Earnings call transcript: Blend Labs reports Q3 2025 revenue beat, stock drops

Blend Labs Inc. (BLND) reported its Q3 2025 earnings on November 6, 2025, surpassing revenue forecasts but falling short in terms of stock performance. The company posted a revenue of $32.9 million, narrowly exceeding the forecast of $32.78 million. Despite this revenue beat and a strategic focus on AI-driven product innovation, Blend Labs' stock fell 7.14% in regular trading and an additional 1.02% in after-hours trading, reflecting investor concerns over future market challenges and competitive pressures.

Key Takeaways

• Blend Labs' Q3 2025 revenue slightly exceeded expectations at $32.9 million.
• Stock price declined by 7.14% during regular trading and 1.02% in after-hours.
• The company is focusing on AI innovation and product expansion to drive growth.
• Blend Labs anticipates market share challenges in the mortgage sector.
• The company maintains a strong cash position with $82.3 million in cash and equivalents.

Company Performance

Blend Labs demonstrated resilience in Q3 2025 by slightly exceeding revenue expectations despite a year-over-year decline of 1%. The company's strategic shift towards higher-margin partnerships and AI-driven products is beginning to show promise, with the Consumer Banking Suite growing 11% quarter-over-quarter. However, the Mortgage Suite's revenue fell 18% year-over-year, reflecting broader industry challenges.

Financial Highlights

• Revenue: $32.9 million, down 1% YoY
• Non-GAAP gross margin: 78%, up from 76% last quarter
• Non-GAAP operating income: $4.6 million, representing a 14% operating margin
• Cash and equivalents: $82.3 million
• Share repurchase: 1.6 million shares worth $5 million

Earnings vs. Forecast

Blend Labs reported actual revenue of $32.9 million, slightly above the forecasted $32.78 million, representing a revenue surprise of 0.37%. This marginal beat indicates the company's ability to navigate a challenging market environment, although it did not significantly impact investor sentiment, as reflected in the stock's decline.

Market Reaction

Despite the revenue beat, Blend Labs' stock fell 7.14% in regular trading and a further 1.02% in after-hours trading. This decline suggests investor concerns about the company's future growth prospects and market share challenges, particularly in the mortgage sector. The stock's performance remains within its 52-week range, with a high of $5.525 and a low of $2.635.

Outlook & Guidance

Looking ahead, Blend Labs provided Q4 2025 revenue guidance of $31.0-$32.5 million and anticipates non-GAAP operating income between $2.5-$3.5 million. The company is focusing on expanding its consumer banking offerings and enhancing its AI capabilities to drive future growth. Despite expecting market share headwinds, Blend Labs is optimistic about the potential for lower mortgage rates to spur industry growth in 2026.

Executive Commentary

Nima Ghamsari, Co-Founder, emphasized the company's forward-looking strategy, stating, "We are no longer just ready for what's next. We are building what's next." He also highlighted the importance of AI, saying, "AI is one of those things. It's almost like water for us at this point." Jason Ream, Head of Finance and Administration, reinforced the company's commitment to product innovation, noting, "We have a strong portfolio of products that will continue to improve."

Risks and Challenges

• Market Share Decline: Blend Labs' market share in the mortgage sector has decreased, with further headwinds expected in 2026.
• Competitive Pressures: The company faces intense competition from established players in the mortgage and consumer banking sectors.
• High Loan Origination Costs: Mortgage loan origination costs remain high, impacting profitability.
• Economic Uncertainty: Broader economic conditions and interest rate fluctuations could affect market demand and growth.
• Dependence on AI: While AI offers competitive advantages, rapid technological changes pose risks.

Q&A

During the earnings call, analysts inquired about the company's contract with Mr. Cooper and revenue protection strategies. Executives also addressed questions on AI's role in reducing loan origination costs and the strong customer interest in Rapid products. Market share and revenue growth strategies were also discussed, highlighting the company's focus on innovation and strategic partnerships.

Full transcript - Blend Labs Inc (BLND) Q3 2025:

Amy, Conference Operator: Thank you for standing by. My name is Amy, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Blend Labs third quarter 2025 earnings call. All participants have been placed in a listen-only mode. After the speaker's remarks, we will conduct a question-and-answer session. If you would like to join the queue to ask a question, simply press the star followed by the number one on your telephone keypad. It is now my pleasure to turn the call over to Meg Nunnally. You may begin.

Meg Nunnally, Head of Investor Relations, Blend Labs: Good afternoon and welcome to Blend's financial results conference call for the third quarter of 2025. I'm Meg Nunnally, Blend's head of investor relations. Joining me today is Nima Ghamsari, our co-founder and head of product, and Jason Ream, our head of finance and administration. Before we start today's call, I'd like to note that we also refer to certain non-GAAP measures, which are reconciled to GAAP measures in today's earnings release and in the appendix to our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial results we'll discuss today, including our profitability, refer to non-GAAP.

