Q2 2022 Blend Labs Inc Earnings Call
With me today are Mike I'm, sorry, cofounder and how to blend 10, myopathy, President and Mark Greenberg head of finance.
After newmont and Mark to live with their prepared remarks, the team will take questions you.
You can find the supplemental slides on our Investor relations webpage at Investor Dot one 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 today's conference call regarding Glenn 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 circumstances to different materially from those described in these statements.
Please see the risk factors, we have identified in our most recent 10-K 10-Q and other SEC filings.
We are not undertaking any commitment to update these statements if conditions change except as required by law I'll now turn the call over to NEMA.
Thank you Crystal and good afternoon, everyone. Thank you for joining us.
I'll cover three things today.
First I'll highlight our Q2 results and business trends, which are reinforcing blend underlying growth thesis.
<unk> allowed our plan for realigning, our cost structure and position the Gwen for future profitability.
And third I'll speak to key trends in our business and how we'll continue to win going forward.
Starting with Q2 results, we continue to see strong top line performance with revenue of $65 $5 million for the quarter.
We grew up on platform revenue by approximately 5% year over year against a 37% mortgage market volume decline in the same period.
We're continuing to increase our share of funded loan volume even during the current market reset.
Additionally, within our consumer banking marketplace segment, we saw revenue grow by over 50% this quarter as opposed to the same period last year and we have seen an increase in the number of banking transactions every quarter since we launched.
On the title front, we are making progress by migrating customers from traditional title to a software enabled blend title solution.
Notably we went live with Mr Cooper, and our blend title solutions this quarter.
I want to quickly call out the impairment charge recognized on title through 65 and our results today.
While this is a noncash charge it is clearly a significant number.
This business was purchased during a much more robust economic in mortgage refinance environment.
In light of current market challenges, we performed an assessment of goodwill and intangible assets within the title through 65 reporting unit and have recognized an impairment charge.
<unk> hundred 65 has strategic value to blend and remains a leader in its business having title on the blend platform enables us to deliver a vertically integrated mortgage and home equity solutions titled through 65 is filling that role in accelerating our path to this objective.
Overall, our second quarter revenue and metrics represent continued progress against transforming this industry I want to be clear that I'm very confident in blend long term opportunity as a result of this progress.
That being said we know there are many things we can do better as a business starting with our cost structure.
As we said last time, we have undertaken a comprehensive view of our P&L in light of the change in market conditions.
<unk> will share our plans or targets for cost alignment and what the long term operating model for the company will look like the.
The headlines are.
First we are operating the company prudently as if mortgage industry unit volumes will remain at or near historic lows through 2025.
Despite this we expect to achieve positive free cash flow during that time.
Second along the way we plan to reduce our non-GAAP net operating loss by 50% from current levels by the end of 2023.
And third we believe we can achieve these goals with our current capital base, which includes $475 million in liquidity at quarter end inclusive of our $25 million Undrawn line of credit while reserving options to manage our capital structure Opportunistically going forward.
Our plans include specific targeted ranges for gross margin and for the primary components of operating expenses I'll, let mark walk through those details shortly but first I'd like to give an overview of the key initiatives we're undertaking.
Our first and most immediate lever is our cost of labor.
April we have eliminated over 400 positions or 25% of our workforce, including the elimination of boxes.
We should see the full impact of these actions by Q1 2023.
In aggregate both actions are expected to reduce our annualized expenses by approximately $60 million we.
We will continue to monitor and adjust this cost base as market conditions warrant. We have also significantly limited hiring focusing on the most important positions for the company.
Our second levers offshoring through our acquisition of titled through 65, we expanded our geographic reach to India home to two full scale operational hubs that currently support our title business.
We believe our India operations provide a foundation that can support the entirety of blend and work is already underway to streamline our corporate support functions and shift work, where we historically relied on third party vendors.
Third we are taking decisive steps to achieve near term cost efficiencies in non personnel spending across our products and corporate functions.
These steps include consolidating third party vendor spend our cost tools services and partnerships as well as driving down deployment costs and shorten deployment windows through bundling moves, which can drive efficiencies for both blend and our customers.
