Q2 2021 Blend Labs Inc Earnings Call
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Good afternoon, and welcome to <unk> second quarter 2021 earnings release conference call. All participants are in a listen only mode.
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I would now like to turn the call over to Crystal summer head of legal compliance and risk.
May begin.
Good afternoon, everyone and thank you for joining us today to discuss blend fiscal 2021 second quarter result.
I'm joined on the call today by New York, I'm, Sorry, co founder and head of blend Mark Greenberg head of finance and 10 Minneapolis prejudice.
Before we start I'd like to note that certain statements made during today's conference call regarding blend and its operation.
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 could cause actual results events or circumstances could differ materially from those described in these statements.
Please refer to the risk factors included in our filings with the security and Exchange Commission, which are available on the company's website at blend dot com under the Investor Relations section and on the SEC's website at SEC Gov.
You should not put undue reliance on any forward looking statements.
Also note that any forward looking statements. We make on this call are based on information available to us and assumptions and beliefs as of today's date.
We disclaim any obligation to update any forward looking statement, except as required by law.
During this call we will be discussing certain non-GAAP financial measures information regarding our non-GAAP financial results, including a reconciliation of such non-GAAP results to the most directly comparable GAAP financial measures may be found in our earnings release, which is available on the company's website under the Investor Relations section.
And included as an exhibit to our form 8-K furnished with the SEC before this call.
These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results.
I'd also like to mention there are slides in product and are for your reference available for download at Investor Dot one dot com.
With that I'd now like to turn it turn the call over to co founder and head of Glenn Neither can sorry.
You may begin.
Thanks, Crystal and thank you all for joining us today.
Mike I'm, sorry head of plan and I'm also one of the founders.
In the last few months have been a very exciting time for Glenn we've grown our revenue quarter over quarter. Despite a national shopping in mortgage volumes, which indicates that we are growing our customer base, expanding our customer relationships and diversifying our product offerings. We also executed a successful IPO in that time period with strong investor interest and support and so a special thank you to our <unk>.
<unk> and team members for helping us get through that milestone.
We believe that banking will look very different in the future than it does today and it's that future that we're constantly moving towards and preparing for.
We started nine years ago to take friction out of banking and make a profit getting alone opening deposit accounts.
Anything else that they would do online.
And above all else, we wanted to bring simplicity and transparency to financial services.
But today.
The banking industry is still heavily relies on paper documents, making the approval process for these products slow expensive and more susceptible to air in fraud.
Any of you have likely had that experience personally I know I have opening accounts or getting alone visiting our branch having to sign a stack of paper.
And the good news is with our help our customer base is committing to making this a better experience for everyone.
We see a future of practice finance, where consumers receive personalized database suggestions from their financial services firms and that's focused in driving their financial wellness to consumers' financial wellness.
We predict the consumers will be able to open their mobile phone and just an instant see everything but there are financial services firm can do for them tailored to their specific financial situation.
With that future in mind blends platform is designed to power any banking product using data driven workflows.
That means from the moment that consumer starts with their financial services firm to the moment. They digitally sign their final documents, we've centered the experience around their unique data profile, including their assets their income tax history credit history, everything and underwriting team needs to make a credit decision in real time.
Through our products financial services firms are able to deliver those real time customer experiences across important financial moments in People's lives.
We estimate the serviceable addressable market of blends current product offerings is greater than $33 billion and we expect this market to grow over time as we add more products to our software platform develop additional marketplaces and expand internationally.
Financial services firms choose us as a strategic innovation partner today, and we believe they will continue to do so in the future because we are well position to help them in critical ways first unlike legacy point solutions that focus on individual product lines. We sell a single software platform designed to power the end to end journey across products and channels.
Second our software platform is flexible and modular enabling financial services firms to innovate rapidly and respond to new opportunities and changing market conditions.
Third we have an expansive and rapidly growing partner ecosystem that use our platform as a way to gain adoption of new fintech innovations and our customers love that because it helps their end customer or the consumer get the best experience.
And last we attract and retain the best software engineering talent at blend to continue innovating and building value for the financial services industry.
Turning to the specifics for the second quarter, we achieved strong revenue performance and continued to make progress on adding new customers and expanding value to existing customers.
Our revenue reflects growth across our mortgage and consumer banking product lines or homeownership journey marketplaces, and the volume of banking transactions that we facilitate on behalf of our customers.
In the second quarter, we continued to gain market share across banks credit unions, nonbank lenders and fintech as the consumer expectations and COVID-19 pandemic fueled behavior shifts continued to drive industry wide digitization.
Key customer wins include Mr people, a top 15, one bank mortgage lender.
Our mortgage title and close products.
G Bank, a top 20 U S bank.
Our mortgage model.
E C. You one of the nation's largest credit union or consumer banking suite.