Also, certain statements made during today's conference call regarding Blend and its operations, in particular its guidance for the fourth quarter of 2025, commentary regarding 2026, and expectations about our markets, our strategic investments, product development plans, and operational targets may be considered forward-looking statements under federal securities law. The company cautions you that forward-looking statements involve substantial risks and uncertainties, and a number of factors, many of which are beyond the company's control, can cause actual results, events, or circumstances to differ materially from those described in these statements. Please see the risk factors we have identified in our most recent 10-K, 10-Q, and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. All comparisons made in the course of this call are against continuing operations for the same period in the prior year unless otherwise stated.

Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call, and an audio replay will also be available soon after the call. I'll now turn the call over to Nima.

Nima Ghamsari, Co-Founder and Head of Product, Blend Labs: Thank you, Meg, and welcome everyone. Our third quarter results demonstrate our team's strong execution and the increasing resilience of our business model. We delivered total revenue just above the midpoint of guidance and, more importantly, non-GAAP operating income that exceeded the high end of our guidance. This marks our fifth consecutive quarter of non-GAAP operating profitability, a trend we expect to continue into the fourth quarter. For all of this, I want to personally thank the entire Blend team. This five-quarter streak of profitability is not an accident. It's a direct result of their focus, their discipline, and their deep commitment to our customer success. Their execution is what gives us the stability to invest in our future from a position of strength. This profitability is the result of deliberate work to right-size the business over the past few years and build a foundation for sustainable long-term growth.

While our overall top line was steady, it reflects a tale of two dynamics. We saw continued strength and growth in our Consumer Banking Suite, which was offset by some headwinds to revenue in our mortgage business, but this was not a surprise to us. It reflects the intentional strategic transitions that we are navigating, specifically moving from lower-margin services businesses to higher-margin partnerships and managing the final rollout of legacy customers that we've discussed in prior quarters. We expected and are managing these headwinds, and they are clearing the way for a healthier, more profitable future. I want to spend our time today on three topics. First, the quality of our new customer wins and the strength of our future pipeline. Second, the incredible energy and pull that we're seeing from our customers around our RapidSuite and AI. And finally, our key strategic priorities as we drive towards 2026.

To start out, in the third quarter, we signed 14 new deals and expansions in line with the prior year. The quality of these deals is what's most important. Our largest deal was a seven-figure expansion with a top 20 U.S. bank for solar home equity lending. This is a prime example of our platform strategy at work, using our core technology to rapidly deploy and configure complex, high-value solutions with our largest clients. This is precisely what we mean by our platform. Our customers can launch new high-margin products in weeks, not years, leveraging the technology they already have. We also had another major renewal and expansion with a consumer banking customer across six product lines. This same customer is now evaluating our mortgage solution, which is a fundamental shift. Our flagship mortgage product used to be the only door into Blend.

Today, we have a multi-product platform that allows our customers to land and expand. This is the flywheel we have been building for years, and it is now actively turning. Our consumer banking products create deep, daily engagement with customers, which in turn builds trust and provides a natural, data-driven pathway to a mortgage. Our mortgage platform creates a high-value, data-rich event that our customers can use to offer those consumers deposits, cards, and home equity loans over time. Each side of our business now feeds the other. This platform momentum is why the small handful of churn notices we saw this quarter are not a strategic concern. The four small customers who left were outside the core market and represented about $200,000 in aggregate annual revenue. We are successfully trading low-value, non-core churn for high-value strategic platform expansion.

The only noteworthy churn on the horizon is the expected rollout for Mr. Cooper, which Jason will detail further. In all, the real story for me is not the legacy share that we're shedding, but the future share that we're building. Our pipeline activity is strong, building sequentially from Q2, and is up approximately 60% year over year. This pipeline is our future, and it's robust. We're actively pursuing multiple seven-figure consumer banking deals, sizable top 10 banks in mortgage, and several cross-sell opportunities for our Rapid and Close products. This is the high-quality, platform-based business that we are building. This energy was on full display at our Blend customer forum in September. This was our largest forum yet, with 120 executives, and the tone was completely different from last year. Last year, AI felt like a science project. This year, we're at an inflection point.

The question from customers is no longer, "What is AI? How can it help me?" but, "How fast can you get it into our hands?" The reason for this urgency is clear. The cost to originate a mortgage loan is still stubbornly high, nearly $11,000, and roughly 90% of that is human labor. The industry is realizing that bolting on more point solutions only adds complexity and cost. What we demonstrated at Forum is the only real path forward: Blend Intelligent Origination. This isn't another tool. It's an entirely new operating model for lending. By embedding agentic AI directly into our core Blend workflow, we can autonomously orchestrate and execute end-to-end processes. Because it's embedded natively into our platform, it's not just another tool for employees to learn or another chatbot for people to talk to.

