Q4 2021 Blend Labs Inc Earnings Call

Good day and welcome to the blend labs fourth quarter 2021 earnings conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by Seattle.

After today's presentation there'll be an opportunity to ask questions.

You ask a question you May press Star then one on I touched on phone to withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Mr. Dan Smith head of Investor Relations. Please go ahead.

Good afternoon, and welcome to blends fourth quarter and full year 'twenty. One earnings call. My name is Dan Smith head of Investor Relations for the company with me today are anemic I'm, sorry, co founder and head of blend Tim <unk>, President and Mark Greenberg head of finance.

You can find the supplemental slides on our Investor relations webpage at Investor Dot blend dot com.

During the call we will refer to certain non-GAAP measures, which are reconciled to GAAP results in today's earnings release and in the appendix to our supplemental slides non.

non-GAAP measures are not intended to be a substitute for GAAP results.

Also certain statements made during todays conference call regarding blend and its operations may be considered forward looking statements under federal Securities laws. 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 circumstance.

To differ materially from those described in these statements.

Please see the risk factors, we've identified in our most recent 10- Q1 0-K and.

And other SEC filings.

We are not undertaking any commitment to update these statements if conditions change except as required by law I will now turn the call over to Emad.

Okay.

Thank you Dan and welcome everyone.

I want to cover four topics today.

First our 2021 result, and operating environment second the rapidly changing market dynamics that we've seen this year third the reasons why in spite of the current headwinds we face the long term fundamentals of our business remain strong and last an update on our priorities, including adjustments to bring our cost structure in line with current conditions.

So first 2021 and.

In many ways 2021 was a foundational year for blood.

Look the company public and made a major acquisition.

We grew our mortgage banking estimated market share by approximately five percentage points.

We delivered an grew flagship products like black clothes and blend income.

And we expanded our footprint in the broader consumer banking space with over 70, new customers.

As a result, our revenues grew by 41% and a blend platform segment on a full year basis growing through what turned out to be lower volumes in 2021 and 2020.

And for the fourth quarter, specifically, our platform segment was up 19% year over year, despite mortgage volumes being down approximately 35% in that quarter over the prior year showing that we're growing through these volume downturns.

But 2021 was still a boom year overall.

For much of 2021 mortgage volumes were more than many lenders can handle while this provided us with revenue opportunities. It also became a double edged sword.

As mortgage industry origination volumes boomed, especially refinance volume many lenders were focused on managing those volumes and asked us to help them navigate that inundation volume and to labor lots of new products, while doing so.

This was a headwind for us, but we're always focused on our customers first.

Now shifting to 2022 and the new market dynamics.

2022 presents a very different challenges and we already started seeing this in Q4 of 2021 .

With rapid changes in U S interest rates rising inflation and associated reductions in 2020 two loan industry forecasts that commenced in the fourth quarter of last year and has continued into this year loan originators are now dealing with razor thin margins and trying to adapt to a new normal in.

In particular mortgage volume is projected to be down approximately 35% in 2022, and refinance volume as protected be down 60% to 70% in 2022 as compared to 2021, which particularly effects refi heavy businesses like legacy title through 65 and blend title.

The mortgage industry outlook has changed significantly and rapidly arguably the biggest change in over a decade and Tim will touch on this later.

While the customers' challenges that they're facing our acute they underscore the value of the blend platform and technology more broadly technology as a scalable way to provide great experiences at a lower cost and our platform will allow them to significantly improve their profitability and advance their competitive position in the industry throughout this downturn in volumes.

Okay.

Yeah.

Now shifting to wideband is well positioned despite these market headwinds. It is clear that this rapid reversal in industry loan volume expectations has impacted our outlook for 2022 revenue growth we.

We recognize that the 2022 revenue guidance that we set forth today is much lower than consensus estimates we've reflected the estimated negative impact of the lower loan origination environment, along with the knock on effects of the volume related slowdowns in new product adoption into our 2022 guidance.

As a result, we believe that this guidance range represents an achievable baseline revenue expectation for blend and 2022 that forecast consistent strong growth in the blend platform. Despite these current headwinds.

And I want to talk about why we have been able to and we will continue to be able to grow through this.

This underscores why our long term growth thesis remains intact and there are four main reasons.

First the banking industry continues to digitize in order to meet consumers' expectations. The secular trend towards digital banking continues in fact, the pandemic has only accelerated this trend and we see no signs of it changing.

Second we are successfully winning new customers and gaining market share.

We brought in a number of marquee names in 2021 onto the <unk> platform and not just for mortgage and look to build on that foundation for years to come. This includes a top 10 bank a top 25 bank and some of the largest mortgage originators that we believe will become long term winners in the market, including Mr Cooper and Pennymac.

During that year, we grew our estimated mortgage market share from 10% to 15% and that doesn't even include many customers that are still in the process of rolling out blend.

By the end of the year, we expect to continue to grow our market share by a similar amount in 2022.