And built technologies.
Car companies are renters for Facebook.
We are excited to partner with Mr. Cooper across our mortgage title and close products as we work to deliver an end to end digital home purchase and refinance experienced with their customers.
Bill technologies represents an increasing trend of Fintech, who typically have great in house Tech talent partner with plans to accelerate their ability to put appropriate infrastructure in place and effectively originate all of their products.
All customer signed in the second quarter out of the capacity of around 270000 annual banking transactions to our base. This number represents a banking transaction volume at our signed customers volume that we will have the ability to capture in the coming quarters as we work to onboard them onto the <unk> platform.
Since we expect that we will be talking about new customers on our earning calls going forward I'd like to take a brief moment to provide some context around the journey from signing to going live on our platform.
You'll hear us refer to four phases that signify their stage in the Onboarding process that was four phases are signed in.
In deployment.
<unk> and growth.
Customers generally contribute to revenue in the light and growth phase, while the length of time to onboard a customer varies by type and the nature of products that they initially adopt it generally takes between one and three quarters progressed from sign to live in another quarter or two for them to move to the growth stage.
We drove progress moving customers to the independent lives growth stages in the second quarter, including Utah community credit Union for a consumer banking product suite.
The way independent mortgage for a mortgage product and BMO Harris bank for our personal loans.
Fairway of top 10 mortgage lender has gone live with blend to drive efficiency in its mortgage operations and is in the midst of a blend rollout hundreds of branches across the country.
BMO Harris Bank is in the top 25 banks in the United States and our longstanding customer our partnership started off in mortgage and expanded our home equity loans and lines of credit and they're now deploying blend to power personal loans.
Overall, we have good momentum and setting the foundation for future market share expansion and are continuing to gain traction at the high end of the market.
As of today, we serve 32 of the top 100 U S financial services firms by assets under management.
Up from 31 at the end of 2020, and 28 of the top 100 U S. Nonbank mortgage lenders up from 24 at the end of 2020.
Yeah.
Another achievement for US was our acquisition of title through 65, which we closed on June 32021.
Title escrow and settlement services are a key piece of the one stop shop for homeownership and home refinance the blend is building, but they are currently paper and labor intensive.
We've already started the process of building a software driven title agency blend title internally, but entitled through 65, we found a great match to expedite our transformation of this set of services.
365, we acquired a highly experienced and talented team combined with operational scale and sought after licenses and relationships that allow us to continue to serve our customers in new ways and across all 50 states.
We also expect that the acquisition will continue to accelerate growth of our core platform revenue as we complete the integration and shift legacy title volume onto our software driven blend platform.
We frequently been asked why an innovative Silicon Valley software company would undertake the profit of acquiring and transforming our services business to drive growth to answer for US is simple our business at the key services businesses that support the homeownership journey can and will be embedded in a digital mortgage process, which we power today.
And the blend platform is rapidly becoming the foundation for that transformation.
By acquiring and add scale title business and migrating customers and services onto blend software platform. We can accelerate our strategy to power. The end to end journey for any banking product, including mortgages and home equity loans and in the process more quickly scale. The innovations we've already made on our platform to digitize title insurance.
Overtime, the acquisition creates substantial upside for <unk> customers, the financial services firms for consumers and therefore, ultimately blend shareholders by driving core platform revenue growth.
With the acquisition closed we're executing on our integration plan and are eager to continue our work with a talented titled through 65 teams a number of blood.
So far what we've seen is what we expected and we are fully integrating handled through 65 inch the blend platform and business model as far our progress on key integration milestones.
First the tenant for 65 team has quickly become an integral part of a blend as we have retained penalty 60 fives capable leadership team and key staff.
Second we are proceeding with critical technology integration is necessary to deliver our software enabled title escrow and settlement services to existing <unk> customers were fully resourcing those efforts and they are top priority for our team.
Mr. Cooper isn't deployment with the blend platform, including our enhanced title escrow and settlement services as of early Q3, we expect them to go live on blend in the first half of 2022.
Mr. Cooper is the largest title through 65 customer its adoption of blend will facilitate migrating legacy business to blend software enabled title escrow and settlement services.
We also expect to launch pilots of the joint blend entitled through 65 experience with a select group of mutual customers by year at those efforts are likewise on track.
In the meantime, we will continue to deliver titled through 65 services to existing customers.
Those customers have responded favorably to the acquisition say for the attrition of a handful of legacy channel grew 65 customers, who were not inclined to be on the blend platform, including some who view blend as a potential competitor, we fully expected and planned for this limited attrition and took it into account in our assessment of the deal.
And lastly, we have seen significant interest from blend customers in the blend title solution, including interest from a number of our largest customers for all these reasons, we remain confident in our ability to execute and deliver on the premise of the acquisition of title 365.