It's a system that works with the rest of the Blend Platform and learns for them. This is a fundamental architectural advantage that point solutions simply cannot replicate. Our customers see this as the definitive answer on the path to the industry's $11,000 problem. They are excited, and we are too, because this is the future, and we are building it with them. We also saw tremendous buzz around our Rapid Home Equity product, which is a very important product for consumers in this day and age. This was the first forum where early adopters could share their results with peers. The value of this product is its seamless data connectivity and personalized offers in real time, which drive higher conversion by radically reducing the time to an approval. The momentum here is palpable.

This momentum and the energy from our customers at Forum is what gives me such great optimism about Blend where I stand today. It is a great way for us to lean into 2026 on offense, where we are laser-focused on three key areas. The first area is our take rate with our customers in the Mortgage Suite. Our primary measure of this in our Mortgage Suite is economic value per funded loan, or EVPFL. While EVPFL has come down in recent quarters, this pressure is a direct and intentional result of our platform strategy, specifically transitioning to higher-margin partnership models and navigating one renewal in this tough market. While this impacts the near-term metric, it is the right decision for our long-term margin structure and profitability and customer base. Our focus is not on this near-term pressure, but instead on the long-term prize.

For 2026, our priority is driving the adoption of the products that create exponential value for our customers. In the mortgage case, RapidRefi and Blend Close. These products are the powerful levers we have to grow our take rate and deliver on the full long-term potential that we see ahead of us. Our second focus is the continued expansion of our Consumer Banking Suite. This business is already a strategic powerhouse for us. It now represents 39% of our total revenue, up from just 29% one year ago. Our customers are using it to solve their most pressing problems, driving high-margin, non-interest income and capturing sticky deposits in a highly competitive market. Our engine provides a powerful, less cyclical revenue stream that enhances the stability and resilience of our entire company.

For 2026, the goal is clear: expand adoption with large accounts and accelerate our speed to market by standardizing more of our out-of-the-box solutions for the rest of our customer base. This is how we scale our business effectively. Our third and final focus is on building the next horizon of growth. As I talked about earlier, we are making targeted, disciplined investments in AI and our suite of Rapid products to solve our customers' biggest problems. The great news for us is that these are not massive, speculative bets. We are building these world-class solutions with nimble, focused teams. This innovation is what will keep us and our customers well ahead of the curve. To summarize, when I look at the macro environment broadly and I see it finally showing signs of life, particularly the potential for us when rates come down.

I combine that with the specific momentum we are generating for ourselves. I have never been more excited about our business. To be clear, our entire 2026 plan is built to succeed in the current environment and win in the current environment. The disciplined, profitable, and simpler cost structure we have built over the last five quarters gives us incredible operating leverage in a recovery. When the mortgage market turns, we are in prime position to have that recovery flow to our bottom line, all on top of the organic platform growth that we are already driving with our Rapid solutions, our Close solution, new customer growth, and over time, AI solutions as well. The team has done the hard work to build a resilient, profitable, and scalable platform. We are no longer just ready for what's next. We are building what's next.

With that, I'll turn the call over to Jason.

Jason Ream, Head of Finance and Administration, Blend Labs: Thank you, Nima. To everyone on the call today, thank you for joining us. As this is my first earnings call with Blend, I'd like to reflect on my first three months here before I talk about our results. First, the team that I've been lucky enough to join is one of the best I've ever worked with, and they are passionate about making Blend successful. Second, we have a strong portfolio of products that will continue to improve under the leadership of product-focused executives like Nima and Srini. Lastly, the best word I can use to sum up our relationship with customers is partnership. I had the great fortune to be able to attend our annual customer forum only one month into my time at Blend and to talk to a number of our customers.

While our customers, of course, have lots of requests and suggestions for our products, everyone I talked to believes that Blend is the best option in the market and that they are on a journey with us. That gives me great confidence in the foundation of this business and our right to win long term. I'm sure I'll talk more with many of you about that over the coming weeks and months, but for now, let's dive into our third quarter financial results and an update on market share trends. Total revenue in the third quarter of 2025 was $32.9 million, ahead of the midpoint of our guidance and down 1% year over year. Digging below those headline numbers, Mortgage Suite revenue was down 18% year over year, driven by the strategic transition to lower revenue but higher margin partnership models for some of our products.

By some churn, and by the effect of the large renewal with lower pricing that we talked about last quarter. On a side note, our work with that customer continues to be very positive, and we continue to believe that the customer can provide meaningful upside to 2026 and beyond. Mortgage Suite revenue was down approximately 1% from Q2 to Q3. Driven by the ongoing rampdown of several customers that gave churn notices last year, the continued effect of our strategic transition to partnerships and by some seasonality. Consumer Banking Suite revenue was up 11% quarter over quarter based on go-live deployments on some large customer wins, as well as ramping usage at some of our larger customers. The increase came across both core Consumer Banking Products and home equity lending products, which are included in our Consumer Banking Suite.