Our fourth lever and one of the big long term one is product prioritization and increased rigor around return on investment we are prioritizing product lines that we believe can deliver ROI on a relatively short time horizon.
We are emphasizing solutions that are high value to our customers and that reflect our assessment of customer needs and demands over the next 12 months, we will be disciplined in measuring success and flexible in allocating capital is return potential dictates.
I fully anticipate this initiative will make us more disciplined in our R&D programs I also want to be clear that we will continue to invest in sustaining and adding value to our key products to ensure we are growing and deepening our customer relationships for the long term.
Our goal across all of these cost reduction efforts and investment initiatives is to make <unk> stronger for the long term to not only sustain us during this tough period, but well into the market rebound.
The benefits of the changes we are making will not arrive in a linear fashion, but we commit to keeping you posted on progress towards the headline goals I shared earlier.
In addition to our cost structure plan, we're focused on topline growth.
Our growth is inextricably linked to that of our customers and I think about our growth drivers parallel to the customer journey with blend as we deploy deepen and broaden our suite of products.
In Q2, we reported gross revenue retention of 99% roughly in line with 98% in Q1 and market adjusted net revenue retention of 164% up from 159% in Q1.
Additionally, we have a healthy pipeline of customers, who have signed but have yet to deploy so there are built in revenue opportunities that we have good visibility on.
Our differentiated mortgage product allows us to win customers in this tight margin environment.
One recent example is PNC bank one of the largest diversified financial institutions in the U S, which went live with our mortgage solution in Q2 in under six months from signing and work is underway to launch our closed product as well.
In addition, because we continue to add value to our platform on a regular basis, we were able to responsibly raised price with our customers, we're seeing consistent quarterly uplifts in pricing per transaction.
Specifically, we've seen more than half of our renewals in Q2 at higher rates because of the value. We continue to add to our platform on a regular basis, which adds value to our customer base.
Within our consumer banking marketplace segment, we grew revenue 53% year over year in Q2 and remain on pace with our plan to double this business in 2022 as compared to 2021.
We are seeing customers start with mortgage but stay for end to end platform solution.
At the end of the second quarter, 71% of customers use multiple blend solutions, reflecting increased from 59% in the prior year.
Notably our income verification and closed solutions are in high demand and we're seeing significant growth in our home equities to tweet as that market heats up.
Putting this altogether, we are making progress and we are strengthening blend for the long term.
However, 2022 forecasted mortgage industry volumes have come down materially since we released our initial guidance in March despite.
Despite that we've only brought down our blend platform outlook modestly, reflecting both our outperformance relative to industry declines and the growth we are seeing in our home equity offering.
Overall this guidance change for blend platform is offset by a like for like increase in title revenue in light of better than expected performance on that side due to home equity and default business.
Mark will provide more details on our guidance update in a few minutes.
To summarize we remain optimistic in our ability to execute and delivered another solid revenue quarter as we continue to grow market share.
We plan to continue to optimize our cost structure streamline our support functions and prioritize products that generate near term ROI such that we can generate free cash flow under a prolonged market reset.
And we are positioning ourselves as a category creator as we continue to drive innovation through our software solution for digital banking.
I want to end by saying that a blend we're playing to win and we're playing to win big we're not playing to avoid losing theres a once in a lifetime industry transformation is happening right now.
Most banking products are still analog and processed in a manual way by humans. They lack of modern software stack that works across the bank to deepen our relationships with our customers at a lower cost.
We believe the lenders and banks to adopt our technology will come out the other side winners.
Our role in the industry as a trusted partner to one hundreds of financial institutions across the country and so we're going to continue to play to win.
Thanks, and now let me turn it over to Mark.
Thanks, NEMA and good afternoon, everyone I'll walk through our financial results and provide context in the following order first I'll start with the recap, including how we're performing in this mortgage cycle second.
I'll provide more color on our recent plan and future efforts to reduce our cost structure as part of our broader capital management strategy unless I'll provide context around our guidance revision and how we expect to see trends unfolding for the rest of the year then we'll open up for questions.