As we look ahead to the balance of the year and into 2022, our parties are deepening our customer relationships, we're always focused on existing customers growing market share and.
And delivering ongoing product improvement and innovation.
We executed on the pace of our title through 65 integration.
Blend is keeping an eye on the very long term is a key long term partner of Digitization for the financial services industry.
With that I'll turn it over to Mark.
Thanks, NEMA and thank you all for joining us to review the results of our second fiscal quarter of 2021.
Before I dive in I want to remind you that our acquisition of title 365 closed on June 32021.
Our reported results for the second quarter and for the first half of the year do not include the impact or the result of title for 65 unless noted as pro forma.
Beginning with the third quarter and moving forward, we will report results, including the contributions of total 365, and we will.
Sure year over year comparisons on a pro forma basis as if we owned titled $3.65 for the comparable year over year periods.
Total blend revenues for the second quarter of 2021 or $32.1 million compared with $21.9 million in the second quarter of the prior year.
This represents an increase of 46% year over year.
This growth featured strong transaction volumes, demonstrating increased utilization and adoption of our platform, even though total industry wide mortgage originations were roughly flat to the prior year.
In terms of success based volumes, we completed over 520000 banking transactions on our platform in the second quarter of 2021 up 51% year over year.
Note that we also generate a small percentage of banking transactions under enterprise license agreements with certain customers that are not included in our reported transaction volume.
Looking further at our blend P&L for the second quarter, our gross profit was $19.7 million compared to $13.3 million in the prior period.
Our non-GAAP gross profit was $19.9 million compared with $13.3 million in the prior year period.
Our current stage of development, we are focusing on absolute gross profit dollar growth more than margin expansion.
Expect gross profit to improve in the future as we add more products to the platform and progressed further on title III thinking five integration.
Linda operating costs for the second quarter of 2021 were $59.3 million or 185% of revenue compared to $34.1 million or 155% of revenue in the second quarter of 2020.
Non-GAAP operating costs for the second quarter of 2021 were $46.2 million or 144% of revenue compared with $29.6 million or 136% of revenue in the second quarter of 2020.
The largest driver of operating expenses was an increase in our head count which increased to 917 by the end of the quarter.
Note that this does not include employees, we added from the title III 65 acquisition.
We continue to invest in our operations across the company, particularly in R&D to push product enhancements and invest in future products.
Sales and marketing to best serve our customers and in G&A to meet operating needs support growth and scale and meet the demands of being a public company.
These investments deepen the competitive moat, we built over the past nine years by strengthening our ability to innovate at a faster pace than I T teams at the largest financial services firms can build similar capabilities in house.
Our spending is reflected in the loss from operations for the second quarter of 2021 of $39.6 million compared with a loss from operations of $28 million in the second quarter of 2020 non.
Non-GAAP loss from operations for the second quarter of 2021 was $26.3 million compared with $16.4 million in the second quarter of 2020.
In the second quarter of 2021, we incurred $6.6 million in transaction and integration costs related to our acquisition of title $3.65.
Our net income for the second quarter of 2021 was $5.8 million compared with a net loss of $26 million in the second quarter of 2020.
Our net income for the second quarter of 2021 includes a one time income tax benefit of $45.3 million, primarily due to the release of our historical deferred tax asset valuation allowance in connection with the acquisition of title 365.
Our non-GAAP net loss for the second quarter of 2021 was $26.2 million compared with $16.1 million in the second quarter of 2020.
Now turning to our balance sheet.
Our cash cash equivalents in marketable securities at June 32021 on a pro forma basis were $630 million, which reflects $377 million in net proceeds from the IPO to.
$219 million in net proceeds from the term loan financing.
And the disbursement of $420 million for the title III since <unk> purchase consideration, which was disbursed in early July.
Our reported cash at June 30th also includes $17 million received in connection with the acquisition of title 365, effectively reducing the purchase price consideration to $403 million net of cash acquired.
Now I'll turn to our outlook for.
For the remainder of this year, our revenue will come from two primary sources first blend platform revenue, which consists of our mortgage and consumer banking products or homeownership journey marketplaces are new products that we continue to rollout on the platform.
And second from title 365, which will begin to meaningfully appear in our revenue in the third quarter as.
As we migrate customers. We expect this revenue will convert to platform revenue in future periods.
With that for the full year 2021, we anticipate revenue of between $226 million and $232 million and pro forma revenue, which includes the impact of a title III 65 revenue for the first half of 2021 of between $365 million and 371 million.
Yeah.
To wrap up we had a solid second quarter and we're optimistic about our future growth potential as we continue to bring new customers onto the blend platform increase the ROI and value delivered and drive forward with integrating titled Fish 65 into our business.
And to our new followers in the investment community I'm looking forward to engaging with you and updating you on all our progress in the years to come.
