Blend Labs at Citizens Technology Conference: Strategic Focus on Core Software

On Tuesday, 04 March 2025, Blend Labs (NYSE: BLND) presented its strategic direction at The Citizens Technology Conference. Nima Gamsari, Cofounder and Head of Blend, discussed the company’s focus on its core origination software, while exiting less profitable ventures. The tone was optimistic, highlighting both growth opportunities and challenges as Blend aligns its operations for future success.

Key Takeaways

• Blend is exiting the homeowners insurance business to focus on core origination software.
• A new agreement with Mr. Cooper extends their partnership through 2028.
• Blend is investing in AI for document processing and targeting independent mortgage banks.
• The company is expanding its consumer banking business and sees growth in refinance opportunities.

Financial Results

• Profitability: Blend exited the homeowners insurance business due to low profit margins, transitioning to a partnership model that promises higher returns.

• Revenue Growth Drivers:

- New mortgage logos with top-tier financial institutions, including a top 10 bank and a top 5 mortgage servicer.

- Enhanced solutions increasing value per unit, with new products like automated refinance and home equity offerings.

- Growth in consumer banking services, offering a unified platform for diverse financial products.

Operational Updates

• Simplify Blend Initiative: The company is focusing on core origination software and has partnered with TrueWork for income verification.
• IMB Expansion: A dedicated team led by Justin Van Hoosen is targeting independent mortgage banks, a promising market segment.
• Mr. Cooper Agreement: The partnership with Mr. Cooper, the largest mortgage servicer, is extended through 2028, removing a put option on a 9.9% stake in the Title three sixty business.

Future Outlook

• IMB Market Focus: Blend is aggressively pursuing the IMB market, investing in product development for these institutions.
• Technology Investments: The company is leveraging AI to automate document processing, aiming to cut costs and enhance customer experience.
• Consumer Banking Growth: Blend is expanding its consumer banking business, offering a platform for auto loans, mortgages, and deposit account openings.
• Refinance Opportunities: With potential interest rate decreases, Blend anticipates a surge in refinance activity, particularly among Mr. Cooper’s customers.

Q&A Highlights

• Competition: Blend is capitalizing on competitors’ weaknesses, securing new deals with major financial institutions.
• Customer Acquisition: Success in acquiring new customers includes a top 10 bank, a top 5 credit union, and a top 5 mortgage servicer.
• Fannie and Freddie Privatization: While privatization is a potential future event, Blend is not immediately concerned and sees it as a net positive.

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - The Citizens Technology Conference:

Aaron Kimson, Software Analyst, Citizens: Alrighty. Good afternoon, everyone. Welcome to day two of the Citizens Technology Conference. My name is Aaron Kimson. I cover software here at Citizens.

Really excited to have cofounder and head of blend, Nima Gamsari, with me on stage today. Nima, how was the walk up the hill this morning?

Nima Gamsari, Cofounder and Head of Blend, Blend: Not too bad. Not too bad.

Aaron Kimson, Software Analyst, Citizens: Pretty good. Headquarters right down the hill. It’s a very steep hill. It’s a very steep hill. In Cisco A Couple Years and climbed it for the first time in a while yesterday.

It’s good for the glutes. Absolutely. So let’s just jump right into it. There’s a ton to talk about here. You specifically talked about seeing competition falter on the earnings call Thursday and April being a turning point there.

On the spectrum of competition failing to deliver promised innovation, so you’re largely organically built core the core mortgage platform is organically built, reaching a tipping point of features and functionality. What are you seeing there?

Nima Gamsari, Cofounder and Head of Blend, Blend: Yeah. I mean, I I think it’s tempting for companies that want to try to compete with us as the market leader to make promises for things. And every couple years this every few years this happens where some competitor will come up, make really big promises. And in this case, it was 2023. Our stock was down.

People were worried about, you know, the market broadly. First Republic had just failed. Our you know, the we had a lot of debt on our balance sheet. None of those things are relevant at this moment, but at the time, it was a really big deal in the market, and our competitors used that in combination with what I would say were not, the most savory sales tactics and, you know, won some customers from us. And now it’s, like, just like I told the team internally at the time, it was, like, keep your chin up.

Look. We’re doing the right things. We’re building the best tech. We’re we’re delivering on our promises, and we’re gonna be doing this in a decade, and they won’t be. And, you know, we’re seeing that now.

A lot of the deals that we closed in q four were not competitive deals. And these are large financial institutions who typically do large RFPs with lots of participants, and that just wasn’t the case. And the reason for that, I think, is because we are we have delivered. We have a reputation of being the best the highest end brand in the market, and we weathered the storm really well as Blen, and we’re still here. And this happened five years ago, seven years ago.