Let's start with the highlights from Q2.
Our results reflect continued outperformance in mortgage banking relative to the industry and solid growth in our consumer banking and marketplace offerings offset by declines in the legacy title business total revenues for the quarter were $65 5 million blend platform segment revenue was $33 6 million, notably up about 5% year on year. Despite a <unk>.
37% decline in mortgage originations volume in the same period.
Title III 65 segment revenue was $31 9 million.
Shifting to consumer banking and marketplace, we achieved revenue of $8 $5 million this quarter up from $5 6 million or 53% as compared to the prior year period year on year total consumer banking transactions grew by approximately 138000 to approximately 215000 in Q2 supporting in particular the <unk>.
We observed in our home equity revenue as compared to the prior quarter.
Closing up the revenue discussion, we recognized $1 2 million and professional services revenue.
Moving to gross profit Q2, non-GAAP gross profit was approximately $25 $8 million.
Up from $19 $9 million in the prior year period current period non-GAAP gross profit includes $26 million attributable to blend platform and $5 $2 million to title $3 65.
Products like blend income blend clothes and blend title are lower margin than some of our other product lines and as those products ramp up but before they get to scale, our aggregate margins will be diluted.
We expect our medium term non-GAAP blend platform gross margins to be in the low 60% range.
non-GAAP operating expenses for the second quarter totaled $65 $3 million compared with $46 2 million in the prior year, which is primarily attributed to increased costs associated with title $3 65.
Keep in mind, when comparing year over year that last year's Q2 was our final quarter without many expenses associated with operating as a public company.
As you can see in our financial supplement our non-GAAP loss from operations was $39 $5 million versus $26 3 million in the prior year.
This quarter, we also recognized approximately $392 million noncash charge to reflect impairment of title III 65, goodwill and intangible assets driven by a decline in the fair value of the title 365 reporting unit now.
Now turning to our balance sheet, our cash cash equivalents in marketable securities on June 30 totaled $450 million or $25 million revolving line of credit remains undrawn.
We believe we have ample runway and liquidity in light of the cost reduction efforts without outlined today, noting that our $225 million term loan does not come due until 2026.
Further as Niman noted, we have additional cost levers to pull depending on the depth and severity of the mortgage banking downturn and we will be opportunistic when it comes to improving our capital position.
As Nemo highlighted at the top of the call. We are introducing a number of operating improvement initiatives with clear objectives that define our path to positive free cash flow and ultimately profitability.
That plan has started with our two announced workforce reductions. The second in August included approximately 220 positions, which when taken together with our actions in April affected over 400 positions and approximately 25% of our pre reduction in workforce.
Hearing in the April reduction these eliminated positions represent annualized compensation expenses of over $60 million.
While the majority of the reductions were entitled 365, where it needs to reduce both due to anticipated lower refi volumes near term and our migration of legacy title III 65 customers to blend title. We also undertook significant reductions in parts of our general and administrative operations, we expect cost savings associated with the risks to materialize starting in Q1 2023.
Hi.
And as Neil mentioned, we're also undertaking a transition of business processes and corporate support to India and that work is already underway.
As we expand our capabilities in India will be able to share more detail on future calls.
What I can share today, however is the progress we've been making on reducing our vendor expenses, we are reducing our vendor spend by at least $6 million per quarter in 2023.
<unk>. This through the continued maturation of processes and G&A commercial operations and cloud operations. We're also moving some work in house and moving it offshore.
And we are reducing the number of vendors, we have and simplifying where we can and we're undertaking more robust negotiations with those we decided to retain.
When complete we believe the steps, we're taking will significantly impact our current model as we move towards profitability.
As we execute towards profitability in the medium term. This is directionally, where we expect costs as a percent of revenue land.
We expect G&A expense to be reduced a further 20% in 2023 with a medium term operating goal to get G&A to the low teens as a percentage of annual revenue.