With that I'll turn the call back over to Neal for his closing remarks.
Thank you Mark this is an exciting time for blend and I'm proud of the team for their efforts and their dedication to our customers is incredibly hard work, it's very complex.
Diligently working to meet challenges in partnership with our customers.
<unk> Foundation is strong and I'm confident that we'll continue to add value to our customers and the industry at large as we move forward as a public company, we're happy with our growth today, and we're confident that blend will continue to expand and advance our vision of bringing simplicity and transparency to financial services.
With that I'll open it up to your questions.
Okay.
And at this time, we will be conducting a question and answer session.
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Our first question is from Bhavan Suri with William Blair. Please proceed with your question.
Hey, guys nice job and congrats on a solid quarter out of the gate there.
As a public traded company I guess I wanted to touch a little bit on the blend closed products.
We know the mortgage rates and we know kind of the refi rates are flat year over year, but you've seen great growth Glenn close has seen a pretty substantial interest since launch and or whatever 25%, 30% attached in few quarters. Just can you give us a little more color on the demand for clothes and how do you expect that to play out over the next let's say 18 to 24 months or longer timeframe, but it feels like.
That should be an obvious no brainer attach how should we think about that.
Yeah. Thanks, Bob.
They're just for people, who don't know blend closes our digital clothing products. So it allows consumer to instead of going in and signing a stack of paper at the closing table that can either be entirely online with video notary or parts of it online and then close with a much smaller stack with just a couple of papers at the end of the process and for those of you who closed alone a mortgage loan in particular it does.
Very onerous process. It is a it is sort of that that is where the industry is growing we talked about digital transformation tailwind for blend and this is a great example of one where this process is going digital our customers want an end to end solution I had been on the road with our customers for the past two weeks past week or so into the next week as well.
One of the most common areas that we hear from our customers is how do we make the closing process better, but not just with clothing, but eventually how do we make the the back and forth. The title company, along the way better and so it's an area of great interest and where it's a product we're extremely confident and as a result.
Great Great. That's helpful. And then I know you don't talk about things in sort of a take rate base.
Basis, but by my calculations I should try and do that math it looked like take rates have come down a little bit.
And help us just understand or unpack that a little bit I think by my calculations. It was kind of revenue per transaction, let's call. It that was down modestly from Q1, but trying to understand sort of the dynamics that played out there I think that'd be helpful. Thank you.
Yeah, I'll give a quick quick note of color I mean.
Two things one there are as Mark mentioned in his portion there are some transactions that are not accounted for in our Q2 numbers because we have some enterprise license agreements as well so it might even be a little off but it's because as we expand into other product lines. Our mortgage business continues to grow but as we expand into other product lines. Some of the price points for those other non <unk>.
Mortgage banking product lines. So for example, personal loans deposit accounts credit cards, those price points are different and so as a result, the overall transaction volume will continue to go up if that continues that trend continued or went up and transaction dollars per transaction that we get from the banking transaction revenue goes down.
Okay, Okay, I'll jump back in queue, but I love to unpack that a little bit but thank you for taking my questions and like I said congrats on a good start as a public company.
Yeah.
Thanks, a lot our next question.
And our next question is from Michael turn with Wells Fargo Securities. Please proceed with your question.
Hey, great. Thanks, good afternoon, and congrats on the first quarter as a public company.
You mentioned at the outset, 46% growth is still strong, but the sequential growth number is more modest here.
How much of that core slowdown is a function of the macro environment and then in terms of guidance can you just maybe talk a bit more around what you're assuming in terms of just the overall mortgage environment for the rest of the Europe.
Yeah.
Yeah, Mark do you want to take this figure on me so sure sure I can start with the guidance on the second half of the year.
Our guidance continues to reflect the Fannie and MBA forecast as of last month, and we're off to a really solid start in Q3 if.
If volume is higher than what those industry forecasters have predicted there's there's definitely room for upside.
And there really hasn't been a major shift in any of the component parts since the IPO, so and that part of the that part of the process is something that we're working from in terms of sequential quarters. The mortgage market was down I think 1% Q1 to Q2.
Over time, I think that will be less and less exposed to name. His earlier point about revenue per transaction as well as the mix continues to evolve towards consumer banking, we're less exposed to the mortgage market, but from a from an existing revenue perspective that that down 1% kind of influenced the Q1 to Q2 sequential.
Yeah.
Okay. That's that's helpful. And then maybe touching on the prior question would be great to hear more just on where you are on blends journey towards diversifying into other areas of consumer banking outside of mortgage it seems like you solved the difficult problem with mortgage first but wondering if you could talk more about how much expansion opportunity that can open up within your existing <unk>.
Customer base.
Over time, thank you.
Yes.
A little color from this tour had been worked with a lot of customers. This week like I mentioned.
And for.