It happened again a couple years ago, like I mentioned. I’m sure it’ll happen again in the future, but our core strength is gonna be our technology and our integrity. And those two things have stayed with us, you know, the twelve years we’ve existed.

Aaron Kimson, Software Analyst, Citizens: Got it. And then let’s talk IMBs a little bit. So on the earnings call last Thursday, you announced an organization that you started in Q4, I think, led by Justin Van Hoosen, specifically focusing on on IMBs where it’s a little bit different of a of a market versus banks and credit unions. Can you talk about your history with IMBs with some of the larger ones and and why now is the right time to to get into that market?

Nima Gamsari, Cofounder and Head of Blend, Blend: So for those who don’t know, IMBs are, they’re independent mortgage banks. They’re nondepository financial institutions that offer mortgages that they typically sell immediately through the capital markets, Fannie Mae, Freddie Mac, or through, aggregators, who do various kinds of wholesale lending and correspondent lending. And IMBs are a very interesting breed because because they’re monoline. They’re very loan officer centric, their salespeople are the people who run the organization. And so while we’ve historically done really well in the largest IMBs, we have not, I’d say that because they sort of are are different beasts in how they buy software, how they use even features of our platform because of the the unique nature of these organizations, we have not historically gone down market in the INB segment.

And I don’t mean down market to small customers. I still mean pretty large tickets, you know, half a million, three quarters of a million a year tickets. But the other thing that was nice about this this launch of the IMB segment for us is it’s gonna make our existing customers get more value out of our product. There’s a dedicated team. It allows our bank and credit union segment to focus on the banks and credit unions who speak a different language as well.

So our existing customers will be happier, and we’re gonna get more presence in the IMB segment, which is a big part of the mortgage market today that we have not historically played a huge role in. And it happens to coincide with when I see our competition failing or at least faltering, and that’s the majority of their business. And so we’re going to go after it. We think we’re the best product for the IMBs as well, and we’re going to only continue to invest there because we believe in the market and we want every organization that does mortgages to have the best technology.

Aaron Kimson, Software Analyst, Citizens: Got it. And then when we think about the IMB organization from a go to market perspective, how do you think that’ll differ versus the existing organization going after largely banks and credit unions? And will that be a direct motion or on the smaller end of the IMBs, will there be an indirect component there?

Nima Gamsari, Cofounder and Head of Blend, Blend: Well, it’ll all be direct. Okay. And again, we’re even though we’re going smaller than we historically have gone on the IMBs, we’re not going to maybe the very long tail of the market. A lot of them the the very long tail of the market is gonna use the systems that are built into their loan origination system. And so these are still pretty big tickets.

And the sales motion, the nice thing about the INB market is it’s very insular. They all talk to each other. And so it’s the same core DNA that’s made us successful in the banks and the credit unions, which is if you make a few of them really, really successful, they talk about you. They recommend you to their friends. They all kinda compete with each other, but they all go to the same cocktail parties and the same events, and they move around organizations.

And then the tech guy over here goes over there, and he’s like, hey. I gotta bring over Blend. And so, I think us being very focused on it is gonna allow us to give them the message that they need to hear and the products that they need to see and feel for them to and even the pricing and packaging. You know, there might be ways to bundle certain things that serve that market better than maybe or build certain integrations that serve that market better that didn’t make sense for the banks and credit unions. And so just having that focus, like, one thing I I love about Blend now is as I talk a lot about Simplify Blend.

We’re getting to to be really focused, and everybody at Blend is very focused. And that focus, it just leads to better execution.

Aaron Kimson, Software Analyst, Citizens: I think that’s a great segue. So a big piece of the press releases you put out before the three q call and then the four q call and talked about on both calls has been simplifying Blend. Can you talk about the steps you’ve taken there? And then should investors read anything into not guiding title revenue in one q where that’s been something that you’ve guided in the past?

Nima Gamsari, Cofounder and Head of Blend, Blend: I mean, the goal of Simplify Blend is what we’re going back to the focus point. Where we’re best in the world is our core origination software. And, however, over the last, call it, half a decade, we got into a few other businesses that are either data businesses or more operational businesses. So the first example, the first one we got into is homeowners insurance. And it’s actually a good idea.

You you you the only reason you get homeowners insurance is because you get a mortgage and the mortgage company makes you get one. You know? So it’s not like these things were totally not and same with title insurance. The only reason you get title insurance is because you need it to get a mortgage. There’s no other reason.