We're also targeting sales and marketing expense land in <unk> as a percentage of revenue in the medium term, though there is a wider range of outcomes here, depending on the pace of an opportunity for revenue growth, noting that commission sales fall into this bucket.
And finally, we expect R&D expense to be in the high teens to low twenties on a road to profitability.
I want to emphasize what Naeem said earlier and that is we are operating the company to achieve positive free cash flow under the assumption that mortgage industry unit volumes will remain at or near historic lows through 2025.
We're in the early stages of executing on this plan. So the composition within our operating expense lines may shift over time and may not be linear.
I also want to touch on gross margins, especially.
Especially in challenging and uncertain markets like this our product offers customers a cost competitive advantage in house and development that is best in class.
As our product matures and we continuously enhance our offering our incremental value has outpaced the price we charge in.
In addition to applying discipline and increasing scale to drive our cost to deliver even lower we are taking steps to ensure our pricing is reflective of the full cycle value we offer to our customers.
As Nir mentioned, we've seen more than half of our renewals in Q2 at higher rates, we expect this trend to persist.
As a result, we're targeting medium term blend platform gross margins in the mid 60% range.
This may seem below some of the current targets of our software peers.
However, our platform gross margins, we determined by shifting mix across our growing product suite.
We have some very high gross margin products and some that will carry lower margins like income verification.
These products are strategically important and a reliable source of significant incremental gross profit dollars at scale.
Of course cost reduction is only half of the margin equation.
As Nemo highlighted we continue to see growth drivers that reinforce market share gains within mortgage ongoing revenue diversification led by consumer banking in marketplace and the opportunity to responsibly increased prices as we deliver greater value to our customers.
To summarize we're <unk>.
<unk> immediate steps to reduce and manage our personnel spend we're taking immediate steps to reduce and manage our third party vendor spend.
We are planning further efficiencies through offshoring, and we're taking concrete steps to prioritize profitable revenue growth.
Name a shared goal of exiting 2023 with our non-GAAP net operating loss reduced to 50% of current levels. This is how we plan to achieve it.
I'll wrap up now with 2022 guidance and our near term outlook.
In light of prevailing market conditions, we have adjusted our 2022 revenue guidance for the blend platform down by $5 million, while raising the 2022 revenue guidance for the title 365 segment up by $5 million.
We are affirming our full year guidance range of between 230 and $250 million in consolidated revenue in 2022 with between 135 and $145 million in the blended platform segment.
On the title III 65 side, we're raising our guidance range of $90 million to $100 million.
To <unk> $95 million to $105 million largely attributed the outperformance of our default and home equity products within that segment, which is expected to offset the decline in origination title volume.
While this inflationary environment and market reset presents challenges we remain focused on things that are within our control.
This includes meaningfully reducing our cash burn through aligning our operating structure with current market volume streamlining processes, increasing our operational efficiency across the company and adopting a capital efficient growth model for the near term.
This also means narrowing the scope of our strategic priorities, while continuing to grow penetration of our platform in the market.
Wrapping up the first half of 2022 has been a challenging one for the industry, but we remain optimistic about our cost revenue and growth drivers that are within our control.
With that I'd like to thank you for joining us Crystal we are now ready for questions.
Thank you Mark for your remarks, we'll now turn to Q&A. Our first question comes from Matt Stotler from William Blair.
Alright, Thank you for taking the questions maybe just to start with one on on the <unk> titled transition transition that's held business over the core one platform you talked about that starting in mid 2022, it seems like thats kind of.
Early in terms of progression.
But we're seeing a little bit of outperformance on the title of 365 side. So just any update on the expected transition to the core but total platform and the updated timeline there.
So the outperformance on the total 365 side is really because they have built in.
Countercyclical offsets right they have the default business as well as the home equity business. So that's that's where you're seeing the outperformance on the title III five side otherwise Mr. Cooper transition is is going great they've been a wonderful partner for us.
And we're ready for the for the increase in volume in the second half of the year.
Okay.
Next question comes from Joseph Buckley from Canaccord, Please feel free to meet yourself and go ahead.
It looks like you might be muted.