For a diversified financial institution that offers all of these products.
Being able to offer all of these products and have won and customer experience is incredibly important to them a lot of the meetings were with the CIO is C. T. O is digital officers for these financial.
Financial institutions and so it is very core to their strategy long term, which is why we have a lot of upsides.
And in that part of the pie because it's much earlier it continues to grow on an absolute basis.
And as a percentage of our total transaction volume, meaning in some ways, it's it's becoming a bigger and bigger part of our Pi already as we've continued to roll it out and we have some very large we've announced some very large customers and we're in process with some other ones chegg to continue to grow that product suites in terms of how we how it's used by our customers and their capabilities and offers to the customers who are use.
Yes.
Helpful. Thank you.
In my mind, I can just add BMO.
BMO personal loans was one of the big deals we announced this quarter B C. U was a consumer banking deal it.
It was also announced this quarter.
And our next question is from Joseph <unk> with Canaccord Genuity. Please proceed with your question.
Hey, guys. Good afternoon, sorry, so it's up a little bit noisy here, just wondering moving forward and by the way congratulations obviously.
Getting out of the box here.
Isn't that retention something that you're going to be providing annually or.
Is that something you can provide now and if not now maybe just some color on.
Maybe the trajectory of net retention.
Hum Q1, and then I'll have a quick follow up.
Thanks, Joseph and good to chat with you again.
Net revenue retention remains a super positive metric for us, but we're not planning on disclosing on a quarterly basis. So.
We do have really strong customer retention.
I said it really does reflect the company's focus on our customers, but on a quarterly basis is not something we're going to disclose.
Okay, and then any update on marketplace.
The opportunity there and maybe any progress that's occurred.
In the quarter on the marketplace, but thanks, a lot guidance.
Tim do you want to talk a little bit about the title.
Acquisition and how that's contributed starting starting out that was a recent one that's a big part of our marketplace obviously.
Sure so.
I didn't even know it's this is a a big expansion in our marketplace offerings.
We are pleased with the way the integration of titled 365 is going.
There have been no surprises there and.
First we've been really pleased that we've been able to retain a really talented.
Executive team, there and the key staff.
We're making good progress on big integrations that needed to be done.
We have prioritized those within our company.
We've got the thing we have Mr. Cooper, which is a very significant titled 365 customer coming onto the blend software platform. We started that deployment in early Q3.
And we.
We would we would expect Mr. Cooper to go live on blend in the first half of.
Of next year.
And since they are the largest totaled 365 customer to.
The adoption of a blend.
We will facilitate migrating their business onto our software enabled title escrow and settlement platform.
We also expect that.
We will be able to launch our pilots with some joint customers that we have between blend entitled 365.
Before before the end of the year and as I think Nemo would report from his visits with customers, who says you mentioned he's been out on the road. This week and we'll be out on the road next week a lot of interest from from our customers, but we're still early in the process of.
Of scaling up the title business, but we are encouraged by what we see here.
Early days of the integration.
Okay.
Thanks very much.
Yeah, and just just to touch on the other marketplace opportunities we call it marketplace on this call, but the way our the way our customers talk about it is that whether it's in the home space. It's the homeownership journey.
And in the auto space and see the auto buying journey or the auto ownership journey.
About it is from their consumer standpoint, how they are feeling through the process and having that be a one stop shop remains really important to us.
As we look at the growth we've had in in Q and Q2 to.
Q1, just on that on those products and we have some numbers from title IV 65 debt.
That we can share on the revenue side.
The overall company, but.
We continue to see a lot of growth in our in our marketplace businesses and we're very excited about them because it creates that one stop shop for the consumer where they can do all the things they need in one place.
Thanks, Steve.
Okay.
And our next question is from Karl Keirstead with UBS. Please proceed with your question.
Thanks, very much and congrats maybe all Alaska to Nemo congratulations on the on the Keybank win you mentioned that it covers mortgage title and close but I was just curious did.
The Keybank have another third party that you displaced did they have a homegrown system be curious about that and also you probably don't want to size a win like this but where might it rank and blends you know largest deals does it hit the top five or top 10 any color there would be great and I'll just ask my second question to Mark now Mark most of.
The underwriting analysts' models, where on a pro forma basis, obviously, you've printed on core blend are you at Liberty and maybe to give us what the pro forma with title 365 would've been in <unk> that might be a helpful. Thank you.
Mark do you want us starting to sharing the pro forma I'm sure you and then I can talk about Keybanc.
Of course of course, so for the three months ended June 32021 pro forma revenues were $98.2 million.
And pro forma net loss was $31.2 million.
Yeah.
And for the three months ended June 32020, if that is that helpful. Karl are you yeah.
Say that one yeah and it would also be great. If it's just.
