down 1% year-over-year. Digging below those headline numbers, Mortgage Suite revenue was down 18% year-over-year, driven by the strategic transition to lower revenue but higher-margin partnership models for some of our products by some churn and by the effect of the large renewal with lower pricing that we talked about last quarter. On…

[Operator Instructions] Your first question comes from the line of Aaron Kimson with Citizens.

Nima, you talked on the 1Q '25 call about the inflection in pipeline after the Rocket-Cooper deal was initially announced. I appreciate the commentary about Forum in September and pipeline up about 60% year-over-year at the end of Q3. But since the Rocket-Cooper deal closed on October 1, has there been any change in the tone of conversations with FIs that want to keep their largest consumer lending relationships that know they need to upgrade their tech stack to remain competitive?

Yes, good question. Yes, definitely, I think the Cooper-Rocket acquisition has been -- I'd say, what one thing that I've seen happen there is big mortgage servicers are starting to think through their strategies, and it's an area where we're very strong. We work with most of the top 10 servicer -- mortgage servicers in the country. We're the ones who are primed to be able to take advantage of both the current situation with cash-out refis and home equity loans. And then if the rates -- if the mortgage rates get into the mid- to low 5s, there's a huge volume of customers between 6% and 7% who need to be able to take advantage of lower rates, especially if the economy gets worse. And so I've definitely seen companies react. And I've also seen some of the very largest lenders who are our customers say, we got to do something really important with AI. And so they were the ones calling on me on the AI front saying, we want to not just remain competitive, but we're going to use this time when potentially some companies might be busy integrating or distracted with other things, and we're going to put our best foot forward and to come out of this next 6 to 9 months with a much more automated, much higher quality operation than we used to.

That's really helpful. And then switching over to Jason, it's great to have you with us. Given that you were a senior MD at Haveli in April '24 when Haveli made its investment in Blend and with Haveli owning about 20% of the company today, can you talk a little bit about your history with Blend dating back to Haveli? How involved you were in that investment process? And then how you came to be the Head of Finance and Administration at Blend? Was it through prior relationships or third-party recruiters or something else?

Yes. So I -- Haveli is not a huge firm. So, I obviously had visibility into what was happening. I wasn't part of the investment team that made the investment in Blend, but I did have some contact with the company. And primarily as an operating partner, I was here as a resource for all of the -- sorry, I was there as a resource for all of the port cos that Haveli had. But the switch that I made was really wanting to get back into an operating role. Given the fact that Amir was -- had made the decision to leave Blend, I was looking for a good opportunity -- everyone at Haveli had a really high view and estimation of the team at Blend. And I had gotten to know Nima and the team a little bit as well, but that's a really great opportunity. They need a CFO that has experience with public markets, and I was looking to get back into the operating role. And so essentially, the stars aligned.

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

On Mr. Cooper, can you just help us synthesize the moving pieces you called out there in terms of sizing the revenue impact in 2026, just juggling the handful of commentary that you gave between both the mortgage and the consumer banking segment? And then beyond 2026, you're mentioning a part of the revenue still being protected through the expiration of that contract. So, just help us understand exactly what that looks like and what that cumulative impact might look like post-2028?

Yes, Ryan. This is Jason. So the specific commentary we gave on the call is that there will be a share headwind, and that is essentially because we do expect the volume of transactions coming through our system from Mr. Cooper to come down now that the transaction has closed. We didn't really give specific revenue numbers around that. But what I will say is that the majority of the revenue that we've had in the past is protected for some period of time. So, there will be some revenue headwind. We didn't call out a specific number, but the majority is protected through the second quarter of 2028. I'm sorry, the second part of your question, I think we missed that.

No, I think you covered it, but I mean, I have a related follow-up. I think last quarter, you called out a mortgage pipeline consisting of roughly 400 bps of market share. Can you provide an update on where that stands today? And then it sounds like net of Mr. Cooper, we should still be expecting market share growth next year, but correct me if I'm misunderstanding it.

Yes. Sorry, go ahead.

Yes. Again, we haven't provided guidance for next year on market share, and we'll give you more color on the call, the Q4 call at the beginning of the year. But yes, look, we still have a very strong pipeline for mortgage. Our strategy here is a combination of factors. As Nima talked about on the call, we've got the flywheel effect now going where the mortgage side feeds the consumer banking side, the consumer banking side feeds the mortgage side. And so we're looking for growth on both sides of that. And obviously, share growth in the mortgage industry is something we're driving towards, but we're also driving towards growing consumer banking. And as you'll recall, home equity, which is a big potential upside for us, feels a lot like mortgage. It is lending, but it is -- we reported in the consumer banking side. So, I think you should look to see big growth on both sides.