Yes.
Okay.
Hello can you hear me.
Ken.
Yes.
Hi, good afternoon, everyone. Thanks for taking my question sorry for the background noise I was wondering if you could just give us a.
Little bit more flavor on the demand environment, New logos, we're trying to continue to see banks do a lot of digital transformation, but.
I wanted to get an updated view from you on the pulse on the mortgage mortgage side. Thanks a lot.
Yes sure. Thanks for the question on the mortgage side, we mentioned one new logo in P&C.
But both our mortgage side and the add ons for mortgage pipeline remains strong and specifically add ons around flows and verification of income.
And the reason those remained strong as because efficiency really matters in a time of.
Market margin compression and so we're seeing intense focus from our customers around implementing digital technology and implementing more digital technology than they had before and so actually we feel good about our mortgage side.
And we will continue to invest there going forward.
Okay.
Next question comes from Ryan <unk> from <unk>. Please go.
Go ahead.
Hi, everyone. Thanks for taking the questions.
I guess.
Digesting all of the.
Operating targets correctly.
Maybe you can say if theres a consolidated top line.
Revenue growth target.
Associated with these.
<unk> net operating loss and breakeven over that 2025 time horizon, whether or not that's.
By segment or just on a consolidated basis I think that would be helpful. Just for us to understand the bridge between both the opex as well as the top line.
Our modeling here.
Yeah. Thanks, Bryan so we.
We are using MBA as our guide for.
For the mortgage volumes.
They are frankly more conservative and if any so we've made a transition to the MBA forecast going forward, but it's a pretty volatile market out there.
So but.
All of our growth metrics are moving in the right direction, we're not going to give.
Specific revenue guidance at this point, we'll just focus on now to the end of the year and then we'll try and update you as best we can.
Yeah.
Next question comes from Matt <unk> from Keybanc.
Hey, guys. Thanks for taking my question I was wondering if you could talk a bit about how you're thinking about multiyear condition for the mortgage industry with respect to new mortgages versus refis and what factors you're planning on monitoring to see any.
Taking all of the rebound in demand.
And then just a follow up.
Type of visibility do you have in terms of share gains based on your current pipeline. Thanks.
Yes sure. So so first of all it is.
Hard to project forward mortgage volumes beyond 2023, there is good industry MBA forecast for example in 2023 and <unk>.
And less so 2024 and beyond.
So we're kind of we're taking a prudent approach to the beyond years in saying it is going to remain flat.
<unk> is near all time lows through that period, and so we're managing the business as if even if it remains flat, we still get to that cash flow positive.
And profitable.
The measures that the company things that we're paying attention to obviously interest rates, what how new home purchases are going there's been different things happening in the market and then ultimately at the end of the day, we're focusing on primarily on the things within our control, which is growing our market share. So on your second question on market share.
We do spend quite a bit of time looking at how much total volume there is out there and who are the best targets are we mentioned P&C, but theres a number of others that we've also signed.
In the last few months.
Continue to grow our volume base as well as rolling out customers that we sold before that which is why you're seeing us outperform in the mortgage segment compared to the market like we said, it's down 37% year over year in our mortgage segment is.
Is nothing not down even nearly that much and so so that's one piece and the other piece.
Consumer banking more broadly we continue to win there.
Whether it's home equity or personal loans or or other aspects of the mortgage lifecycle. We havent touched yet we continue to increase our diversification of revenue, which has been a great way for us to not just expand our revenue base expand our Tam and create some countercyclical measures that make us less exposed to interest rates that might negatively impact revenues things.
<unk>.
Okay.
Yeah.
Before we turn to next question just a reminder, that if you have questions. Please feel free to raise your hand and get in queue.
Our next question comes from Terry Tillman from Trust, please feel free to mute on mute and go ahead.
Yes. Good afternoon. Thanks for taking my two part question. The first part of it is maybe for Mark in terms of mortgage transactions I think it was in the first quarter Q1 was 376000 can you share what the actual mortgage transactions were in <unk> and the second part of my question is for either Mark or NEMA is just it's good to hear those.