Shifting back to consolidated results, our total gross profit was $24.5 million. After excluding stock-based compensation and the amortization of software development expense, our non-GAAP gross profit was $25.6 million, and our non-GAAP gross margin was 78%, up from 76% last quarter. Non-GAAP operating expenses were $21 million, up 9% quarter over quarter, almost entirely driven by a Q3 specific sales and marketing expense related to Blend Forum and by higher non-GAAP R&D expense due to a lower capitalization rate of software development expense. Non-GAAP operating income was $4.6 million, above the high end of our guidance and representing a non-GAAP operating margin of 14%. Free cash flow for the quarter was negative $5 million, bringing our year-to-date total free cash flow to positive $1.5 million.

Our balance sheet remained strong thanks to the work Blend did in 2024 to eliminate debt and realign the cost structure of the business for sustainable growth. As of September 30, 2025, we had approximately $82.3 million of cash, cash equivalents, and marketable securities, inclusive of restricted cash. In the third quarter, we repurchased 1.6 million shares worth more than $5 million, bringing the year-to-date total to $9.2 million, and leaving $15.8 million remaining under our repurchase authorization as of quarter end. Our EVPFL for Q3 was $86, in line with our guidance. We do see some near-term headwinds, and as we look to Q4, we expect EVPFL to be approximately $83-$84. We are not providing specific guidance beyond Q4, but believe that most of the recent issues negatively impacting EVPFL will be largely behind us as we enter 2026.

It is important to remember that EVPFL, while a useful metric, is somewhat incomplete as it does not capture home equity loans, an area where we see significant momentum in our business and which are included in our Consumer Banking Suite. Next, I wanted to provide an update on our market share. We've included a slide in our supplemental deck that provides additional numbers and context, including Blend's annual funded loan volumes. As a reminder, we use Home Mortgage Disclosure Act, or HMDA, data as our benchmark for total market size. The market share we report is measured by dividing Blend funded loans by total market volume per HMDA. As anticipated, our 2024 HMDA market share is down from the high watermark of 21.7% in 2023. It landed at 18.6% in 2024.

The decline is primarily driven by churn notices that we received from customers in 2023 and 2024 when cyclical pressures in the mortgage industry were at their peak. Since customer rolloff is often a long process, we've continued to see some of the impact to volume from those customers into 2025. We anticipate further market share headwinds in 2026 of approximately 100 basis points, primarily due to lower volume from Mr. Cooper. As we have said before, we signed a contract with Mr. Cooper shortly before the acquisition by Rocket was announced. That contract runs through June 2028 and protects a significant portion of our revenue from them through that time period. As we look to 2026 and beyond, the trajectory from here is encouraging, given the stabilization of churn trends and the new customer wins and expansions that we've been talking about.

For the first nine months of 2025, we've only had a few smaller customers indicate their intention to churn, which in aggregate represents less than 10 basis points of 2024 HMDA share. We believe we've created a solid base for long-term share growth. We're not providing any formal macro outlook or company-specific guidance for 2026 at this time, though we will have more to say in February. Still, it's fair to note that we generally agree with the current consensus expectation that lower mortgage rates in 2026 will drive industry growth, which should more than offset the market share headwinds in mortgage. In consumer banking, we have a solid deployment pipeline heading into 2026. Though we expect that consumer banking will face some headwinds from the expected churn of Mr. Cooper's home equity business.

Please also keep in mind that consumer banking revenue has a tough prior year comparison due to a large customer that went live late in 2024, contributing about $5 million to growth in 2025 and which is now at steady state. Now, turning to our expectations for the fourth quarter. We expect total revenue for the fourth quarter of 2025 to be between $31.0 million and $32.5 million, with the midpoint representing a slight decrease from the third quarter. Within total revenue, we expect Mortgage Suite revenue to be flat to slightly down quarter over quarter, driven by some one-time revenue in Q3 that we do not expect to repeat in Q4, and partially offset by flat to slightly up mortgage volume. We expect consumer banking to be down mid-single digit % quarter over quarter, largely driven by the impact of Mr.

Cooper that we mentioned earlier and by typical Q4 seasonality, and partially offset by increased revenue with several large customers that went live in Q3 and which will have a full quarter of revenue in Q4. Lastly, we expect fourth quarter total non-GAAP operating income to be between $2.5-$3.5 million. In August, we shared our Q4 2025 market size expectation of 1.13-1.23 million units, and we think this is still a reasonable range. For Q1 2026, we expect a sequential volume decline in line with normal seasonal patterns. Our current expectation for the fourth quarter of 2026 is for mortgage volume to be between 1.07-1.17 million units. Now, let's take your questions.

Amy, Conference Operator: Thank you. The floor is now open for questions. To enter the queue, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and the number one. If you are called upon to ask your question and are listening via loudspeaker on a device, please be sure to pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Aaron Jacob Kimson with Citizens. Your line is now open.

