Blend Labs, Inc. — FY2023 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2023. Blend provides cloud-based software for financial institutions, with two reportable segments: Blend Platform and Title. Its transaction-based revenue is substantially exposed to mortgage and housing activity. The company reclassified digitally enabled title revenue and costs into the Title segment in 2023; comparative figures were recast.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $156.8 million | $235.2 million |
| Gross profit / margin | $81.1 million / 52% | $89.7 million / 38% |
| Operating loss | $156.2 million | $746.2 million |
| Net loss | $179.9 million | $763.8 million |
| Net loss per common share, basic and diluted | $0.76 | $3.28 |
| Cash used in operating activities | $127.6 million | $190.4 million |
| Cash, cash equivalents and marketable securities | $136.9 million | $354.1 million |
Revenue and segments. Revenue fell 33% year over year. Blend Platform revenue was $109.5 million, down 10%; Mortgage Suite revenue declined 18%, while Consumer Banking Suite revenue increased 22%. Title revenue was $47.3 million, down 58%. Mortgage banking transactions fell 34.7% to 805,000; Title closed orders declined to 15,000 from 58,000.
Margins and expenses. Consolidated gross margin improved to 52% from 38%, although gross profit decreased. Blend Platform gross margin rose to 70% from 62%, while Title gross margin fell to 10% from 13%. Lower Title activity and cost reductions contributed to the consolidated margin change. Operating expenses were $237.4 million, down from $835.8 million; FY2022 included $449.7 million of goodwill and intangible-asset impairments. No such impairment was recorded in FY2023. FY2023 restructuring charges were $24.9 million.
Cash, debt and liquidity. Cash and cash equivalents were $31.0 million and marketable securities and other investments were $106.0 million at year-end. Operating cash outflow improved to $127.6 million from $190.4 million. The company prepaid $85.0 million of term debt in 2023; $140.0 million principal remained at year-end, with a reported effective interest rate of 14.57%. The loan matures June 30, 2026; an extension to June 30, 2027 depends on conditions that were not met at year-end. The revolving facility was terminated. The company reported $31.6 million of current liabilities. It states that available liquidity should fund operations for at least 12 months.
Material changes, outlook and risks
- Market and outlook: Management says elevated mortgage rates and reduced affordability have depressed volumes. Industry forecasters expect mortgage originations to increase in 2024, but Blend expects relatively high rates to continue weighing on near-term transactions and revenue, particularly Title. Management expects long-term growth from Blend Platform and ongoing expense improvements in 2024; it did not provide quantified revenue or earnings guidance.
- Restructuring: Two 2023 workforce plans eliminated approximately 340 and 150 positions, respectively. Blend had 881 employees at year-end and cautions that expected savings may not be achieved and further reductions may occur.
- Debt covenant: Blend was out of compliance with certain non-financial covenants and its minimum-liquidity covenant at December 31, 2023 because control agreements for certain accounts had not been completed on time. The company says it remedied the failures after year-end and was compliant when the financial statements were issued.
- Customer concentration: The top five customers represented 31.9% of Blend Platform revenue and 71.9% of Title revenue. Mr. Cooper accounted for 49.8% of Title revenue. Many customer arrangements may be reduced or terminated, including usage-based contracts.
- Other risks and contingencies: Key risks include dependence on mortgage activity, floating-rate debt, competition, customer concentration, cybersecurity and data privacy, and extensive financial-services and title regulation. Blend reported no litigation it believed would likely have a material adverse effect, but accrued $1.1 million for litigation contingencies. It administers third-party escrow and trust funds and is contingently liable for their disposition. The filing describes certain indemnification obligations as potentially unlimited.
- Controls and unusual items: Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not attest to internal-control effectiveness because Blend is an emerging growth company. FY2023 also included a $4.0 million loss on partial debt extinguishment. The 2022 Title365 impairment fully wrote off goodwill and customer relationship intangibles.
Important facts for investors to verify
- Whether mortgage transaction volumes and Title orders stabilize or improve, and how that translates into revenue and gross profit.
- Whether cost reductions deliver sustainable savings without disrupting product development, customer service, or retention.
- Current debt-covenant compliance, the applicable floating interest rate, and the conditions and timing for the 2026 maturity or possible extension.
- Liquidity runway and cash burn, particularly if operating losses persist or revenue declines further.
- Exposure to major customers, especially Mr. Cooper’s share of Title revenue and the renewal terms of significant contracts.
- Potential payments or liabilities related to Title365’s redeemable noncontrolling interest, escrow funds, litigation, and indemnification commitments.
- The effects of Blend’s multi-class voting structure: the founder held approximately 62% of voting power at year-end 2023.