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Losses continued to mount at lending software and title insurance provider Blend Labs Inc. during the final three months of 2022 as rising interest rates took a toll on the business of the mortgage lenders that are Blend’s core customers.
But Blend executives say they’ve got plenty of cash to weather the storm and are positioning the company for future growth after trimming the company’s payroll by nearly 800 employees and cutting annual expenses by $72 million.
Blend reported an $81.4 million fourth-quarter net loss Thursday as revenue declined by 47 percent from a year ago to $42.8 million.
The San Francisco-based cloud banking software provider said it expects to bring in $33 million to $35 million in revenue during the first quarter of 2023 and trim its operating loss to between $37 million and $39 million.
For the full year, Blend’s net loss totaled $763.8 million, with 2022 revenue essentially flat from the year before, growing by $706,000 to $235.2 million. Adding up losses from previous years, including a $169.1 million 2021 net loss, Blend’s cumulative losses stood at $1.163 billion.
But as of Dec. 31, Blend had $354.1 million in cash, cash equivalents and marketable securities on hand and hadn’t touched a $25.0 million revolving line of credit it can tap.
Blend started laying workers off last April, cutting more than 780 positions including 340 job cuts announced in January to streamline the company’s title operations, research and development and sales and marketing teams. Blend ended 2022 with a headcount of 1,546, meaning it has about 1,200 workers on the payroll after the January job cuts.
Blend co-founder and head Nima Ghamsari pointed to positive trends outside of the company’s core mortgage banking services, including 109 percent annual growth in revenue generated by Blend’s consumer banking and marketplace segment and 85 percent year-over-year growth in consumer banking transactions.
“Blend navigated a challenging 2022, outperforming a rapidly declining mortgage origination market, taking actions to significantly reduce our cost structure, and introducing composable origination with our evolved Blend Builder Platform that will accelerate our vision of digitally transforming banking,” Ghamsari said in a statement.
Ghamsari said Blend has three strategic priorities this year — to hit previously announced cost reduction goals, enhance the value Blend provides to its mortgage customers and drive adoption of the Blend Builder Platform, software that offers drag-and-drop design tools and integrations allowing Blend’s customers to create and deploy new products.
“Amidst an ongoing uncertain period for our industry, we’re pleased with our execution on what remains in our control, and are supported by a solid capital position underpinning our growth plans,” Ghamsari said.
Shares in Blend, which have traded for as little as $1 and as much as $7.38 in the last year, closed at $1.47 Thursday before earnings were released, a decline of 4 percent from Wednesday’s close. After earnings were released, Blend’s share price fell another 5 percent in after-hours trading.
Mortgage banking services still accounted for the biggest chunk of Blend’s fourth-quarter revenue (35 percent), followed by its Title365 title insurance business (31 percent). But the company says it’s well positioned to benefit from the digital transformation taking place across the financial services sector.
In addition to helping lenders streamline the process of providing mortgages and home equity loans and lines of credit, Blend’s software can also help them manage vehicle loans, personal loans, credit cards and deposit accounts.
Last year, the Blend software platform helped financial services firms process nearly $1.7 trillion in loan applications, the company said in its annual report to investors.
“We bring together an extensive ecosystem of technology, data, and service providers through our software platform, enabling financial services firms to collaborate with third parties to provide best-in-class banking experiences to consumers,” the company said in its annual report. “As consumers use our software platform to access financial products, they can also shop for Realtors, title and property and casualty insurance products, and other service providers through integrated marketplaces that are introduced at the precise moment these products or services are needed.”
With more of its business coming from banks, Blend issued a statement Monday reassuring investors that it does not have any deposits at two failed banks — Silicon Valley Bank and Signature Bank — “and do not see any balance sheet risks from the FDIC’s resolution of either institution.”
In announcing a fourth round of layoffs in January, Blend also announced the resignations of President Tim Mayopoulos, Head of Finance Marc Greenberg and Head of Legal Crystal Summer.
Mayopoulos has been appointed by the FDIC as CEO of the newly created bridge bank, Silicon Valley Bank N.A. but will remain on Blend’s board of directors, the company said.
Editor’s note: This story was updated March 17 to correct that Blend has cut more than 780 positions since April, a figure that includes 340 layoffs announced in January.
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