Healthy pipeline in terms of new mortgage and consumer banking customers have you all tweak your assumptions because of the macro on the timing of them rolling out or rolling.
Those.
The rollout schedules are they remaining resilient. Thank you.
So in terms of mortgage banking transactions.
In page 15 of the supplement we outlined at 348000 mortgage mortgage banking transactions 215000, consumer banking transactions. So yes, we will.
And from $3 80 to $3 48 in Q2 and those numbers, we do update as we get more information from our customers.
And the second part of the question.
Sorry, Terry did give us that second part again.
The second part of the question sorry, I missed that on slide 15, thanks to the revenue.
The second part of the question is just related so you are talking about a healthy pipeline in terms of one business. What I'm curious about is sometimes what we're hearing is there can be just a.
Slower pace of Rollouts because of just macro factors lack of staffing et cetera have you all changed in the last 90 days, how youre thinking about these rollout schedules that could impact.
Platform revenue in <unk> and <unk>. Thank you.
Not materially.
We've been planning some of these rollouts at our customers for a while they've staffed up for them.
And then like we said the pipeline for new business is also healthy.
That's around things like home equity and income and clothes and so on both of those fronts, we feel pretty good and it reflects in our guidance I think the mark touched on our guidance.
And what we change there, but it reflects on our guidance as well that we're not materially changing the guidance despite the market coming down.
Quite a bit and I was just one other thing I'll call out is that when we rollout with customers nowadays versus maybe two years ago.
We often rollout with multiple solutions at once.
For example, we have a top 20 bank rolling out with our mortgage solution.
Towards the back half of this year.
And they're going to have multiple solutions when they go live on day, one so they're going to have our mortgage in our income together, which is a little bit of a different situation than what we did before and that allows us to get them value faster and also it's obviously a good good for us and our consumers as well.
Next question comes from Michael <unk> from Wells Fargo. Please feel free to Aneel can go ahead.
Yes. Thanks I appreciate you taking the question I mean, you mentioned the industry volume declines we can see it in just the mortgage banking transaction is closed.
You are able to hold onto the combined revenue target for the year still so just wanted to spend a moment on <unk>.
Scott.
A function of having taken a conservative lens around mortgage since the start of the year as the growth Youre seeing on the consumer banking transaction side, providing enough of an offset or what are you seeing that helps you hold onto the outlook here.
Anything you can add around just about the same for rest of the year.
Any question if the macro were to continue to work I think.
Very useful context. Thank you.
You bet. Thanks, Michael.
So there were some.
Slightly unexpected offsets in the title III <unk> business in default and.
Home equity.
Can you, maybe being a little bit better than we expected we've been able to.
Responsibly increased prices.
Across our customer base on renewal in particular.
And it's really in line with the value that we're delivering so that some offset.
We're not we're not.
I wouldn't I wouldn't characterize our.
Our guidance is as cushion, but I think it is prudent.
Yeah.
Next question comes from Ryan Tomasello from K B W.
Hey, Brian Thanks for taking the follow up just wanted to drill down into.
Title, 365% and the migration there I just following up on earlier questions can you talk about the margin uplift you expect when migrating $3 65 clients to the blend titled product, maybe remind us how that product is priced relative to the legacy products.
The gross margin you would expect on a blend title transactions versus the same revenues coming from legacy title and I guess wrapping that up just the timeline for fully winding down the legacy title 365 revenues.
And what percentage you would expect ultimately capture on the blind pilot products. Thanks.
Sure.
So we're really in the early days of the transition to software enabled title so.
<unk>.
There is no change in pricing and.
We're not really offering any any any guidance on the eventual margins. We think this builds in it's a comprehensive product that makes it better for consumers and better for lenders, it's an integrated product.
That delivers more value, particularly in the instant home equity that we've been talking a lot about with an integrated title solution. So at this point.
There's not much more I can say I don't think about the margins on the title side, where I think we're in early days here Ryan.
Okay.
Next question comes from Matt Stotler from William Blair.