And we didn't -- I talked about this in my prepared remarks. We talked about we have some top 10 lenders, banks in our pipeline right now. We're actively pursuing -- we believe, and I think the market sees that we have the best product in the market for someone like them. I got to spend a lot of time at the Mortgage Bankers Association Conference with these prospects. And we've weathered these headwinds, and we've kept our reputation good and we've continued to innovate. And so it just puts us in the pole position to be the right partner for some of these big guys and especially as we continue to build capabilities that makes us a true platform for them, building AI into the platform, building the rapid products on top of the platform. It just allows them to get a lot out of us. And so that's why we've seen the pipeline stay strong and why we're excited about even just in our existing customer base, the growth of the existing customer base is where I spend most of my time because those existing customers are the ones that can move faster with us and want to do more with us.

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

Just wanted to maybe just drill down on the big renewal a little bit. Just kind of what was maybe going on there in a little more detail, if possible? Do you see more renewal risk in the pipeline? And it feels like you provide a pretty high-value product to customers. So kind of just wondering why there needs to kind of be a pricing discussion when you're already adding so much value for customers? And I have a quick follow-up.

Yes. Really good question, Joe. And just to put the timing of when that that initial discussion around renewal started happening, it was in either late Q1 or early Q2 of 2024. So, we're talking 18-plus months ago and before Jason's time here. And it was a different time for Blend. I mean it was before our Haveli investment, before we had taken a new capital, people were worried about our debt in the market. They're worried that we weren't going to necessarily be around. And so to answer your question, pretty candidly, no, I don't see renewal risk in the rest of our pipeline. In fact, most of our renewals -- if you sort of normalize -- we took an internal look at this, this week. If you normalize for the contribution that our customers are giving us per loan outside of this one renewal, the value per loan is up actually year-over-year from Q3 to Q3. We looked at this as a one-time view for ourselves because I know there's a lot of moving pieces. There's this one renewal. There's the partnership model transition, which I'm super bullish on, and we think is going to drive more upside for us next year. And so, yes, we did have this one moment with one very large customer in 2024 that we're feeling some impact for. But interestingly, they were the ones who were on stage with us at Forum doing a demo of the AI functionality that they're adopting with us. They were the ones on stage with us talking about Rapid home equity and talking to us about what they can do with us more on that front. And so I view these things as maybe short-term headwinds where we built -- we use that moment together in the trenches to build long-term partnership. And this customer is so big and has been such a good partner for us. There are so many things we're talking to about them. And I'm very happy we did the renewal. I do that renewal even at the same rates today, if I could, because there's just so much more upside. We're talking about this $11,000 problem in the industry, and we're $80-something into that $11,000. So while we had to spend a couple of years cleaning things up internally, getting debt off our balance sheet, getting the company in a good profitable state, we're there. We're on offense. We're building really cool things, and I'm looking forward.

Your next question comes from the line of Michael Turrin with Wells Fargo.

There were just a few different mentions throughout the call I wanted to unpack a bit if we could. So it sounded like some of the market share impacts you're seeing likely continue into next year, but there are also some comments from Nima around macro showing signs of life and pipeline growth building back a bit. So, just any more context you can give us to help square those 2 factors? And big picture, just the factors within Blend's control and driving better growth into next year is helpful.

Yes. I think, Michael, thanks for the question. There are 2 dynamics you're referring to. One is our share and the other is sort of the market itself, the macro. I think as we mentioned on the prepared remarks, the general consensus expectation out there is that there will be lower rates in 2026, and that will drive higher mortgage activity, higher refi activity and that will lift the market overall. We haven't guided to that yet, but we do see that that's our belief as well falling in line with what the sort of general consensus expectation is out there in the market. On the share piece, we do have -- we called out one specific headwind, which is Mr. Cooper, right? And as I mentioned on one of the earlier questions, a significant portion of our revenue with them is protected under contract. But regardless of the revenue, if they move their volume elsewhere, we're not going to count that in the share. right? And so that is a likely headwind to our share in 2026. That doesn't mean that the share has to stay with just that -- that's not the only impact to share, right? Obviously, we can win new customers, we can get new customers live, et cetera, and that can drive additional share for us. We haven't guided to 2026 yet. But just calling out, we highlighted one headwind, but that's not an indication of where we see the overall going yet.

Okay. That's actually -- that's useful supporting color. And just, Jason, on margin, you're delivering above the high end of the prior operating income guide with revenues within the range. So just where the efficiencies are coming from and how you think about different investment levels for the business and various growth scenarios as some of what you just framed potentially plays through?

