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Mortgage technology and cloud-based banking platform Blend Labs Inc. says it’s laying off another 150 workers in a fifth round of layoffs that have reduced the company’s workforce by more than 1,000 employees in the last year-and-a-half.
Blend reported a $41.5 million second-quarter net loss on Aug. 9, down from $477.2 million a year ago. Blend has racked up $1.27 billion in cumulative losses since 2012, including $720.2 million in 2022 losses and $107.7 million in losses during the first half of 2023.
Having already slashed operating expenses from $496.7 million during Q2 2022 to $60.2 million during the three months ending June 30, the company said the latest staff reductions will initially cost it $7.2 million for severance payments, employee benefits, payroll taxes and related costs. But ultimately, the latest round of downsizing is expected to save the company $33 million a year, “further accelerating Blend’s path to profitability,” the company said.
Blend said it expects to bring in $38 million to $42 million in revenue during the third quarter and trim its operating loss between $15.5 million to $17.5 million.
“Blend’s second-quarter results once again beat our top and bottom-line expectations,” head of Blend Nima Ghamsari said in a statement. “Revenue is benefiting from faster adoption of add-on mortgage products and new deployments of our consumer banking suite. At the same time, we are progressing ahead of schedule on our cost reduction efforts.”
Shares in Blend, which hit a 52-week low of 53 cents in May, climbed to an August high of $1.71 after last week’s earnings announcement, but have since retreated to $1.35 at the close of trading Monday.
On a call with investment analysts, Blend Chief Financial Officer Amir Jafari said the company has the capital resources to stay the course.
“Our cash, cash equivalents, marketable securities, inclusive of restricted cash totaled $278 million as of the end of the second quarter,” Jafari said. “With the actions we’ve undertaken, we remain confident our business remains well capitalized to reach our profitability goals, and we have ample liquidity based on our current projections in this macro environment.”
In its Q2 earnings report, Blend said that in addition to the 150 workers who are being laid off, the latest downsizing will eliminate 20 existing vacancies across the company. The workers being laid off represent 19 percent of the company’s onshore workforce, which would put the U.S. headcount at 790 before the layoffs and 640 after.
Blend had previously eliminated 860 roles in four rounds of layoffs beginning in April 2022. After cutting 200 positions in April 2022, the company eliminated another 220 roles including 80 vacant positions in August and shed another 100 workers in November. A fourth round of layoffs in January eliminated 340 positions.
During 2021, Blend acquired national title insurance and settlement services provider Title 365 and went public, growing from 577 employees to 2,276 workers worldwide, including 587 employed in Title365’s India operations.
Blend Labs Q2 2023 revenue by source
Source: Blend Labs Inc. quarterly earnings report
Blend’s suite of software products lets lenders choose from a library of modular components that they can brand as their own to provide mortgages, home equity loans and lines of credit, auto loans, personal loans, credit cards and deposit accounts. Last year, Blend says it helped lenders process nearly $1.7 trillion in loan applications.
Most of Blend’s $42.8 million in Q2 revenue came from providing services to mortgage lenders who have been hard hit by rising mortgage rates. At $22.3 million, Q2 revenue from Blend’s mortgage banking services was down 17 percent from a year ago as the mortgage industry saw lending shrink by 37 percent.
Helping to partly offset that decline, revenue from services provided to consumer banks was up 27 percent to $5.8 million. Blend expects to see continued growth in consumer banking revenue through the adoption of its Builder Platform, which offers low-code, drag-and-drop design tools allowing lenders to create and deploy their own products.
But title insurance has also been a drag on Blend’s earnings. In 2021, Blend paid Mr. Cooper $422 million for a 90 percent stake in Title365. But at $12.5 million, Q2 revenue from title, escrow and other closing and settlement services was down 61 percent from a year ago.
Ghamsari told investment analysts that having digitized key parts of the title process and “significantly improved the cost structure,” Blend is on track for the title business to generate an operating profit, “within the next several quarters. This is now a more sustainable business for us with operating leverage potential as the refi market ultimately returns.”
But for now, Ghamsari said Blend is prepared to weather the tough environment by helping its clients do the same, citing the rollout of new features like a soft credit prequalification for lenders and a Spanish language intake form.
“Mortgage rates are at 23-year highs and origination volumes are still [down] as a result,” Ghamsari said. “This is a real headwind for our customers and for Blend. But we aren’t planning around a recovery. We are planning to be profitable in this type of environment.”
Blend says the ability to do soft credit pulls can save lenders $50 per credit file; and Ghamsari said it also protects borrowers from being turned into “trigger leads” and bombarded with hundreds of calls “and maybe tearing them away from the lender that they applied with. And so it’s been a really important feature for our customer base.”
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