Blend Labs, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This annual filing reports full-year results; it does not provide a standalone 2022 Q4 financial summary.
Business context
Blend provides cloud-based software for financial institutions’ consumer banking and loan origination processes. It reports two segments: Blend Platform, including software-enabled title services, and Title365, its traditional title, escrow, and settlement business. Revenue depends substantially on completed transactions, particularly mortgage activity. Blend says its platform processed nearly $1.7 trillion in loan applications during 2022.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $235.2 million | $234.5 million |
| Gross profit / gross margin | $89.7 million / 38% | $116.0 million / 49% |
| Loss from operations | $746.2 million | $197.2 million |
| Net loss | $763.8 million | $169.1 million |
| Net loss attributable to Blend | $720.2 million | $169.9 million |
| Net cash used in operating activities | $190.4 million | $127.5 million |
Revenue was nearly flat year over year. Blend Platform revenue fell 3% to $132.0 million: mortgage banking revenue declined 23% to $83.4 million, while consumer banking and marketplace revenue rose 91% to $44.2 million. Title365 revenue increased 4% to $103.2 million, but the comparison includes Title365 for only the post-acquisition portion of 2021. Segment composition also changed after the largest Title365 customer migrated to software-enabled title services in 2022.
Mortgage activity weakened sharply: Blend reported 2.055 million Blend Platform banking transactions, down 3.9%, including 1.234 million mortgage transactions, down 31.9%, and 821,000 consumer banking transactions, up from 326,000. Traditional Title365 closed orders fell to 46,000 from 80,000; this excludes about 11,000 software-enabled orders reported in Blend Platform.
Operating expenses included $449.7 million of impairment charges, fully writing off Title365 goodwill ($287.2 million) and acquired customer relationships ($162.5 million). Stock-based compensation was $109.7 million, up from $70.8 million. The filing reports $15.3 million of 2022 restructuring charges.
Liquidity, debt, and cash flow
At December 31, Blend held $124.2 million in cash and cash equivalents and $229.9 million in marketable securities and other investments, or $354.1 million combined. It also had an undrawn $25 million revolving facility. Management said these resources were expected to fund operations for at least 12 months.
Operating cash outflow was $190.4 million. Investing activities provided $99.4 million, principally from maturities of marketable securities; financing activities provided $2.2 million. The company reported $225 million of term-loan principal outstanding ($216.8 million net carrying value), with a floating rate and a June 30, 2026 maturity. The effective interest rate was 13.43% at year-end; the facility includes a minimum-liquidity covenant and was in compliance at December 31, 2022.
Outlook, risks, and unusual items
- Management cited rising rates, reduced housing affordability, and economic uncertainty as drivers of lower mortgage volumes. The MBA forecast further declines in mortgage originations in 2023, followed by a recovery in 2024. Blend expected near-term pressure on both segments, said Title365 faced significant growth headwinds, and expressed a belief that Blend Platform would continue positive growth overall. The filing does not provide specific numerical company guidance.
- Blend eliminated about 440 positions during 2022. A January 2023 plan eliminated approximately 340 more; the company estimated about $14 million in related charges and $43.4 million in annualized compensation expense reductions. Savings and execution are uncertain.
- Title365 revenue is concentrated: its five largest customers represented 78.1% of segment revenue in 2022, and Mr. Cooper represented 53.1%. Blend Platform’s five largest customers represented 33.5% of segment revenue.
- Other key risks include mortgage-market exposure, continuing losses and cash burn, customer concentration, competition, cybersecurity and service disruptions, and extensive financial-services, privacy, title, and insurance regulation. The filing also discusses 2023 banking-sector instability, including the failures of SVB and other banks, and the potential effect on customers and deposits.
- Blend disclosed a $0.7 million litigation contingency accrual and no litigation it believed would likely have a material adverse effect. It also administers third-party escrow funds and is contingently liable for their disposition. The Title365 minority holder has a put option; its stated redemption amount if currently exercisable was $53.2 million at year-end.
- Management reported that a previously disclosed material weakness in internal control over financial reporting had been remediated by year-end 2022. The auditor gave an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.
Most important facts for investors to verify
- Whether mortgage and title transaction volumes—and the related segment margins—stabilize or continue to decline.
- Whether the January 2023 workforce plan delivers its estimated savings without disrupting product development, sales, or customer service.
- Cash burn, available liquidity, floating-rate debt costs, covenant compliance, and ability to meet the 2026 term-loan maturity.
- Title365 customer concentration, integration progress, and exposure to the minority-interest put option.
- Progress on the stated Blend Platform growth outlook, given flat consolidated revenue and reduced mortgage activity.