Nobody’s going around buying title insurance on the side. And and so organically, it made sense to me as we have such big distribution, huge percent of the market going through our platform that in some ways it makes sense. But from a focus and simplicity perspective, it’s not our core differentiator in the market. And so we exited the homeowners insurance business and actually switched it where we moved the part the operations to a partner. We still get really good economic from that partner.

And the more volume they do through our platform, the more they pay us. And so it allows us to leverage the fact that we are still widely deployed to help them grow their customer base, and that benefits us as well. And they’re investing in this. This is their core business. It’s gonna be really good for them, really good for our customers, and has been very already very good for us financially.

So one of the unsung stories of the q four earnings was how profitable we were, and part of that was because we got out of it an operational business that was while it was a good revenue business for every $10 of revenue, we’re making only $2 of profit. And now it’s maybe $5 of revenue and we’re making $5 of profit. And so it’s those are not real numbers, but just type that’s the illustrative example. So it’s a really good example. And and the next step we took was on we got into income verification business, which is largely a data business, and some technology.

And we we announced that we’re partnering with TrueWork on that. We’re similar. They have a wider array of offerings. They’re gonna drive a lot of value to our customers through our platform, and they’re going to make our customers more successful, make and then make themselves more successful, and then in turn make us successful with, you know, pretty good economics for us over time as well. And so it’s another one I’m, you know, I’m super excited about.

But broadly, I I I think the benefit of simplifying Blend is that we can focus on the things that can truly differentiate blend, and truly differentiate our customers from people who don’t adopt the most modern technology. And so we wanna be on the forefront of most of what they do today is stare and compare documents. They’re reading from one document, keying numbers into a system, comparing it to a number the consumer entered two days earlier, things that AI is really equipped to solve today. And, AI can just do that for them today. And so we’re we are a widely deployed software platform with great distribution.

We have to help them with this. And so by not doing those things, that’s out that’s there’s a resource that we can allocate towards things that are truly differentiated for our customer base and will meaningfully impact their bottom lines and hopefully pass on some savings to the consumer as well.

Aaron Kimson, Software Analyst, Citizens: Yeah. I think it makes a lot of sense. And then switching gears, I want to talk about deposit account opening a little bit. So can you walk us through the history of your deposit account opening product? Is this something you land with or more of an expansion product, an add on?

And how do you think about deposit account opening strategically given that it’s probably the single most important piece of real estate for a tech vendor within a bank? Or if you can solve that issue for a bank, the money stays at the bank, they’re happy, they collect the spread. And I think we saw some validation there with Alkami’s announcement that they’re acquiring mantle Yeah. On on Thursday. Yeah.

Nima Gamsari, Cofounder and Head of Blend, Blend: I don’t know what the more valuable real estate is. It might be the digital banking platforms like q two and Alchemy and those things. That’s pretty valuable real estate. It might be the things that grow deposits like, you know, man I’m sorry, Mantle and, Blend’s deposit account opening solution and others that are in the market. And it might be the things that drive a lot of revenue, which is the lending platforms like Blend.

They’re all valuable in different ways. The reason we got into it was because a lot of where our customers saw opportunity was when somebody was getting a lending product from them, using that to encourage them or in some cases offer them benefits to bring over their deposits. And so, you know, consumers getting a mortgage, you know, back in the day with First Republic, a lot of what they would encourage you to do is bring over your bank balances. And it was sort of a nice symbiotic relationship between those two lines of business, but they wanted it to feel like one experience for the consumer. And so I think similarly for us, we were kind of dragged into that organically by our customers.

And I mean that in a good way. I mean dragged in a bad way. Dragged in a good way into that, organically by our customers. But now it’s now it kinda starts in both ways. We still land with mortgage a lot, but now we’re starting to land more with, or, I guess, more often than than I would have expected with just the deposit account opening solution, the new membership onboarding solution.

And I think that’s because, you know, to your point, growing deposits for a financial institution that collects deposits is very, very important. And doing that in a frictionless way, that takes two minutes and then brings over your money and maybe shows you how you can consolidate your other debt with this or refinance your other debt with this institution is a meaningful way to drive a delightful experience that brings over money and makes that money really sticky.

Aaron Kimson, Software Analyst, Citizens: Yeah. That’s great to hear that you’re able to land with with the deposit account opening product as well. And then how large can a financial institution get before it generally handles deposit account opening in house? Right? I worked at one of the mega banks earlier in my career, and they had a a massive team focused on this in Columbus, Ohio.

Is that a product that is generally geared towards your smaller customers today?