Aaron Jacob Kimson, Analyst, Citizens: Great. Thanks for the questions, guys. Nima, you talked on the 1Q25 call about the inflection in pipeline after the Rocket Cooper deal was initially announced. I appreciate the commentary about form in September and pipeline up about 60% year over year at the end of Q3. Since the Rocket Cooper deal closed on October 1, has there been any change in the tone of conversations with FIs that want to keep their largest consumer lending relationship but know they need to upgrade their tech stack to remain competitive?

Nima Ghamsari, Co-Founder and Head of Product, Blend Labs: Yeah, good question. Yeah, definitely. I think the Cooper Rocket acquisition has been, I'd say, one thing that I've seen happen there is big mortgage servicers are starting to think through their strategies, and it's an area where we're very strong. We work with most of the top 10 mortgage servicers in the country. We're the ones who are primed to be able to take advantage of both the current situation with cash-out refis and home equity loans. If the mortgage rates get into the mid to low fives, there's a huge volume of customers between 6% and 7% who need to be able to take advantage of lower rates, especially if the economy gets worse. I've definitely seen companies react.

I've also seen some of the very largest lenders who are our customers say, "We got to do something really important with AI." They were the ones calling on me on the AI front, saying, "We want to not just remain competitive, but we're going to use this time when potentially some companies might be busy integrating or distracted with other things, and we're going to put our best foot forward and come out of this next six to nine months with a much more automated, much higher quality operation than we used to.

Aaron Jacob Kimson, Analyst, Citizens: That's really helpful. Then switching over to Jason, it's great to have you with us. Given that you were a senior MD at Haveli in April 2024 when Haveli made its investment in Blend, and with Haveli owning about 20% of the company today, can you talk a little bit about your history with Blend dating back to Haveli, how involved you were in that investment process, and then how you came to be the head of finance and administration at Blend? Was it through prior relationships, a third-party recruiter, or something else?

Jason Ream, Head of Finance and Administration, Blend Labs: Yeah. Haveli is not a huge firm, so I obviously had visibility into what was happening. I wasn't part of the investment team that made the investment in Blend, but I did have some contact with the company. Primarily as an operating partner, I was there as a resource for all of the portcos that Haveli had. The switch that I made was really wanting to get back into an operating role. Given the fact that Amir had made the decision to leave Blend, I was looking for a good opportunity. Everyone at Haveli had a really high view and estimation of the team at Blend, and I'd gotten to know Nima and the team a little bit as well and thought, "That's a really great opportunity.

They need a CFO that has experience with public markets. I was looking to get back into the operating role. Essentially, the stars aligned.

Amy, Conference Operator: Thank you. Your next question comes from the line of Ryan John Tomasello with KBW. Your line is now open.

Ryan John Tomasello, Analyst, KBW: Hi, everyone. Thanks for taking the questions. On Mr. Cooper, can you just help us synthesize the moving pieces you called out there in terms of sizing the revenue impact in 2026? Just juggling the handful of commentary that you gave between both the mortgage and the consumer banking segment. Then beyond 2026, you're mentioning a part of the revenue still being protected through the expiration of that contract. Just help us understand exactly what that looks like and what that cumulative impact might look like post-2028. Thanks.

Jason Ream, Head of Finance and Administration, Blend Labs: Yeah. Ryan, this is Jason. The specific commentary we gave on the call is that there will be a share headwind, and that is essentially because we do expect the volume of transactions coming through our system for Mr. Cooper to come down. Now that the transaction has closed. We did not really give specific revenue numbers around that, but what I will say is that the majority of the revenue that we have had in the past is protected for some period of time. There will be some revenue headwind. We did not call it a specific number, but the majority is protected through the second quarter of 2028. I'm sorry, the second part of your question, I think we missed that.

Ryan John Tomasello, Analyst, KBW: No, I think you covered it, but I mean, I have a related follow-up. I think last quarter you called out a mortgage pipeline consisting of roughly 400 basis points of market share. Can you provide an update on where that stands today? It sounds like net of Mr. Cooper, we should still be expecting market share growth next year. Correct me if I'm misunderstanding. Thanks.

Jason Ream, Head of Finance and Administration, Blend Labs: Yeah. Sorry, you want to go ahead? Yeah. Again, we haven't provided guidance for next year on market share, and we'll give you more color on the call. The Q4 call at the beginning of the year. Yes, look, we still have a very strong pipeline for mortgage. Our strategy here is a combination of factors. As Nima talked about on the call, we've got this flywheel effect now going where the mortgage side feeds the consumer banking side, the consumer banking side feeds the mortgage side. We are looking for growth on both sides of that. Obviously, share growth in the mortgage industry is something we're driving towards, but we're also driving towards growing consumer banking. As you'll recall, home equity, which is a big potential upside for us, feels a lot like mortgage.