We also signed 70 consumer banking customers in 2021.

This underscores the diversification of our platforms product suite and explains why our consumer banking revenues grew materially in 2021 and we expect it will continue to grow going forward.

We aim to be the platform across all product lines, and we made meaningful progress in that direction last year.

I know, we've talked about mortgage quite a bit given today's environment, but I don't want to lose sight of the long term digitization of the banking industry, which is the future of blend and a key part of what our customers need.

Third after we win customers, we proved that we can keep them and grow with them.

Our gross retention and market adjusted net retention remains very high because of our customer first mindset and anecdotally I've heard from a number of our customers, including some of the largest financial providers that we're their preferred partner for new projects. For example, the head of consumer banking at one large regional bank called me recently to say he thought the blend mortgage rollout was the best technology project they've ever.

Done and that he would give us a first look at all their key priorities moving forward. This is the reputation we aim to build an industry as a modern cons.

Constantly innovating vertical software platform.

And fourth and last we're continuing to rollout and scale new innovative products.

Customers, who sign up for one or more products grew from 116 to 225 in 2021, including a good number who are using us for many product lines.

On top of that blend clothing blend income, which are natural addition to any lending process had been well received by customers each having over 100 signed customers and roughly half alive with many more to come.

Based on my discussions with customers and are already signed home equity base. We believe that we are well positioned for home equity lending as well, which is increasingly important in a rising rate environment for consumers to be able to tap the untapped equity in their homes.

Yeah.

We expect revenue in our consumer banking marketplace solutions will grow by more than 100% this year, including the transition of approximately $15 million of legacy title 365 revenue to the new software enabled blend title platform and on top of that we have other early stage value, creating high revenue projects products in the pipeline as well.

Yeah.

Yeah.

Now shifting to cost and how we're dealing with this new environment for all the reasons I just discussed we continue to be excited about the future. We see 2022 as a year of increased transformation in the banking industry.

We continue to help our customers deliver a single platform across all products all channels and all parts of the transaction.

As a result, we expect a blend platform segment will grow meaningfully in 'twenty, two and Hugh despite a challenging market environment.

Nonetheless, we are well aware of our need to focus on our cost and ultimately our path to profitability.

Therefore, we're actively prioritizing areas of.

Of investment that we believe are either foundational to our business such as blend builder for consumer banking, where our near term value creation opportunities for us and our customers like blend income in black clothes.

At the same time, we are taking actions to bring our expenses in line with market realities. This is especially important for the more operational parts of our business such as our legacy title P 65 business.

We've also modified our sunset a few product initiatives that we're going to take a longer time to generate meaningful outcomes such as blend realty.

Overall I want to end by saying that we've been building our business for almost a decade and plan to serve customers for decades to come but doing so means prudently using the capital available to us and reacting appropriately to both opportunities and challenges that arise. This challenging market is one that we're taking very seriously and we are prepared for it now.

Turn it over to Mark.

Thanks, NEMA hopefully everyone on the costs had a chance to review our release I'd like to start my discussion with highlights from Q4.

<unk> continues to capitalize on the secular growth trend in cloud banking software solutions with growth of 14% and our mortgage banking revenues. Despite an estimated 35% decline in industry mortgage volumes. We also achieved 46% growth in consumer banking in marketplace revenues.

Summarizing our performance for the quarter blended chief consolidated revenue of $81 million driven by blend platform segment revenue of nearly $37 million in title III 65 segment revenue of approximately $44 million.

Blend platform segment revenue grew 19% year over year highlighted by an increase of 46% in consumer banking of marketplace revenue owing gains in blend closed homeowners insurance home equity and consumer banking products, while year over year growth was strong sequential comparisons reflect the conversion of a large customer from a subscription based contract to them.

Pay as you go relationship.

Mortgage banking revenue grew by approximately 14% year over year, despite declining U S mortgage volumes in the quarter, reflecting significant new customer wins and other gains in glens market share or.

Our title 365 revenues reflect customer attrition and lower mortgage loan refinancing volumes overall, the strong revenue growth rates, we achieved in the fourth quarter of 2021 and keep both our proven ability to drive counter cyclical revenue growth and good progress on our path to create intermediate to long term value as customers continue to adopt the blend platform.

In particular during 2022 I would expect the consumer banking in marketplace revenue line to benefit meaningfully from the new customer signings and implementations in the verification of income product along with the transition of total volumes to blend software platform.

During the fourth quarter Glen added 10, net new customers, including a top 10 in the top 25 bank growing our total banking capacity by approximately 25% year over year.

Continued wins like these demonstrates blend ability to attract leading financial institutions, who are well positioned to weather the current downturn.

In addition, as we illustrated in our supplemental slides, we significantly increased our share of U S mortgage industry volumes to more than 15% share from approximately 10% a year ago.

We also grew our committed but not utilize share of the mortgage market to approximately 25% from approximately 17% a year ago.