Hey, Thanks for taking the follow up just maybe one on the.
The marketplace opportunity here, obviously consumer banking in marketplaces, where youre seeing a lot of growth and you mentioned a couple of components of that in the consumer banking side any update on I guess, the marketplace's ecosystem generally and then any plans to monetize that going forward.
The marketplace.
Consumer banking marketplace includes.
All non mortgage.
Consumer banking transactions, so personal loans home equity.
Credit cards deposit accounts.
So those are that those hours are in there it includes.
Things like property and casualty insurance.
That are that are coming to scale that.
We've been at for a couple of years now and then and then going forward.
It will eventually likely include the.
The software enabled title right. So I mean.
Does.
Does not.
That has been.
Great offset a diversification of our revenue.
Counter cyclical to the underlying many of those are countercyclical to the underlying mortgage transactions.
Is that where youre going.
Matt.
Yes in terms of.
It was more focused on it as you think about things like.
Bob.
Homeowners insurance and things like that that you are building into the consumer journey and being able to monetize that kind of part of the of the journey.
Where that fits in and obviously, there's a number of different.
Places where the marketplace.
Are you can you can establish market places within that journey, and you've talked to them I would like to see.
<unk>.
We are more and more on just that that component of the broader journey and being able to add those and monetize.
Those those ecosystems.
As part of the broader consumer journey.
Yes, the ones that are the one that's probably being monetize the most today, Matt is the homeowners insurance property and casualty insurance and so that one is already in our flow used by a number of our customers. We also have a bunch of partnerships on that front as well and thats. The one thats probably furthest along by next as title, which like we said we're migrating over another marketplace.
We don't have anything on the evaluation side quite yet, although we're talking to a number of partners on that valuation being whether it's automated or automated valuations abms or appraisals.
And then Theres a few other things that we've talked about.
And the flow that could help for identity and fraud that might be able to help us continue to add value to the whether its the homeowners.
Sorry, the home ownership journey or the broader consumer financial journey.
So we'll continue to do that Opportunistically I will say just going back to my commentary around ROI for products, we are being very thoughtful about the things that can drive the most value for our customers and consumers in a short time horizon and so we're making sure we focus our energy around those kinds of things and make sure we deliver on those things to the end before we go and expand it to many new thing.
So that we can be focus of the company.
Okay.
Question comes from Terry Tillman from Trust, please feel free to EMEA.
Yes, Thanks for my follow up market questions for you.
You are all talking about $60 million worth of comp expense coming out of the model through the various actions I hope I have that right.
It's kind of a timing question in terms of I mean, some of those take time to flow through the model, but is there any general sense, you could give us on how kind of the loss profile could look like <unk> versus <unk>, maybe in relationship to what we saw in to give us the 30 $31 million loss. Thank you you bet. Thanks, Terry yet.
It is.
Some of those costs were not fully annualized obviously.
And we can grow a lot in the second half of 2021 in terms of the net loss I wouldn't assume a materially different net loss in Q3, and Q4 relative to Q1 and Q2 remember there are some challenges on the revenue side that we're also trying to offset so on a net net costs do come down marginally, but we're also addressing.
<unk> volume decrease, particularly on the on refinance title for UCT Bob.
Now, let me addressing submitted questions from investors from via the <unk> platform. Our first question is is blend labs, adding other financial products to its line of offerings.
Yes, that's a good question and it goes back again to our ROI, we're making sure we figure out the products that mean, the most to our customers consumers and so we're going to be constantly adding new financial products.
I'll make one side note, which is our investment in blended builder, which we've talked about quite a bit so our low code drag.
Drag and drop platform to make it possible to create these new products that Youre R&D resources, which makes the ROI equation that much more appealing for us to be able to deliver those things. So expect to see some announcements in the coming months as we respond to changes in the environment. There are some new products that make a lot of sense given the new market environment in all of the vertically integrated capabilities we have.
And so stay tuned on that will come out to market.
With some things here in the next few months.
Another question from investors via the state platform is blend labs, Adam how are you managing the current tension between growth and profitability.