To be comparable to the $26.3 million non-GAAP operating loss for core blend. If you have a similar number for titled through six five that'd be great or or give a pro forma non-GAAP operating loss. Thanks Mark.
Sure.
Let me start with the with the pro forma and then we can come back to the.
The second piece so like I said three months ended June 32021 revenues of 19 point too.
Net loss of 31 point to three months ended June 32020, $73.6 million.
Our net loss of $28.4 million.
And then at the six months comparable numbers six months $2021.203 two.
Revenue.
$44, one net loss.
And six months ended June 32020.
$132.6 million in revenue.
$12.9 million in net loss.
Okay.
Terrific. Thank you Mark.
Okay.
And then on Keybanc key he is a very interesting new customer for us, we're very excited and partnering with them. They are one of the 20 largest banks in the U S.
So that will help you I think size, we'd probably have a sense of which which large banks in the U S. We work with work with a number of them, but I can help you size in terms.
The banks were.
Where that fits in our overall ecosystem.
They didn't have they had started some internal build work, but they had really I think they were really evaluating a few different paths for going down and they felt that we were both the best short term partner on long term partner for them as a company that to really start to create that experience that there, but their customers are trying to expect from us as well as the efficiency of their customers are starting to expect from them. So we're very excited about.
That partnership and we think it's gonna be a they're.
They're very motivated we want to work closely with them to get this thing to be live.
Live quickly go back to our analogies and get get their customers see that starting to go into that digital funnel.
Got it congratulations Nemo.
And our next question is from Terry Tillman with true with Securities. Please proceed with your question.
Yeah, Yeah, I think hi, Nemo, Mark Tim and Crystal Congratulations from me as well on the IPO in the quarter.
Maybe just the first question relates to well actually I have two questions. One is a two parter. So I'm sorry in advance, but Nemo you talked about you know the reality of a softening mortgage market, but you did have 51% year over year transaction growth, which was strong and that may not even be all the transactions, but is there some dynamic here, where you've still got customers. They really are.
And even at full scale, yet the helping otherwise a soft mortgage market is that part of it and then the second part of the first question is have you all seen historical kind of pattern recognition and a softening market do they actually accelerate kind of deal activity to transform do they slow down or what happens when they see a softening market on sales cycles and.
And then I had a follow up.
Sure So when markets are very.
Hot like they were last year, if anything it slowed down sales cycles, because new customers are so busy with their existing volume and so.
It's been great that we've been able to sign customers during that time, but we expect that we signed some good customers this quarter.
We shared the capacity numbers of new new customer capacity, we've signed Marc shared it during his section.
I'll get you that exact number as well, but mark showed that during his section of the <unk>.
Of the just the overall the over.
Have you.
And then to your second question around the mortgage market softening in general we did we do have more runway as we sign new customers. It does take time to go through those four stages.
Sure.
And the time it takes to Ted to go through those four stages. So yes, even though the mortgage origination market was down about 2% year over year between quarter two last year in quarter. Two this year our volumes grew 51% from the transaction markets that shows two things one we're helping our customers rollout more use more of our product signing new customers.
But it also means that we're expanding to other product lines, along this larger digitization tailwind across the entire financial services sector and so.
Those are some of the reason that we're able to grow and yes, we still have more headroom. We're not not every customer has fully at scale rolled out with every loan we saw a lot of opportunity to continue to grow our existing customers as they get them through these phases of our rollout funnel.
Got it thanks for the answers there I guess my second question and it's the one partner I think you talked about seeing some good early signals from folks around title III 65, there might been looking blend title going forward, but I'm curious about you know we're not talking about next year, yet so mark is not on the hook for guidance, but as we move into next year.
Is there a sense that folks could take blend title and it can become meaningful in terms of the contribution next year, whereas next year really going to be more about progressing this shift from title $3.65 onto your platform and that's really more of a blend title all comes in next year. Thank you.
Yes.
This is Tim I think we're going to see a combination of those things. So we're going to see a combination of titled 365 volume coming onto the blend software platform.
But I think given the interest we're seeing from a from.
Existing blend customers.
And new customers such as Keybank too.
To be on the blend titled platform I think we will start to see growth there as well so.
I don't know that we're in a position to size that at the moment, but I think we will see both components of that.
That sounds good thanks, Tim.
Our next question is from Josh Beck with Keybanc. Please proceed with your question.
Thanks, so much and my congrats as well.
Life, new to the public markets at least I.
I wanted to ask I guess, one of the things that stood out to me.
Was.
Basically the breadth of the customer wins, so mortgage credit card consumer banking suite.
You, obviously had some fintech oriented companies traditional financial institutions. So it was pretty broad.
My question is.
Did that surprise you at all.
We obviously best Division, but should we expect this type of drug.
Yet in terms of new wins as we go through the balance of this year and into next.
No. It did not surprise us in fact this is what we've been building towards.