The 75% remaining market share it leaves a lot of headroom for us to grow within the U S mortgage industry.

Historically glenn's high gross and net revenue retention rates have enabled us to achieve high market share growth in the fourth quarter consistent with prior quarters gross revenue retention stayed high at 99% while market adjusted net retention was 147%.

Next on gross profit fourth quarter gross profit totaled approximately $35 million up 60% year over year blends platform segment gross profit was $22 $4 million up point $6 million or 3% year over year.

Total 365 segment gross profit was what $12 $5 million focusing on blend platform cost revenue. We saw a significant increase in personnel related expenses for customer deployments and within homeownership journey marketplace solutions.

We also saw higher expenses related to third party hosting costs and software licenses in.

In addition, we saw an increase in per funded loan fees related to accessing consumer credit banking and other financial data provided through the blend platform. These higher per funded loan expenses resulted from an increase in customer application volume.

During 2021 blend incurred increasing customer deployment and implementation costs associated with rolling out products like L. O toolkit to our growing customer base generally we bill customers for professional services at relatively low gross margins.

During the fourth quarter 2021, a higher volume of this activity negatively impacted lens platform gross margins in.

In the future.

As we achieve greater scale across multiple products and our customer base. This adverse impact of professional services margins should diminish.

Fourth quarter 2021 loss from operations was nearly $60 million compared with a loss from operations of just over $16 million in the fourth quarter of 2020 opt.

Operating expenses for the fourth quarter of 2021 were approximately $95 million compared with just under $38 million in the fourth quarter of 2020.

In addition to the aforementioned increase in personnel expense Opex also reflects higher stock based compensation and commissions associated with expanding our teams focused on the development marketing and sales of new and existing products.

Lend recorded sharply higher G&A expense in the fourth quarter, primarily related to increased headcount stock based compensation and third party professional services tied to blends transition to being a public company.

Now turning to our balance sheet, our cash cash equivalents in marketable securities at December 31, 2021 were approximately $547 million with total debt outstanding of $225 million on our five year term loan our $25 million revolving line of credit remains undrawn.

Now turning to our full year 2022 revenue guidance, we expect that blend will generate between 230 and $250 million in consolidated revenue in 2022 with between 140 $150 million in the blend platform segment, and 90 and $100 million in the title III 65 segment.

As we noted in our press release this afternoon.

<unk> 2022 revenue guidance reflects the following.

Continued U S economic growth and federal reserve interest rate and open market policy actions in the context of current market expectations U.

U S mortgage market volumes declining by approximately 35% from their 2021 level as reflected by forecast from industry experts like Fannie Mae and the mortgage bankers Association.

2022, full year mortgage banking revenues slightly lower than full year 2021 levels driven by expected market share gains, whose revenue benefits are expected to mostly offset the negative impact of lower U S mortgage market origination volumes in 2022.

2022, consumer banking in marketplace revenue reflect triple digit growth from full year 2021 levels, which includes the transition of approximately $15 million in revenues from the title III 65 segment due to the consumer banking a marketplace revenues in the blend platform segment as customers transition to the blend platform and the blend.

<unk> solution.

Looking forward to the first quarter of 2022, we anticipate that blend will generate revenue of approximately $63 million to $66 million in total on a segment basis, we anticipate that the blend platform segment will be modestly lower on a year over year revenue basis compared to the first quarter of 2021 with a total of 365 segment declining by about 20%.

From fourth quarter 2021 levels.

The combined effect of ongoing investments in new products transition to a public company and slower 2022 revenue growth will lead to a greater expected cash use this year than in full year 2021.

As Namal discussed at the outset, we believe that our industry is currently in a secular growth trend in the adoption of new and innovative cloud banking software solutions, our ongoing investment in R&D is focused on enhancements to our products and overall platform.

We've launched a comprehensive review of our cost structure across all aspects of our business and we are in the process of staging targeted cost actions with an eye towards managing our cost structure prudently through the near term.

As in the past, we will provide quarterly updates to our financial outlook and guidance as market environment and our internal growth trends married with that I'll turn it over to Tim.

Thank you Mark.

Mimi correctly described 2021 is a foundational year for blend as we push into 2020 too many mortgage originators and investors are understandably focused on the rapidly declining industry forecast for full year 2022 overall mortgage origination volumes.

High rates and lower refi volume clearly will have an effect on blends business and our guidance for the year reflects that among other things.

But what I've experienced in this business going back to my days running Fannie Mae is that those companies that are clear market leaders going into the downside of the cycle.

Emerge even stronger coming out the other side.

Let me describe why I believe that will be the case for blend.

First we have established ourselves as one of the leading vertical software platform partners in mortgage.

One third of the largest banks in the country views blend as well as one quarter of the largest independent mortgage originators.

Most technology companies struggle to move up market to win big customers for blend we have done that from the beginning and we continued windows lenders, who are destined to be winners long term or.

