The provider of mortgage technology and cloud banking software says it is debt-free and on track to become profitable faster thanks to a $150 million cash infusion from Haveli Investments.
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Blend Labs Inc., a provider of cloud banking software, said it is reaching profitability faster thanks to a $150 million cash infusion from Haveli Investments, even as revenue from mortgage customers continues to decline.
“Despite continued high interest rates in the mortgage industry, Blend is now debt-free and just delivered its best free cash flow and operating income quarter ever as a public company,” the company said Wednesday when announcing a first-quarter net loss of $20.7 million. .
Blend lost $66.2 million in the first quarter of 2023 and had a net loss of $179.9 million in 2023. The improvement in net losses was due to the fact that while first-quarter revenue fell 6% to $34.9 million from a year earlier, Blend was able to cut operating expenses more significantly – cutting 49% to $39.3 million.
While revenue from Blend’s services to consumer banking clients grew 29% from a year ago, to $6.7 million, revenue from the company’s title division fell 12% to $11.1 million. Blend’s largest source of revenue – services provided to mortgage lenders – also fell 15% from a year ago to $15.1 million.
Blend said its platform processed 14.1% fewer mortgage transactions in the first quarter of 2024 than a year ago, with refinancing volumes taking the biggest hit.
“We attribute this decline primarily to relatively higher interest rates, declining housing affordability and uncertainty over global political and economic conditions,” Blend said in a more detailed quarterly note to investors.
But the biggest news for Blend was a development it announced after the quarter ended on April 29 – Austin, Texas-based Haveli Investments injecting $150 million into private equity firms, which Blend used to funds to repay the debts incurred when entering the company.
Blend paid Mr. Cooper, the mortgage servicer, $422 million for 90% of Title365 and partially funded the deal with a $225 million term loan and a $25 million revolving credit facility. Two weeks later, Blend raised about $360 million in an initial public offering,
Nima Gamsari
“This is a big deal for our company,” Blend Chief Executive Nima Ghamsari said on a conference call with investment analysts on Wednesday. “By adjusting our balance sheet, we have taken the pressure off any short-term capital obligations, And can focus on what matters most to us: serving our customers and growing long-term with modern solutions that enable our clients, mortgage companies and consumer banks to better serve their customers.
Ghamsari said Blend is expected to save $18 million in annualized interest payments, “which we expect will help us achieve our goal of generating positive cash flow earlier than previously planned.”
“It’s important to emphasize that there are no coupons for this investment,” Gamsari said. “The Haveli team has made a long-term bet on the company’s technology, financial and customer success and is fully committed to growing the business.”
As part of the terms of the deal, Haveli’s founder and chief investment officer Brian Sheth will join Blend’s board of directors.
Blend said it expects non-GAAP net operating loss to be in a range of $7.5 million to $10.5 million, an improvement from $11.2 million in the first quarter.
Blend shares, which have traded as low as 80 cents and as high as $3.40 over the past 12 months, were up 6% from Wednesday’s closing price of $2.36 in after-hours trading following the earnings release.
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