Being able to offer these products really starting last year and at scale and then this year.
Last year in the beginning of this year at scale and so no I mean, I think the fact that even syntex and prop tax use us as their platform.
She's met their software platform.
It speaks volumes to the quality of our platform as well as the ability of it creates for even the most tech for it organizations to accelerate their tech forwardness, if that makes sense and that's obviously a word that I made up but but being able to offer that to even the most tech for the organization as part of what gives the CIO and the CTO is a traditional firms confidence that we will be a great <unk>.
For them as well.
And so no. It didn't surprise me I think it is what we expected and we continue to work with our our customers on that fits on the mortgage side getting the products like blend clothes and blend title and things that we think can transform that homeownership journey that we've talked about.
And if its brook.
Our multi product bank or multi product credit Union, how do we help them to have one platform. One one software platform that can power all of their major product lines.
So that is the trajectory of the company that is something that we're very excited about to work with our customers on and we expect to continue to be able to do that with our customers over time.
And by the way during this one week of travel that I've been doing with my customers. This week and next week is it just.
That has been the theme over and over again, they want to hear they want to see what we can do for them because theres. So much they have to accomplish to serve the changing needs of the customer that this these are the things that they're talking to us about.
Yeah.
Excellent well, obviously have a great validation of the breadth of your platform. So very good to hear.
My follow up is a little bit.
More nitpicky on the on.
On the financial items, Mark just to clarify when you gave us those net loss numbers.
Are those GAAP or non-GAAP figures, so that was a part a the second part is with that acquisition related expense in the quarter, how should we be thinking about modeling that move.
Moving forward.
Okay.
Thanks, Josh So those were GAAP numbers, we will have to come back to you with non-GAAP.
I think you can you might be able to do the math, but it's not something we're disclosing in our Q. So I need to think about how exactly to maneuver that one.
But those are those are GAAP revenues and GAAP net loss and the difference would be stock based comp.
Right.
The amortization of the warrants so there's not a ton of non-GAAP adjustments, we did adjust and our non-GAAP. The one time acquisition and integration charges, but.
That it's fairly limited and then.
Your second question.
I figure maybe.
What was the.
Believe it was $6.6 million of.
Acquisition related expenses in the quarter, that's right about that.
Time or yes, that's exactly right those are one time charges.
And then I think your second question was around how to model that I think.
I mean, I think we are.
We're in the integration process with title 365, we're bringing them their financial team over and where we've already built that into the model. It's something we had been planning and then something that.
The team's been super thoughtful about is the as that as move forward. So we're planning on still we're still investing we've retained their key leadership that key staff and we're continuing to drive that business forward.
Okay very helpful. Thank you Mark anymore.
Yeah.
Yeah.
And our next question is from Mike M D with Goldman Sachs. Please proceed with your question.
Hey, good afternoon, and thank you for the question I just have two first could you talk a little bit about the sales efforts to continue driving new customer momentum and to the extent you are able to talk about it just a little color on the new customer pipeline and then second I was just wondering if you could give us a little bit more color around the.
270000 annual banking transactions that it will be added.
Any thoughts to think about when that will actually be fully migrated to the <unk> platform and is there any thoughts you might be able to share in terms of how to think about the revenue contribution there or should we just apply the standard.
Revenue per student.
Banking transaction to that thank you.
Okay.
Yeah.
Sure. So yeah on the on the I guess, it's a two part question on the San Juan was sales pipeline. The other was the transaction volume that we added this quarter in terms of new capacity. So on the on the sales pipeline, we don't disclose it but our pipeline is very strong I mean, a lot of it candidly is it's the combination of existing customers who want.
Or do more with us because we have great customers and you saw on the net retention numbers with great customers, who rely on us and work with US and we're you know we're very excited to do more with them.
And then some of it's net new logos and we announced we shared some of those on the on the call today.
Keybanc Mr Cooper.
D C U and built and so so it's a mix it's a mix of both and we feel very we feel very good about the pipeline going forward typically just the way that our business works it tends to be mostly weighted to the back half of the year. Just that's the natural order of things for our business because that's how bank buying some.
Most often work.
But we saw strong strong numbers in Q2 of this year and we are continuing to work the pipeline to make sure we're serving our customers' needs.
And then in terms of the implementation time for existing customers I think in terms of revenue per transaction.
I think what you suggested is a pretty reasonable nostology, we don't have a specific methodology for how we would model those out although we do see that we do have a breakdown overtime of different product lines.
Yeah.
But.
In terms of the rollout time. It says it's those stages that we mentioned so those are the ones that we just signed are assigned and then there.
We signed up in Q2 they'll typically.
From going from that to live as one to three quarters, depending on the depending.
Depending on the size of the customer and the complexity of the customer and so those are kind of the approximate timeline so that would build into your models.