Our recent successes in winning customers such as Penny Mac and Mr. Cooper are proof of that.

Second as Niman noted earlier, our customers truly value us and the numbers bear that out.

We had a gross revenue retention rate of 99% in the fourth quarter with a market adjusted net revenue retention metric of more than 140% year over year.

These two metrics demonstrate that historically, our customers have consistently stayed with us and that they have expanded their business with us as our relationship has matured.

Today, our customers continue to look to blend above other vertical software providers in the mortgage industry to help them tackle difficult problems.

Third many of you in the past year or two when mortgage volume was so high is giving Glenn substantial tailwind.

Transaction volume was high and generating revenue for us. The reality is that many of our customers were so overwhelmed because they asked us to postpone their adoption of some of our latest offerings.

By contrast, 2022 is a year of relative scarcity in our customers and our prospects are highly motivated to find new ways to win borrowers improve efficiency and preserve their margins in many ways lenders are fighting for their lives day.

They know that 2022 will be a year of consolidation in the mortgage industry.

They want to be among the winners they have to take the steps on the journey of digitizing and streamlining the mortgage origination process.

The mortgage industry is currently facing the biggest reset since the second quarter of 2004.

In both 2004 and in the current environment and mortgage industry rapidly moved from peak loan origination levels with historically high refinance volumes to dramatically lower levels as the federal reserve entered into a new rising rate environment. Following a protracted period of very low interest rates.

And the 2004 experience the same commenced interest rate hikes following the low interest rate environment. Following the post 911 recession.

And the same way the current expected mortgage origination volume declines are following defense transitioned to a rising rate environment as the global economy has rebounded from the ultra low interest rates during the Covid pandemic.

One of the really hard things about these abrupt market research is that for loan originators. They go from an environment of adding incremental capacity in head count to handle high volumes.

To slashing those investments to drive sustained profitability.

Over the long term the winners in the mortgage industry have been those that have continued to invest in new technology and growth enablers through the reset.

Historically this has been the type of environment, we're a clear market leader like Glen truly thrives.

We are a proven winner offering differentiated products that deliver measurable impact for our customers.

We don't need to look further than this past fourth quarter of 2021.

Our platform revenue was up 19% year over year.

To put that in perspective industry experts estimated that volume was down 30% to 40% during that same period.

So in the most significant reset in many years land gained meaningful traction and grew with quality customers.

We expect to be the solution that our customers and perspective customers turn to.

As a result, we fully expect to outperform the underlying mortgage market and to gain market share through this cycle.

That will position us extremely well over the intermediate and long term.

Now I'll turn things over to the operator for your questions.

Well begin the question and ill close session to ask a question you May Press Star then one on your Cogs, Sean phone, if you're using a speakerphone. Please pick up your handset before pressing Vicky.

Okay.

My question has been at Jason you would like to withdraw your question. Please press Star then can go finally, volkov momentarily with MLR often.

Our first question will come from Ryan Tomasello with <unk>. Please go ahead.

Good evening, everyone and thanks for taking the questions.

I guess starting out with the comments around the cost structure alignment.

I know I appreciate the prepared remarks, but maybe you can put a finer point around how the.

Those cost structure alignment and the prioritization of your investments is going to translate to the margin trajectory and path to profitability over the next few years, how do you feel about the current level of cash versus the cash burn.

And I guess longer term any guardrails, you can provide for what level of mature operating margins do you think that business can achieve.

<unk>.

Yeah.

Yeah.

Pardon me.

I think your line has been muted.

Yeah.

Operator can you.

The check the line because I.

Well the market speaking, but we can't hear it.

Okay give me one moment.

Can you guys hear me.

We can hear you now now we can.

Can you guys hear me now.

Yes, yes, okay.

I don't know what's going on there my apologies I've been talking to myself for the last two minutes.

So.

When we think about our cost structure right. We talk about we think about it in two different segments.

Legacy title and blend platform there are different dynamics in those two sections.

In in a in the legacy and our legacy title business with transaction volume is driven heavily by refinance.

And then obviously that's been negatively affected in a significant way just like our customers were looking at dedicating the right level of resources, including the right number of people to that business on the software platform.

We're obviously, taking a very hard look at the cost structure, but we don't want to throw the baby out with the bathwater and we pulled back very hard on hiring we've curtailed our expenses and our increases in head count we're looking at savings on our tech stack and how we can even faster achieve economies of scale.

And we've already looked at several near term product opportunities.

Those product initiatives that are that are not near term opportunities. We've cut back so we're thinking about.

And we've already taken some action, we're taking undertaking a comprehensive review to look at.

At our overall cost structure, but doing it in it in a different way between the legacy federal business, which is oriented towards refi and the software platform, which is very different.

Okay.

To that and I guess, the second question would be.

