3. Blend Labs, Inc. (NYSE:BLND)
Number of Hedge Fund Holders: 24
Blend Labs, Inc. (NYSE: BLND) is a cloud-based software platform that operates and empowers a digital interface between consumers and financial service firms. It provides cloud-based solutions to the firms in finance sector. Blend Platform and Title365 are the two core segments of the company’s software operation.
A range of products are available through the company’s Blend Builder Platform, which enables digital-first customer journeys for credit cards, deposit accounts, auto loans, mortgages, home equity loans, and lines of credit. Title365 was acquired in June 2021 with a deal of $422 million, the subsidiary provides professional and consulting services, as well as title search procedures for title insurance policies, escrow, and other closing and settlement services.
According to the Q1 2024 performance highlights, Blend Labs, Inc. (NYSE: BLND) reported revenue of $34.95 million comprising Blend Platform revenue of $23.8 million and Title365 segment revenue of $11.1 million. Mortgage suite revenue decreased by 15% year over year, but the company stabilized and outperformed analyst expectations due to a 29% increase in Consumer Banking Suite revenue of $6.7 million.
In addition, Professional services revenue increased 21% year-over-year to $2.1 million in q1 2024. The company reported an EPS of $-0.06 marginally beating the expected EPS of $-0.07.
As of March 31, 2024, Blend had cash, cash equivalents, and marketable securities, including restricted cash, totaling $135.3 million with total debt outstanding of $140.0 million in the form of the Company’s term loan, which was repaid in full in April upon the investment from Haveli. The investment has paved the way for the company to save an expected $18 million in annualized interest expenses boosting the path to generate positive cash flow soon.
The establishment of a strategic partnership with Haveli Investments proved to be a cornerstone that aided the company in improving its cash flow and acquiring debt-free status. This investment is poised to further strengthen the long-term business relationship that is expected to enhance the company’s product and technology development, go-to-market objectives, and operational framework.
In addition, the company is expanding its customer base and has made progress in deploying new customers, including a partnership with the Navy Federal Credit Union. This integration will enable members to open new accounts easily, with an enhanced user interface that allows identity verifications, new account funding, and membership confirmation.
Despite improvements in revenue and a decrease in operating costs, the company still has a negative free cash flow of $1.3 million in Q1 2024 and is yet to reach profitability. The macroeconomic challenges, high interest rates, and inflation can have a potential effect on customer decisions and market dynamics.
Furthermore, there is an ever-growing market competitiveness in the mortgage and consumer banking sectors. Therefore, the company needs to keep innovating and improving its platform’s technology to stay relevant, and that may risk the company’s broader operations. Regulatory changes and compliance requirements are additional headwinds that can pose a risk to the company’s operational strategies.
According to Insider Monkey’s database of hedge fund sentiment, 24 hedged funds held stakes in Blend Labs, Inc. (NYSE: BLND), and Millennium Management Fund run by Israel Englander had the largest stakes with 4.73 million shares valued at $15.39 million.