It is lending, but we report it in the consumer banking side. You should look to see the growth on both sides. Yeah. I talked about this in my prepared remarks. We talked about we have some top 10 lenders, banks in our pipeline right now. We're actively pursuing. We believe, and I think the market sees that we have the best product in the market for someone like them. I got to spend a lot of time at the Mortgage Bankers Association conference with these prospects. We've weathered these headwinds, and we've kept our reputation good, and we've continued to innovate. It just puts us in the pole position to be the right partner for some of these big guys, especially as we continue to build capabilities that makes us a true platform for them.

Building AI into the platform, building the rapid products on top of the platform. It just allows them to get a lot out of us. That is why we've seen the pipeline stay strong and why we're excited about. Even just in our existing customer base, the growth of the existing customer base is where I spend most of my time. Because those existing customers are the ones that can move faster with us and want to do more with us.

Amy, Conference Operator: Great. Thank you. Your next question comes from the line of Joseph Vafi with Canaccord Genuity. Your line is now open.

Joseph Vafi, Analyst, Canaccord Genuity: Hey, guys. Good afternoon. Just wanted to maybe just drill down on the big renewal a little bit. Just kind of what was maybe going on there in a little more detail, if possible. Do you see more renewal risk in the pipeline? It feels like you provide a pretty high-value product to customers. Just kind of wondering why there needs to kind of be a pricing discussion when you're already adding so much value for customers. And a quick follow-up, thanks.

Nima Ghamsari, Co-Founder and Head of Product, Blend Labs: Yeah. Really good question, Joe. Just to put the timing of when that initial discussion around renewal started happening, it was in either late Q1 or early Q2 of 2024. We're talking 18-plus months ago and before Jason's time here. It was a different time for Blend. I mean, it was before our Haveli investment, before we had taken new capital. People were worried about our debt in the market. They're worried that we weren't going to necessarily be around. To answer your question, pretty candidly, no, I don't see renewal risk in the rest of our pipeline. In fact, most of our renewals, if you sort of normalize, we took an internal look at this this week. If you normalize for the contribution that our customers are giving us per loan outside of this one renewal.

The value per loan is up, actually, year over year, from Q3 to Q3. We looked at this as a one-time view for ourselves. Because I know there's a lot of moving pieces. There's this one renewal. There's the partnership model transition, which I'm super bullish on, and we think is going to drive more upside for us next year. Yeah, we did have this one moment with one very large customer in 2024 that we're feeling some impact for. Interestingly, they were the ones who were on stage with us at Forum doing a demo of the AI functionality they're adopting with us. They were the ones on stage with us talking about Rapid Home Equity and talking to us about what they can do with us more on that front.

I view these things as maybe short-term headwinds where we used that moment together in the trenches to build long-term partnership. This customer is so big and has been such a good partner for us. There are so many things we're talking to about them. I'm very happy we did the renewal. I'd do that renewal even at the same rates today if I could because there's just so much more upside. We're talking about this $11,000 problem in the industry, and we're 80-something dollars into that $11,000. While we had to spend a couple of years cleaning things up internally, getting debt off our balance sheet, getting the company in a good, profitable state, we're there. We're on offense. We're building really cool things, and I'm looking forward.

Joseph Vafi, Analyst, Canaccord Genuity: And.

Amy, Conference Operator: Your next question comes from the line of Michael Turin with Wells Fargo. Your line is now open.

Joseph Vafi, Analyst, Canaccord Genuity: Hey, thanks very much. Appreciate you taking the questions. There were just a few different mentions throughout the call I wanted to unpack a bit if we could. It sounded like some of the market share impacts you're seeing likely continue into next year, but there were also some comments from Nima around macro showing signs of life and pipeline growth building back a bit. Just any more context you can give us to help square those two factors and, big picture, just the factors within Blend's control and driving better growth into next year is helpful.

Jason Ream, Head of Finance and Administration, Blend Labs: Yeah. I think, Michael, thanks for the question. There are two dynamics you're referring to. One is our share, and the other is sort of the market itself, the macro. I think, as we mentioned on the prepared remarks, the general consensus expectation out there is that there will be lower rates in 2026, and that will drive higher mortgage activity, higher refi activity. That will lift the market overall. We haven't guided that yet, but we do see that. That's our belief as well, following in line with what the sort of general consensus expectation is out there in the market. On the share piece, we do have—we call that one specific headwind, which is Mr. Cooper, right? As I mentioned on one of the earlier questions, a significant portion of our revenue with them is protected under contract. But.

Regardless of the revenue, if they move their volume elsewhere, we're not going to count that as a share, right? That is a likely headwind to our share in 2026. That doesn't mean that the share has to stay with just that. That's not the only impact to share, right? Obviously, we can win new customers. We can get new customers live, etc., and that can drive additional share for us. We haven't guided to 2026 yet. Just calling out, we highlighted one headwind, but that's not an indication of where we see the overall going yet.

Joseph Vafi, Analyst, Canaccord Genuity: Okay. That's actually a useful supporting color. And just, Jason, on margin, you're delivering above the high end of the prior operating income guide with revenues within the range. So just where the efficiencies are coming from and how you think about different investment levels for the business and various growth scenarios. As some of what you just framed potentially plays through. Thanks very much.