Nice to see the continued market share gains in the core mortgage banking platform. Maybe you can talk about where utilization rates are running for some of your most tenured claims and if you think it's reasonable to assume that utilization rates over time will approach, 100% essentially bridging that gap.

Currently exists between the sign but untapped and year utilized market share.

How long does it typically take for that too to ramp for assigned client. Thanks.

Sure. It does depend on the particular client and a lot of cases, but.

There's a significant portion in.

In fact, the majority of our customers are already at.

What we call full utilization above 90% so that adoption curve has accelerated over the last 18 months and we're continuing to find ways to to get faster Rollouts and drive faster adoption one of our product initiatives is around and you saw some of the consulting services yet.

This quarter around our loan officers will get a low toolkit.

That's one that has really helped us drive faster adoption across our platform.

Yeah.

Thanks for taking the questions.

Our next question comes from Michael Florin with Wells Fargo. Please go ahead.

Hey, good afternoon I appreciate you taking the questions.

Part of the story has been an ability to diversify away from some of the industry headwinds or volumes. You are facing I think Q4, you still put up growth meaningfully above the industry declines youre seeing can you talk about how you're thinking about share in other offsetting factors and in the guide you're putting out currently because it looks.

Certainly more correlated with the overall industry volume declines and then just the second part of the question is just can you can you talk about is there still confidence in the success based business model is the best approach for blended together.

You are somewhat just tethered to.

Some of the things you're siding with mortgage and the refi cycle currently.

Sure. Thanks for the question I'll answer the second question first around the success based business model.

The success based business model is one that we put in place years ago and it goes back to our core principle of being very aligned with our customers.

It means they can sign with us in a year and booms they'll pass more than yours, but aren't as much volume, they're going to pay us less because that allows them to sign with us and not worry about the cyclicality of the market. That's why part of why we've been able to grab so much share because we're so customer focused and so just going back to your question about share.

Sure.

And by the way, it's slightly different dynamic in the consumer banking segment. The consumer banking segment might have a different pricing model that makes sense, just given it's a little bit less of a transaction based business in some way is although it is still transactional nature to it a little less cyclical and has more predictability and so in that way it might make sense for us to take a different approach to pricing in the consumer banking in the long term.

So what about your question my share we did grow share about 5% last year and we expect to grow at a similar amount this year.

And on the on the share specific on the share growth specifically, we're guiding up on the revenue for a blend platform because of the share growth and because of the attach of other products.

Despite a 35% down market so.

Well I think that the share growth that's going to happen is going to be similar to last year. The down to the fact the market is down so much is going to look make it look like we're offsetting some of that growth, but in reality on a on a relative basis compared to the growth.

The negative growth of the market, we're growing quite a bit and so if you compare 'twenty 2021 to 2022 in particular, you'll see pretty large growth of our bond platform segment.

Okay. Thank you.

One more just the stock has clearly digesting some of these impacts certainly appreciate just the like for like.

Candor the details around cost controls as well can you can you talk about things Youre doing just to shore up.

Employee culture keep continuity within what you felt that blonde and just manage through the upcoming challenges youre referencing as well.

Part of what made has made blend special over the last decade, where almost a decade has been the fact that we're able to attract the best talent. The best Engineers I'm a software engineer by background is that we are a software first company.

Desert is tackling a very large industry.

A very large and she had a huge impact on consumers, we help millions of consumers find their first home get their first personal loan get their first credit card get their first deposit account last year and so those are the kinds of things that financial.

Financial services is a staple and what makes consumer successful in this country and being able to be part of the modern infrastructure for financial services. It's a it's a really powerful mission for a software engineer who wants to work on something that's really big in an industry that is transforming a lot over a very long time horizon.

And so that's how we've been able to retain the talent.

Now granted we are facing market headwinds like you mentioned that the market being down so much this coming year is going to make a different it's going to make it a different environment, where not all of our customers are winning every day like they were in the last two years and so part of that goes back to making sure two things one our customers and our team understands that we'll continue to add value and our.

Team understand in particular, the real metrics that matter the underlying core fundamental drivers of our business.

Why I mentioned, we keep making new software additions to our mortgage platform make sure our customers get more value from our platform. We signed over 70 consumer banking customers last year were growing market share in mortgage we're making our products serve every aspect of the home buying process. Those are the kinds of things those are the fundamental drivers we can't control the macroeconomic environment. We can do is make.

We understand our core metrics and if our more core metrics to keep growing and keep adding customers, we keep helping more and more consumers. Those are the things that get people excited and so we will continue to be a company that is software first engineering first and make sure our customer first so those things remain true for years and hopefully decades to come.

I appreciate all the detail there. Thank you.

The next question comes from call curious Ted.

But UBS. Please go ahead.

Thanks for the question. This is Seth on for Carl I was just wondering if you could help us help us understand maybe some of the drivers in the non mortgage part of the business maybe more specifically how is the growth of this part of the business changed compared to what you were thinking about nine months ago is it customers defer.