Great. Thanks, NEMA and if I could sneak in a housekeeping question I was just wondering mark if you could provide the.
Pro forma gross profit numbers for the quarter as well if you have that offhand.
Yeah.
Yeah. Unfortunately, we can't share that one at the moment.
Okay no problem. Thanks Mark.
And our next question is from Oregon from 90 with Piper Piper Sandler. Please proceed with your question.
Hi, Thanks for taking my question.
So maybe my first question is around the blend cool cool platform targets for FY 'twenty one.
I'm just trying to get the.
Our revenue target for FY 'twenty, one that's more comparable to your $32.1 million in two Q. The blend co platform and if you have already provided that I apologize I missed it.
Not arvin. Thanks for the question, we're not actually breaking it down at the moment in terms of guidance where it is.
We're sharing our topline revenue number and not splitting between.
Between core platform totaled 365.
But.
Yeah.
Is about.
It's about two thirds titled 365, and one third blend ish.
Okay. Okay. That's helpful and then.
Was it just you know.
I know you said you don't provide the specifics around the pipeline but.
Can you maybe talk about kind of the.
Pipeline of deals.
Deals now.
That you're seeing now versus like six months back I'm trying to get a get a sense of you know kind of the robustness of the market and you know.
Just kind of the brand awareness.
I don't see compelling offering that they've never seen kind of a increase in your overall pipeline.
Okay.
We don't have the exact pipeline I guess, one thing I can share is that the amount of capacity. We added in Q2 of this year versus Q2 of last year was about twice as much.
And that is that I think is a pretty good indicator of how much.
It's COVID-19 digital tailwind and just generally the digital transformation tailwind or working with blend people are and this is even before the IPO, which which has additional tailwind now our customers who rely on us to be a.
Company. They can rely on for decades now they know that we have this additional set of things that we do as a company to make them feel confident that we will do that.
So we added roughly twice twice the amount of capacity this quarter that went to the same quarter last year.
New loan capacity or new new account capacity, if that's I don't know if that gives you a good sense of the trajectory of the pipeline.
Yeah. It is it's certainly in the us and.
But just a quick follow up to that how much was how much of it is kind of a lift is because of pent up demand or delayed decision making.
You know and basically what I'm trying to understand is kind of the sustainability of the level of interest I mean, you kind of you know.
Looking ahead over the next couple of years do you think this level of interest will continue to to sustain at these levels or do you think this was more because of some amount of delay.
A delayed decision, making over the last 12 to 18 months.
Well I think the interesting thing and one interesting thing is we just have more products to offer now so putting aside any delay decision making.
It used to be three years ago. All we would offer you pretty much was a mortgage product.
Then this year now we can offer mortgage credit card I think we can offer an entire platform and on top of that we had these add ons, which you don't count as our transaction capacity that we're adding but those are add ons and increase the value, we're creating per transaction for our customers and therefore, the revenue they pass and so the combination of those two things both the breadth of what we can offer now and adaptable, how we'll be able to add to those trends.
Auctions not sure of the numbers, but in terms of depth per transaction I think it will continue as long as we're continuing to build things that drive. This digital transformation. We will continue to have opportunities to to make add ons to our to our customers and grow with our customers as they have new needs in the market.
Great.
Last one for me just given the breadth of these services is your level of conversations being.
Elevated are another way of asking it really is is you know where some of the bank partners looking at you as a point provider earlier on but now kind of looking at it more as a platform provider like us.
Has that perception change from them from a you know kind of providing.
A point solution was the platform solution.
Definitely yes, and I think that that has come with the both the combination of US offering. These other product lines, but also offering services that are that are helpful across product lines, meaning for example, where we have a product that we're building that can help with income across multiple product lines.
So if you didn't verify income for any loan type those are the kinds of things that we'll be able to offer in the future and so those kinds of things make us more of a platform and that is reflected in who wants to spend time with us when we're out in the field. So this week like I mentioned lots of CIO CTO as chief digital officers, who are responsible for their overall digital strategy for the firm.
Overall technology strategy and those are the people who work for fitting us in and trying to figure out how we can help them accelerate that strategy and so yes, absolutely and that's those are often the people that the business has to lean on to be able to drive their overall architecture and so that's really important for us to have those on those levels of conversations.
Alright, thank you.
Yes.
Yeah.
And we have reached the end of our question and their success in Europe now I'll turn the call back over to management for any closing remarks.
And are there any closing remarks.
No closing remarks, thanks, everyone I'm glad to have this first call.
For the quarter done now, we're very excited about our customer base and the growth this quarter and so we'll continue to to keep our heads down and focused on driving this transformation. Thank you all for joining.
Thank you.
And this concludes today's conference and you may disconnect your lines at this time.
You for your participation.
Okay.
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