Nima Gamsari, Cofounder and Head of Blend, Blend: And we do have some very large customers using it. And I think it sort of depends on how they think about our platform. If you think about our I was talking to the CTO of one very large financial institution, and he said, I used to think about build versus buy. And he’s like, that is not that’s not how his brain how his brain works anymore because there’s so much even in just the deposit account opening space, he’s like, I think about I’ll build the things that I need to build and I’ll partner, but I just need it all fit together really well. It needs to feel like one experience.

And this is where I think, you know, one of the things that we’ve invested in a lot the few a lot the past few years is making our Blend Builder platform, which is a much more flexible platform, can integrate with their existing processes and workflow and screens. It’s been a it’s been a meaningful investment for us, but a good one because now it opens the door for these conversations where somebody’s think, you know, somebody who used to think build versus buy who’s now just trying to think, how do I have the best possible experience and how do I do it in a way that doesn’t sacrifice on UI or something like that? It it’s now possible to do that and not feel like you’re compromising.

Aaron Kimson, Software Analyst, Citizens: Got it. And then switching gears again. So you announced on the four Q call on Thursday a new agreement with Mr. Cooper, which is a big customer. It extinguishes the put option on a 9.9% stake in the Title three sixty business you purchased in 2021 extends your agreement with Mr.

Cooper through 2028. Are there any key points you’d want to make there to investors?

Nima Gamsari, Cofounder and Head of Blend, Blend: I mean, I think this was one of the unsung heroes of our earnings call that nobody really paid attention to, but I’m glad you called it out because they’re the largest mortgage servicer in the country, and they are a great partner for us. And we now have meaningful commitment on both sides with them, alongside them. And they are so well positioned to when rates come down, I think they put the stat out in their last earnings. They have something like a million of their 5,000,000 customers who have a mortgage above 6%. So if rates hit five, I that don’t quote me on that stat.

Somebody just go look at their earnings before you quote me on that stat, but it’s a huge number. And when rates go down to five and a half, which they will at some point, maybe it’s not tomorrow, maybe it’s not the next day, but they will, everybody that 6% and above will need to refinance because the, you know, consumers’ finances are not great right now broadly in the in the economy. And so it’s just like a spring ready to explode. And so it’s a meaningful customer to us. It’s a great partner of ours.

They’re doing some innovative stuff that, you know, with us on even on the title side now, which is really exciting. And, yeah, I mean, I just I think that was one of the unsung heroes. Just like, that’s a really important long term relationship for us. And the put option going away, obviously, is also good for us too.

Aaron Kimson, Software Analyst, Citizens: Yeah. Definitely a net positive there. And then I wanted to dig in a little more on the the income verification partnership you announced with TrueWork last week. So you have your own income verification product that you built in house released in July of twenty twenty one. Should we think about this TrueWork partnership as a sunsetting of your internal income verification product or a partnership where it’s kind of combining your functionality with with TrueWork?

Nima Gamsari, Cofounder and Head of Blend, Blend: Yeah. So when I do things like this, I try to be minimally disruptive to our customers. Our customers are everything to me. And so I think of it as you take our core product that we offered there, which is really a partnership with ADP and some layers around it to support the mortgage process, and expanding that functionality to that plus a number of other things that can drive value for our customers, the income verification spectrum. They have other partnerships.

They have other capabilities. Like, they’re much better at the certain kinds of manual verifications that have to happen in the mortgage process. Much better at that. And now that can just if they’ve already integrated it, it can directly benefit our customers. For the existing customers who already use Blend Income, they get that same functionality.

If they just wanna keep using that, they can. It’ll just hit TrueWorks API to as opposed to Blends. And for the ones who wanna take advantage of more functionality, it’s great. And, actually, it’s good economics for us too. So we’re very happy about that.

And, I’m excited about you know, it’s early in that partnership. We just announced it, but we’re excited to see where that goes.

Aaron Kimson, Software Analyst, Citizens: Got it. That was early in my career. I mean, I was on a team at one of the big banks where we were trying to build that income verification product internally. And, you know, based on just the inflows into your DDA checking savings accounts, it has

Nima Gamsari, Cofounder and Head of Blend, Blend: to be Calculating. Yeah.

Aaron Kimson, Software Analyst, Citizens: And for Fannie and Freddie to buy those mortgages, it has to follow a lot of different rules. It is very complex.