And go lives for various reasons feature set maybe not ready for prime time, maybe increased competition or maybe something else.

Yes.

I would not take the last bucket.

It's not the increased competition. There is some amount of ink delayed go lives like I mentioned in my my prepared remarks, where when volumes are very high getting go lives to be something of a priority for customers wasn't there. It wasn't their number one priority that was the reality of the situation but.

But we do have over 100 customers sign for blend clothes and for blending income those are both going live even for the non revenue generating products like one offs for toolkit really valuable product for our customers where their L. O us can do everything that they need to do for the loan and one system.

And then on the consumer banking side. There is still more feature functionality you want to build there were a couple of years in that journey. It took us a while to get from the mortgage product would be fully I would say mature where anybody can use it on the on that.

On the backs of what had already been built but it's getting there and it's something that our customers are already adopting in trials like I mentioned.

So all in all I would say I don't I don't think the growth has slowed there in fact, the consumer bank and marketplaces segment. It is our fastest growing segment in the company and it will continue to grow this year and we're seeing a lot of adoption in particular home equity is going to be really very important this year as part of your company.

A product line that we have a number of customers on and we'll continue to hopefully get more customers on that and grow market share in that realm as well.

Got it thanks for that and maybe just one one follow up.

Maybe just if you can help us with any more color about drivers to profitability from here I understand you're.

More and more so aligning some of the expenses, but anything else, we should keep in mind as we look towards the out years for our models.

Okay.

I think we've been focused on on achieving scale.

And and near term profitability by product so.

It's I mean, we're on a longer path to profitability, but we are.

We're confident in our ability to get there.

We haven't seen her in a challenging market at the moment with the decline in volumes, but.

Not really any color any at the moment.

Thanks.

The next question comes from Mike <unk> with Goldman Sachs. Please go ahead.

Hi, Thank you very much for the question I was just wondering if you could frame the revenue guidance for us.

What would <unk>.

Result in <unk>, achieving the high end versus the low end.

What are some of the range of outcomes that you're assuming in the broader industry.

For mortgage originations.

And then just as a follow up I was just wondering if you could talk a little bit about your pricing strategy for the core mortgage product.

Is that something that you'll be taking price on this year in 2022.

Or is the industry.

Challenge because of the declines that pricing may not be the lever to pull this year. Thank you.

Yeah.

Absolutely so from a from the perspective of the underlying mortgage market.

We feel like.

Our forecast is prudent we feel like it's a responsive.

And we.

Are using the mortgage bankers association and Fannie Maes forecasts to forecast the underlying volumes. So we've taken a.

And achievable approach to our to our guidance into our revenue.

So.

The upside of courses and volumes were working.

Very hard to make sure that our rollouts and our.

Customers are alright.

Capitalizing on value associated with our products. So that's sort of the speed to the rollout is one that that we're really really focused on and then.

I'll kick it the NEMA for the.

About pricing.

Sure. Thanks, Mark Yeah on the pricing strategy the way I think about pricing our product is and I'll go back to saying that our platform being a software platform. We think about pricing a product is it has to be in conjunction with the value that our customers receive.

And so one of the beauties of blend and maybe this is pretty unique for us the financial services space is that we make daily updates to our software.

Now not all of our customers to take all those update every single day, but usually on a monthly basis at the very least taking those updates and what that means is the platform is appreciating overtime and loan officer toolkit, which is something that Mark Mark mentioned, a little bit ago is a good example of that we're adding new functionality to our platform and we don't charge for on a sort of an immediate basis for our customers.

Because as our platform gets more valuable and our customers want to access those premium offerings, we might have different pricing strategy, where we have a premium a premium offering and a base offering something like that that allow our customers to take advantage of the more robust functionality such that they want to take.

I don't think about pricing as traditional centers a price hike is the right thing to do and on a generic basis, but we want to do those kinds of things in conjunction with our customers and how their cheese value.

The other thing I'll say is that.

The way I think about our revenue on a per mortgage basis is a little different than that which is we do have add ons that are separately priced so blend clothes and blend income which are natural add ons to the mortgage process. Those things are significant revenue per unit on the order of magnitude of what people pay us for mortgage maybe maybe a little less but those add ons, if our customers opt into.

Those do increase our revenue per unit on a on a on a price basis, but not in our core platform because that makes sense.

But to your that maybe don't take time to answer your question may be more directly it is a tough year for our customers and so we're mainly focused on getting them through this year getting more technology adopted and we have some we have already had some price increases for customers, who sign up with us in the early days and I'm trying to grow their price stays with us.

Great. Thanks, Nemo, Thanks, Mark.

The next question comes from Josh Beck with Keybanc. Please go ahead.

Hey, guys. This is matti shake on for Josh I was just wondering if you could give a little color on what your expectations are for net revenue retention trends in 2012.

And beyond that.

Yeah.