Jason Ream, Head of Finance and Administration, Blend Labs: Yeah. Look, in terms of where efficiencies are coming from. It's hard to call out one specific area. Obviously, we are growing our presence outside of the U.S., and in some cases, those are lower-cost geographies, and we're able to get talent that's as good, but at lower cost. That's one specific area of efficiency. I would say more broadly, there's just a focus on doing things in a lean way and trying to use small teams, trying to focus on output as opposed to just creating an org structure to deliver something. It's really more of a mindset than it is on specific efficiencies. As we look forward, I think two things. One, sort of as a foundation, we want to think about, obviously, look, this industry is cyclical, on the mortgage side at least.

To some extent, perhaps on the home equity part of consumer banking. We're not going to allow our investment decisions to just follow the macro market. In other words, just because revenue increases, if rates were to drop really far, we're not going to say, "Oh, great, let's spend a ton of operating expense just because revenues are high right now." We're sort of building a business that's resilient, regardless of macro. The second comment I would make about investment philosophy going forward is that we have some amazing opportunities in front of us. Today, we think that we're well-positioned to address those opportunities within the envelope that we've built for the business today. To the extent that we continue to get traction with those and we see the top line materially shifting, independent of macro.

We may pour more fuel on the fire in certain areas where those new initiatives might require it. However, we're really being judicious about the ROI, essentially, of this, of the investments that we make, and making sure we have places where we have a very clear line of sight to getting a return on additional expense put in the business.

Joseph Vafi, Analyst, Canaccord Genuity: Thank you.

Amy, Conference Operator: Thank you. Before we take our last few questions, if you would like to re-enter the queue again, reminding you to press star and the number one on your telephone keypad. The next question comes from the line of Michael Ng with Goldman Sachs. Your line is now open.

Michael Ng, Analyst, Goldman Sachs: Hey, good afternoon. Thank you for the question. I just have two, just a big picture one. Just on the economic value per funded loan. Is there a way to think about where that could be in the long term? Appreciate that you're guiding to $83-$84 for next quarter. Where do you see that going in the next two to three years? Secondly, we've seen some good revenue growth in Consumer Banking Suite revenue. Just as you think about the business more strategically, what's the right mix to think about now between Consumer Banking and Mortgage Suite? Where are you focused on, and where do you see the biggest opportunities? Thanks.

Jason Ream, Head of Finance and Administration, Blend Labs: Yeah. Thanks, Michael. I kind of like to work backwards from what the opportunity size is. We talked about Rapid Home Equity and RapidRefi in our prepared remarks and in the last few quarters. Those products themselves as a standalone are a multiple of our core mortgage and core home equity rates. I think we're just scratching the surface. Now, to answer your question on where we'll be in two to three years, I don't want to necessarily. We haven't guided that yet, but we are aggressively going after deploying those products to our customers. In fact, I would say that's kind of the top priority for us, given that there is a big market need right now for Rapid Home Equity. People are looking forward to.

are a lot of participants in the market that want to help consumers take advantage of their equity, and we want to help them help their consumers. That is very important to us. That has a very high price per unit, although that is in our consumer banking segment. On top of that, on the RapidRefi side, a lot of these companies are seeing mortgage rates coming down. I do not know if you all saw the jobs numbers today or the job cuts numbers today, but they want to be in a position where for the people who are able to get the benefits of lower rates once the rates get into the mid to low fives, that will be kind of an inflection point, I think, for the industry in terms of number of consumers that are eligible.

They need to be able to do that extremely effectively and in a very automated fashion. Our RapidRefi solution is the best way to do that. We have good interest in that. We have some customers that have deployed it and that are scaling it up. We are excited about it, and our customers are excited about it. While we do not want to guide exactly where we will be in two to three years, maybe in a future investor day, we can spend more time on that given the traction we are seeing. I think the opportunity is really large. That is not even withstanding what the AI brings to the table in this case, which is there is a significant amount of operational effort internally of manually reviewing the loan file and going back and forth with the consumer for days or weeks.

It is something that AI was really built for. We are happy to be part of that journey with our customers. I do not have specific guidance on the two to three-year medium term, but I can tell you in the long term, I am very bullish. I think there is a lot of upside for us and our customers in particular. I think a decent amount of that will come in the form of just continuing to grow our EVPFL with our existing customers first and foremost.

Michael Ng, Analyst, Goldman Sachs: Great. Thank you, Nima.

Jason Ream, Head of Finance and Administration, Blend Labs: Was there a second question, Michael? I think I might have missed it.

Michael Ng, Analyst, Goldman Sachs: No, it was just about the long-term, kind of like the long-term trajectory of EVPFL and then the right mix of consumer banking versus mortgage. I think you've covered it.