Yes. Look, in terms of where efficiencies are coming from, it's hard to call out one specific area. Obviously, we are growing our presence outside of the U.S. And in some cases, those are lower-cost geographies, and we're able to get talent that's as good, but at lower costs. That's one specific area of efficiency. But I would say more broadly, there's just a focus on doing things in a lean way and trying to use small teams, trying to focus on output as opposed to just creating an org structure to deliver something. It's really more of a mindset than it is on specific efficiencies. And as we look forward, I think 2 things. One, sort of as a foundation, we want to think about -- obviously, look, this industry is cyclical on the mortgage side at least and to some extent, perhaps on the home equity part of consumer banking. We're not going to allow our investment decisions to just follow the macro market. In other words, just because revenue increases, if rates were to drop really far, we're not going to say, "Oh, great, let's spend a ton of operating expense just because revenues are high right now." We're sort of building a business that's resilient regardless of macro. The second comment I would make about investment philosophy going forward is that we have some amazing opportunities in front of us. And today, we think that we're well positioned to address those opportunities within the envelope that we've built for the business today. To the extent that we continue to get traction with those and we see the top line materially shifting independent of macro, we may pour more fuel on the fire in certain areas where those new initiatives might require it. But we're really being judicious about the ROI essentially of the investments that we make and making sure we have places where we have a very clear line of sight to getting a return on additional expense put in the business.

[Operator Instructions] The next question comes from the line of Michael Ng with Goldman Sachs.

I just have 2. Just a big picture one. Just on the economic value per funded loan, is there a way to think about where that could be in the long term? I appreciate that you're guiding to $83 to $84 for next quarter. But like where do you see that going in the next 2 to 3 years? And then secondly, we've seen some good revenue growth in Consumer Banking Suite revenue. Just as you think about the business more strategically, what's the right mix to think about now between consumer banking and Mortgage Suite? Like where are you focused on and where do you see the biggest opportunities?

Yes. Thanks, Michael. I kind of like to work backwards from what the opportunity size is. And we talked about Rapid Home Equity and Rapid Refi in our prepared remarks and in the last few quarters. And those products themselves as a standalone are a multiple of our core mortgage and core home equity rates. And so I think we're just scratching the surface. Now to answer your question on where we'll be in 2 to 3 years, I don't want to necessarily -- we haven't guided that yet, but we are aggressively going after deploying those products to our customers. In fact, I would say that's kind of the top priority for us, given that there is a big market need right now for Rapid Home Equity and then people are looking forward to -- there's a lot of participants in the market that want to help consumers take advantage of their equity, and we want to help them help their consumers. And so that's very important to us. And that has a very high price per unit, although that's in our consumer banking segment. And then on top of that, on the Rapid Refi side, a lot of these companies are seeing mortgage rates coming down. I don't know if you all saw the jobs numbers today or the job cuts numbers today. But they want to be in a position where for the people who are able to get the benefits of lower rates once the rates get into the mid- to low 5s, that will be kind of an inflection point, I think, for the industry in terms of number of consumers that are eligible, but they need to be able to do that extremely effectively and in a very automated fashion. And our Rapid Refi…

No, it was just about the long term -- kind of like the long-term trajectory of evPFL and then the right mix of consumer banking versus mortgage, but I think you've covered it.

Makes sense. Yes. I mean, you've seen our consumer banking segment grow because we've made some really big customer wins. And actually, one of our biggest deals this quarter was -- this past quarter was a consumer banking win. Now, also 39% is where we are as a percentage of our total revenue in consumer banking. That happens to be in mortgages cyclically low. I think both sides of this business can be much larger than they are today if we continue to execute with our customers and our customers continue to win in the market. And so we're not -- I wouldn't say we're sort of prioritizing one or the other. We're serving both. And it's sort of -- I'd say our focus is our existing customers to start with and growing them first and foremost.

[Operator Instructions] The next question comes from the line of Faith Brunner with William Blair.

Can you maybe double-click on the adoption cadence you're seeing across the different Rapid products within your existing customer base and maybe how that's driving durability into the different product suites? And then just a quick one on top of that about AI and as you get early feedback back from the Intelligent Origination and some of these other solutions, how that can maybe unlock another long-term monetization opportunity for you guys?

Yes. Great questions. The flavor of the day from our customers and where we're focused on the Rapid Suite, although we haven't -- I think it's over 10 Rapid deals in deployment right now with our customers. I'd have to double check that exact number. But the majority of our big customers' focus is being able to serve a consumer a home equity line of credit or loan in 10-ish days. I mean that's -- there's a lot of consumers who have debt that they're revolving on, that's higher interest debt. And so our customers are interested in offering them something we can take advantage of the equity in the consumers' homes. And the process today for getting a home equity line of credit is at a bank or credit union that a typical bank or credit union might be 30, 45, 60 days. But the technology is there now, and we have it with Rapid Home Equity to do that much faster and a much higher conversion. So, that is the focus for our customer base, I'd say, for our largest customers. But we're seeing kind of interest across the board on that and Rapid Refi, with just trying to get ahead of the rates that might come down next year. And then shifting gears to AI. I mean, AI is one of those things. It's like almost like water for us at this point. It was such a breadth of fresh air because it allowed us -- we had this initiative a couple of years ago that we shared with you all around efficiency, and it helps us with our own internal abilities to do things faster and better. And so I think that was part of it. And then it also unlocked -- I mean, there was…

Thank you so much. There are no further questions at this time. So on behalf of Blend Labs, Inc., thank you for joining. That concludes today's conference call. You may now disconnect.