I can take that one I think net revenue retention that are really interesting metric for us in particular, because we have to adjust out market factors like when Theres Williams. Our bus we tried to adjust that out. So you can you can you all of the investment community can see what our net revenue retention is ignoring all the market factors.

And one of the things that helps with that is rolling out customers. So Mark mentioned rolling out customers faster is something that we're thinking a lot about getting to that 100% utilization or approximately there with the standardization of initiatives, we have with our customers. We're just telling them. They all want as well those kinds of things are really good for net revenue retention and so while we're not providing specific outlook.

We expect net revenue retention remained strong over the course of the next few years as you rollout additional software offerings on top of our core platform with our existing customers.

Awesome. Thanks, guys.

The next question comes from Joseph <unk> with Canaccord. Please go ahead.

Hey, guys good afternoon.

Just maybe a first question kind of fully cognizant of the macro environment here.

And going back to some of your prepared comments that ticked me about do you see do you see your ability to gain share in the current environment to be.

Do you think there is a possibility to accelerate share gains and a down year, if thats a down year in 2022 versus 2021 and then.

I'll have a follow up.

Sure, Yes, I mean, we bought it we looked at this historically because there have been other down years in the market since we've been in existence and those those down years when customers are really focused on making sure. They have great technology in place that can drive more efficient operations tend to be better years for us.

And the share gains this year that were projecting which is around similar to the magnitude that we gained last year.

A lot of that has actually already spoken for those are customers that have already signed with us and are already in the process of rolling out and so because of the timing of our rollouts and when the deals end up closing it tends to be a little bit lagged.

Can imagine, but we expect to have and we've already been having lots of conversations with customers that maybe previously wouldn't have had conversations with because this is a challenging environment and they want to get better technology in place to lower their cost structures.

So all in I think that these kinds of years tend to be good for us, but in the set not apps.

Absolute sense, but in the sense of customers and also very aligned during these kinds of yours on let's get ROI, let's drive real value to our to the to the bottom line of our customers and generic consumers and those things tend to tend to help us grow in the long run.

Right and then kind of if you kind of like scan your own your own mind on where top 10 top 20.

Mortgage originators are out there ones that you haven't signed.

Sure.

And you look at the current environment.

What are the prospects.

With the bigger institution versus maybe perhaps some of your smaller customers.

Yeah.

Well, we have some some bigger ones that we haven't announced yet just because we have to work with our customers on the timing of those announcements.

But.

Bigger ones tend to be ones that we've always been successful with because we have a platform that's not only the.

The best in class in the industry from my vantage point, but because of our pricing model. They can sign up with us and do and it becomes a lower risk endeavor. Just also for me not just for being the best but also from being something that's low risk to adopt and so intend we'd actually tend to do really well at that segment. We're a proven solution that also happens to be the best and into lower risk to adopt and so we.

We have a couple of we haven't announced yet, but we're having ongoing conversations with a number of others around adopting Glenn going forward.

Okay, and then maybe I could just sneak one more in on the customer does is there any is there any.

We should be aware of in.

Differentiating between bank customers and independent mortgage originators relative to you know.

There.

There.

Their criteria to adopt your model or other things, we should be aware of thanks guys.

Although some of the I'll I'll break up the independent mortgage originators in the different categories, but theres independent mortgage originators, who are distributed nature and theyre sort of branch by branch.

Many of those are our customers as well some of the biggest ones are our customers already.

But those adopt those tend to adopt a different pattern than maybe a bank or a centralized servicer largely service for like Mr. Cooper of Pennymac.

And the reason that they adopt differently is because they have this branch by branch dynamic without getting into all the details of that.

We've actually been successful in all these segments. Despite the differences in the dynamics one thing they all want they want great tools to their customer the consumer and they want great tools for their team members to loan officers and we offer both and that's something that we'll continue to invest in.

A long term future.

Thanks very much.

The next question comes from Terry Tillman with Childress. Please go ahead.

Hi, guys. This is actually Joe Meares on for Terry Thanks for taking the question.

Another one about market share you guys have done a great job of taking share so far in the guidance for another five ish percent is great do you think there's a ceiling on how much share you can take overall in the mortgage market.

I don't think Theres a ceiling of what we can take and there are some that have very entrenched technology based companies that already exist and so those may be hard those select few might be harder for us to work with.

In the sense that but theres only a handful of those and so I don't think of a ceiling in terms of is it 40% of its 50% long term.

I think that over time, if we keep building apart from the adds the most value on a per loan basis for our customers and for the ones that offer multiple products, it's something they can use across products and channels, that's going to become a natural.

Adoption curve for them as we continue to increase more valuable platform for them to adopt.

That's helpful and then just as a follow up.

If I back out the time up to 65 $15 million of revenue from the 2022 guidance it looks like consumer banking and marketplace organic growth.

Is decelerating so is.

It's what's happening here kind of like last year things would you busy for the lenders to take on these new products and now the market is.

Has gone the other direction, so far that they can't.