Jason Ream, Head of Finance and Administration, Blend Labs: Makes sense. Yeah. I mean, you've seen our consumer banking segment grow because we made some really big customer wins. And actually, one of our biggest deals this past quarter was a consumer banking win. Now, that also at 39% is where we are as a percentage of our total revenue in consumer banking. That happens to be in mortgages cyclically low. I think both sides of this business can be much larger than they are today if we continue to execute with our customers and our customers continue to win in the market. I wouldn't say we're sort of prioritizing one or the other. We're serving both. It's sort of, I'd say, our focus is our existing customers to start with and growing them first and foremost.

Michael Ng, Analyst, Goldman Sachs: Great. Thanks for the extra color, Nima. Appreciate it.

Amy, Conference Operator: Thank you so much. Again, if you would like to enter the queue to ask a question, press star followed by the number one on your keypad now. The next question comes from the line of Faith Bruner with William Blair. Your line is now open.

Faith Bruner, Analyst, William Blair: Hey, guys. Thanks for taking my question. Can you maybe double-click on the adoption cadence you're seeing across the different rapid products within your existing customer base and maybe how that's driving durability into the different product suites? Just a quick one on top of that about AI and as you get early feedback back from the Intelligent Origination and some of these other solutions, how that can maybe unlock another long-term monetization opportunity for you guys.

Jason Ream, Head of Finance and Administration, Blend Labs: Yeah. Great questions. The flavor of the day from our customers and where we're focused on the RapidSuite, although we have an, I think it's over 10 Rapid deals in deployment right now with our customers. I'd have to double-check that exact number. The majority of our big customers' focus is being able to serve a consumer a home equity line of credit or loan in 10-ish days. I mean, there's a lot of consumers who have debt that they're revolving on. That's higher interest debt. Our customers are interested in offering them something we can take advantage of the equity in the consumer's homes. The process today for getting a home equity line of credit is, at a bank or credit union, that a typical bank or credit union might be 30-45-60 days.

The technology is there now, and we have it with Rapid Home Equity to do that much faster and at a much higher conversion. That is the focus for our customer base, I'd say, for our largest customers. We're seeing kind of interest across the board on that and RapidRefi, with just trying to get ahead of the rates that might come down next year. Shifting gears to AI, I mean, AI is one of those things. It's almost like water for us at this point. It was such a breath of fresh air because it allowed us, we had this initiative a couple of years ago that we shared with you all around efficiency, and it helps us with our own internal abilities to do things faster and better. I think that was part of it.

It also unlocked, I mean, there was this part of the industry that always stumped me, which I referred to on the call as this $11,000 problem. The $11,000 problem is that there are so many different, there are hundreds or thousands of different scenarios of consumers' finances, and there are hundreds or thousands of different rules you have to apply to those scenarios. When you multiply those things together, it is like an intractable rules engine problem in the sense that you cannot code all of those things effectively because they change all the time. It was sort of impossible to imagine a world where someone could build an engine that was so complex and so magical that it could work across all of those things.

All of a sudden, out of nowhere, this AI boom came, and it's actually capable of handling those hundreds of thousands of different permutations that might happen on any given loan or line of credit or whatever. We were demoing this. I was on site with a fairly large client of ours, and we were demoing this. I can tell you it was like, the consumer is just going through their normal workflow in our platform, the same thing that everyone uses today. We were showing them what happens behind the scenes, and the AI just picks it up, and it's just doing all the background work, just like a human would, prepping the file for them internally. They were seeing that. It does almost feel like black magic because it's so hard to understand.

How it's even doing all that. I don't think I even understand how it can even do all those things as somebody who's very deep in AI and goes to sleep thinking about AI and wakes up thinking about AI. It is capable of doing those things. I asked them how much they spend fulfilling each of their files manually. It was not a small amount of money. Yeah, to answer your question, that isn't really built into our financial models. It's not built into our—and actually, one other thing I want to reiterate that Jason said is that the other thing that AI has allowed us to do in the spirit of efficiency is, as somebody who loves working with small teams, build these amazing solutions with small teams.

Now, getting the word out to customers and helping customers understand it and adopt it and buy it from us is a different conversation. The actual building in these capabilities is best done with small teams where there's little communication gap. Everybody's working on a very similar tight cadence together. I work with one of the small teams that's building out this, what we call it, Blend Intelligent Origination. It's just so refreshing. There's so much energy around it. Our customers love it, and they're so excited about it. While we still have some work to do, I would say I've put that in the very early stages category, and it's not baked into our financial model and certainly not baked into our cost model in terms of.

Us budgeting a huge amount of spend for that area, it is an area that I view as even more upside beyond some of the things we shared at our last investor day with you all about long-term upsides for the business.

Faith Bruner, Analyst, William Blair: Okay. Great. That was super helpful. Thank you, guys.

Amy, Conference Operator: Thank you so much. There are no further questions at this time. On behalf of Blend Labs, thank you for joining. That concludes today's conference call. You may now.

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