Mortgage tech firm Blend Labs delivered another loss in the second quarter of 2024 even as it signed deals with new customers across the mortgage and consumer banking channels. But executives expect a shift in the landscape due to declining interest rates, which may help them achieve profitability in the final three months of the year.
“The bond market seems to be signaling that the Federal Reserve’s target rate could end the year potentially more than 100 basis points lower than where we’ve been for the last year,” Blend CEO Nima Ghamsari told analysts Thursday on an earnings call.
“Mortgage rates hit their lowest level since April 2023 earlier this week, and we’ve already started to see this show up in our business through application activity levels.”
Ghamsari added that it’s “too early for us to tell how this is going to convert into fundings or revenue” because “things shift seemingly day to day.” But he believed that it’s an “encouraging signal as we look into the second half of the year.”
Blend reported a non-GAAP net loss of $5.6 million from April to June, lower than the $15.1 million loss in the prior quarter and the $22.7 million loss in the same period of 2023. The company’s GAAP net loss in Q2 2024 was $19.4 million, per filings with the Securities and Exchange Commission (SEC).
The company posted revenue of $40.5 million in Q2 2024, compared to $34.9 million in the previous quarter and $42.8 million in the same period of 2023.
The majority of revenue came from the platform segment ($28.7 million) while a smaller share was from the title segment ($11.8 million).
Blend’s platform segment includes its mortgage banking suite, which experienced a revenue decrease of 17% year over year to $18.5 million in Q2 2024. The economic value per funded loan reached a new high of $97 in the period, mainly due to better renewal pricing and product adoption.
Meanwhile, its consumer banking suite revenue rose 37% over the past year to $8 million. Professional services revenue remained at $2.2 million during the second quarter.
Blend has also recently struck deals with new clients, including with Horizon Bank, a $8 billion financial institution based in the Midwest, and with Arkansas-headquartered First National Bank of Fort Smith.
Company executives told analysts that Blend has invested in artificial intelligence (AI) to verify customer information. The company has also facilitated customized workflows and automated origination processes for loan officers.
On the expense side, non-GAAP operating costs in Q2 2024 totaled $27.4 million compared to $41.6 million in the same period last year, as Blend seeks to improve efficiency.
As of June 30, 2024, Blend had cash, cash equivalents and marketable securities (including restricted cash) that totaled $119.9 million.
The company had no outstanding debt at the end of June after its term loan was repaid in full in April upon receiving a $150 million infusion from Haveli Investments.
Looking ahead, the mortgage tech firm forecasts a non-GAAP net operating loss of $4 million to $7 million in the third quarter.
“Over the coming months, we expect to go live with several product developments with our customers, including the latest phase of our instant home equity and next-generation refinance experiences,” Ghamsari said.