Take on the new products or am I. Just this is my math just wrong and do you need more of a goldilocks situation for for those products really be to reaccelerate. Thank you.

Well I think you saw some we saw some delays in the adoption rollout like we mentioned because of the back half of the year as those rollouts start to pick back up it does take some time for them to achieve revenue reality for us they have to use it for us to get revenue.

So.

That's probably part of what you are seeing we expect the growth in the consumer banking marketplace to be roughly in line with what we saw in Q4.

From Q4 of last year Q4 of 'twenty 'twenty four 2021 we expect to be roughly in line and we did signed 70 new customers in consumer banking in 2021, and so we don't necessarily see the slowdown in adoption anymore and incentives around the add on products in particular, but we are starting to see that start to pick up.

Going into this first half of the year as things start to normalize for our customers.

Great. Thank you.

Our next question is from Matt Stotler with William Blair.

Yep.

Hey, guys. Thanks for taking the question and sorry in advance for the background noise here in the airport just a follow up question on the consumer banking side to start with you. Obviously it seems like you're having some close conversations with customers that maybe have engaged because they want to adopt those products were pushed them out because they were busy with other things over the past year, just could you talk a little bit more.

About your visibility into I guess when do you expect those customers re engage as you think through that pathway to guidance.

I mean is this kind of ramp in that business now more of a 23 story or just any sort of commentary on your visibility there would be helpful.

Sure, Yeah, and I think actually many of the customers that you.

You see that we incorporate into our guidance are already signed and in the process of rolling out. So I don't think I think we actually one of the benefits one of the downsides of our businesses that we have.

<unk> deployment cycles.

But that also creates a positive side for us, which as we understand and we have good near term visibility into what's coming.

And so what that means in practice is that our customers have started to reengage with us we're starting to deploy them. We feel good about those appointments as mark said getting deployments happen faster or something that we're very focused on it's what our customers want on a call with the head of consumer banking, a large regional bank today and his his thought was how do I continue to grow.

How do I continue to roll these products out faster because I see a real opportunity in particular in his mind and home equity.

But those kinds of things are starting to happen really rapidly in this market right now is as that smart lenders now that this is a time for them to capitalize on on growth and I think it goes back to US building a software platform that people can really.

Really use and so part of that is.

We have this great foundation of customers and a product they can trust and part of that is investing in the future and so blend builder or something that I don't think gets enough airtime.

Builders, it's drag and drop platform that.

US and our customers can use to make rapid changes and create new products when new opportunities rise those kinds of those kinds of things haven't existed in this industry I've heard before so the fact that we've invested not to build our own platform to work off of is going to be incredibly valuable and art, we're already seeing the benefits of that.

And maybe so maybe more directly to answer your question.

I think where you'll start to really see that as in the back half of the year given the timing of the rollouts, but we're already starting to see that.

Got it this is really helpful. And then just one follow up on the tour.

The mortgage side of the business.

Specifically with share gains.

It seems like you're kind of looking at 2020 guidance relative to our model Brett heading in you. Obviously, there is the lower expectations for origination volumes. It seems like there's also maybe a little bit lower expected share gains and so just wanted to get your thoughts or any any.

Maybe you can share in terms of the conversations you're having with prospective customers and mortgage side, how those are being impacted by the slowdown in originations and I mean is this something where we have to wait for kind of a macro recovery to start seeing share gains on that side of the.

Business pick up again or how should we think about that.

You bet. Thank you.

Sure and actually I would say when we talk about our share we're talking about actual loans flowing through our platform.

But that means what that means is until that customer is fully rolled out and standardized we don't count that as part of our share until the actual loan is on our platform, we don't count that as part of our share and so on what Youre seeing is a similar phenomenon around the delays in rollouts, where it's not like where we've lowered our we actually grew our share significantly in Q4 as well we can see.

To grow our share and some of that may be delays due to rollouts, but overall, we feel very good about our market share growth and keep signing new customers every month.

Got it thanks again.

Okay reminder, if you have a question. Please press Star then one can be joined in the queue.

Next question.

A follow up from Ryan Tomasello with Keybanc. Please go ahead.

Hey, everyone. Thanks for taking the follow up just wanted to get some color on the material weakness disclosure in the 10-K. It seems like that relates to the intangible accounting around title III 65, but maybe you can just take the opportunity to provide some color around that and what youre doing to remediate.

The.

The issue thanks.

Yeah.

Thanks, Brian absolutely. So you are right that that material weakness was limited in scope to the title III 65 acquisition and that related intangible asset valuation it wasn't core to our operations and the Olympics on cash no impact on non-GAAP results.

We absolutely taken internal controls very seriously, we're working to harden those controls and implement additional processes around.

Non routine transactions, which that was and we feel like we've addressed that going forward.

Great. Thanks.

You bet.

And we have no further questions. The conference has now concluded thank you for attending.

You may now disconnect.