Yeah, and I hope I addressed a little bit of this earlier in my remarks, but I want to explicitly call out that.
Managing profitability as a stand alone it was relatively straightforward managing growth as a standalone is relatively straightforward, it's much easier to do those things in a vacuum but doing it.
Together figuring out that right harmony between those two things is extremely difficult.
And so that's the hard part that's the thing that we've been spending a lot of time on and you've kind of heard a little bit about what we're cutting back on what product lines are cutting back on what internal corporate support we're cutting back on.
And so youre seeing some of the plans to become more profitable like cutting back on some of those things and we'll continue to do so.
As well as driving those high ROI products for our customers in the short and medium term.
And combine those those two things will give us enough fuel to continue to grow while not overly consuming the precious capital that we have and we want to we want to make sure that we retain for the long term.
Another question from the state platform, how would you characterize the competitive environment and related what are your perspective on consolidation in the sector.
Well, we certainly pay close attention to our competitors were very paranoid company in the sense that we are constantly looking at what's going on in the market that being said I think nothing has materially changed in the competitive environment during the last few quarters.
And just to reiterate what some of the competitive environment looks like at the top end of the market. Our primary alternative to blend is primary alternatives Brendan blend as an internal build at the medium and lower end of the market.
Typically point solutions that we compete against.
In both cases blend is sort of a premium offering that can work across products and we'll continue to invest in that to continue to win and grow market share, which we've done historically and we've shown even in this quarter that we've been able to do.
We have seen.
Consolidation, we have seen some consolidation both in terms of our customers merging together, which is ultimately good for blend as it becomes a more concentrated industry with customers that rely on us across the bank or lender.
And we've also seen some point solutions out in the market become part of larger platforms and I actually expect both of those trends that continue we'll pay attention will continue to be paranoid and react where necessary accordingly.
But overall I will say that materially there's nothing that's materially changed in the competitive landscape for us in the last few quarters.
Okay.
And the last question will take its also from the state platform what has the sales environment been like in this downturn, our customers pushing a digital transformation transformation initiatives.
Yeah and this is maybe this is a corollary to what Terry from Truest was saying which is <unk>.
People pushing off these implementations and rollouts.
Or bought in these new buying opportunities and I'll say, one I think a lot of those those statements software companies, where the rollouts are getting pushed out or people are getting negotiated down.
Are nice to have platforms in the sense that.
They feel like they are organization can live without a new data warehouse or without a new reporting tool and I'm not specifically, calling those out as things that are not important but I just think it.
If those things slipped two or three or four quarters. It doesn't materially affect the revenue of the organization, whereas blend given where we sit for our customers and how we try to help them modernize acquiring customers and serving their customers were not non essential solution. We partner very closely with our customers to be that essential solution that helps them deliver better.
Experiences across the bank at a lower cost and cost.
That they don't want to be spending more money than they need to for a longer period of time, we actually help them lower their costs as opposed to.
Adding to their cost base. So we're not a non essential solution and so too I think Joe to add onto that I think our customers will continue to invest in a downturn.
As some of the customers that we have given where we play in the market.
We are often some of the largest lenders and banks in the country as customers. They take a long term view of the market <unk> been very encouraged by the fact that when I talk to our customers.
They are really they are on offense I mean, I said, we're playing to win as blend to be this platform that can be used across all these products to serve these modern banking experiences to consumers with that through our customers. Our customers are taking the same approach they want to play to win not citizens. So they are not the same in the next cycle, but they are even bigger and better than they were in the last cycle.
And lastly.
Because we are a company that drives ROI for them, we often are somebody that they want to bet on to help get them there.
And just one supporting sort of anecdotal data.
Sure.
We track quotas for sales reps, and where we're beating our quotas in the <unk>.
Verification of income and home equity, which are really important business lines for us and in Q3, so far we're tracking strong wafer for those business lines again, and so we will continue to.
To invest in those products as long as they can drive that that ROI for our customers.
Okay.
That was our last question in this conference has now concluded. Thank you all for your participation and you may now disconnect your lines.