Nima Gamsari, Cofounder and Head of Blend, Blend: Super complex. And the upkeep on those businesses for a business like that that is important to our customers but not core to Blend’s long term mission, meaning we want it on our platform, but we don’t necessarily want to be responsible for the ongoing innovation and expansion of that product area, we’ll probably take more of a partnership approach like we did with TrueWork. Got it. So as we look into other areas, like valuation of properties or appraisals or whatever, we’re not gonna get into the operational aspects of these, but we will drive partnerships that drive meaningful financial benefit to us and, of course, value to our customers.

Aaron Kimson, Software Analyst, Citizens: Yes. And then speaking of Fannie and Freddie, I guess, how do you think about the potential full privatization there, which has been it was in the news more so, I think, last month. What effect would you think that would have on the the thirty year mortgage rate and ultimately your business?

Nima Gamsari, Cofounder and Head of Blend, Blend: I mean, realistically, I think the people overseeing the government efforts around that right now have their hands full with other things at least for the next couple years. So I, you know, I I don’t know exactly when that’ll happen, but my my hunch is not immediately. And it’s far enough in the future that I think the impact is largely hard to predict, and there are so many other things that I’m worried about before we get to that. And I think it’ll be net positive for our business, but it’s pretty probably pretty far in the future.

Aaron Kimson, Software Analyst, Citizens: Got it. I’ve got some more questions, but I’ll open it up to the audience. If anyone in the audience has questions, we’ve got about five minutes. I wanna make sure everyone gets a chance.

Nima Gamsari, Cofounder and Head of Blend, Blend: I’m just curious, are you seeing any customers move over from NC now? Or are you seeing most of your customer base coming from other lending solutions? Just curious how you feel competitive I think a bit of both. I mean, I don’t know. The other thing that happened in, in q four was, I believe CoreLogic announced this publicly, but there’s a sunset their product they had acquired called Roostify, and then all the news around Encino.

And look, I think for us, we keep our head down. We have high integrity. We build the best product. And eventually, I think things work out. And I think this is a good example of where things have worked out in our favor in the mortgage space.

And, yes, it feels pretty good. Sure. So, I mean, I think there’s three. Let’s put even, like let’s put the cost side and how we’ve simplified the business from a cost perspective as well aside and just put I’ll talk positive revenue or positive growth drivers. There’s three that I’m I’m focused on.

The first is the growth in or new logos in mortgage. You know, we signed a top 10 bank that we announced at our earnings, signed a top five credit union last quarter. We signed a top five mortgage servicer last quarter. Our pipeline is great right now in mortgage. Our pipeline generally is up a lot year over year.

And so I think for us, you know, step one of the equation is keep growing market share in mortgage. And so or, you know, we had a we had, like I said, a tough time in ’23. We’ve really turned it around in late twenty four and now in q one here. So I’m very excited about that. And the second piece that’s related to mortgage is growing the value we create for our customers on a per unit basis and capturing some percentage of that value back to us.

So we’ve grown that pretty materially actually over the last few years, and I expect that to continue to grow because we have more whether it’s add on solutions or net new solutions that replace our existing, like disrupting ourselves. We’re building a almost completely automated refinance solution so that when rates come down, our consume the consumers who work with our customers can tap a few buttons and get their refinance paperwork and sign it and then get ready for closing. And, like, that, we’re gonna charge more for that because that creates a lot more conversion for our customers That takes out operational cost. And similar, we did we did a similar launch for home equity, and we found a bunch of operational costs came out of that. Cycle times came down.

And so meaningfully, that’s almost twice the per funded loan cost that we charge because it creates so much more value, and the ROI is there. So we’ll keep expanding. And that’s not to not to mention things like our digital closing product, which is gaining traction, and then general revenue growth as we do renewals and things like that. And so the other the second tailwind is the growth in the value per unit that we’re capturing because we’re creating more value out in the market on the mortgage side. And then the third piece, our consumer banking business is growing very meaningful year over year.

And that’s a newer business, but it’s in the it’s in a pretty decent percentage of our overall business now and growing very fast because the rest of the consumer bank needs great technology too. And we only really got into it a few years ago, but I’m very bullish on that business. There’s a lot of work we can do there to keep innovating, keep our customers, and give them something on one platform. You could previously never get one platform that could help you get an auto loan or a branch, and then if that person comes back for a mortgage or wants to open a bank account as part of that, do that online two minutes later. And so but now you can with Blend.

And so that’s why the consumer business is growing really well, and I want to keep investing there. But those are kind of the three revenue growth related tailwinds that I’m really excited about. And then I think we’ve done a really good job executing operationally on cost, simplifying Blend overall, and getting through what was a tough time with our balance sheet and this put option and all that stuff. Like I’m just so happy that it’s all behind us.

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