Blend Labs, Inc. (NYSE:BLND) Q3 2023 Earnings Call Transcript

With that, we remain committed to this goal and have identified areas to adopt our operating model to achieve profitability, should the market environment deteriorate further. We saw strong renewals and new customer signings that incorporate committed fees. This translated into growth in our remaining performance obligations this quarter, which reached $58.9 million in the third quarter. Evidence of this of nearly half of our forecasted mortgage and home equity volume that was eligible for renewal in the third quarter, was pre-purchased under contract, a majority of which were multiyear contracts with annual in advance payment terms. When compared to our PayGo model which is built a month in arrears, this has a meaningful pull-forward benefit to our cash profile and is accelerating our free cash flow generation while adding incremental contract length.

We expect to see continued expansion in our RPO, as we execute more renewals under our subscription model and as we enter into platform deals with longer and larger commitments. This is particularly relevant in Q4, which has historically been our most active quarter for our sales team. Q3 marked another quarter of improvement in our cash burn, as measured by our free cash flow metric, which was less than half of the levels we incurred this time last year. Our actions to operate with efficiency in combination with our resilient top line, and improved margins are having a real impact as we inflect towards positive cash generation. Now turning to the balance sheet. Our cash, cash equivalents marketable securities, inclusive of restricted cash totaled $252 million as of the end of the third quarter.

As I mentioned during our Investor Day, we are confident we have taken the appropriate measures to ensure our business remains well capitalized and that we have sufficient liquidity based on the current projections and in this macro environment. Lastly, let me move on to our outlook for the final quarter of this year. As a reminder at our Investor Day we shared that we expected 2023 Platform revenue to be between $110 million and $114 million. After incorporating our third quarter results, this implies a fourth quarter platform outlook of between $26.3 million and $30.3 million. The industry we operate in remains highly dynamic Mortgage rates are cresting two decade highs and prospective borrowers are seemingly willing to wait longer for rates for pricing to improve.

It’s still too early for us to predict how this will impact our Q4 volumes but we are focused on continuing to execute on the areas that are in our control. We are continuing to see good traction in our add-on products delivering more value per loan which is insulating our results somewhat from these headwinds. Similarly, our Consumer Banking revenue growth is pacing well within our expectations. Given the uncertainty within the macro environment, we are widening our fourth quarter platform outlook slightly and expect our revenue to be between $25 million and $30 million. Similarly, our Title outlook is being revised slightly to be between $9.5 million and $10.5 million. This sums up to a revised total company outlook of $34.5 million and $40.5 million.

We expect our total non-GAAP operating loss to be between $17 million and $14 million in the fourth quarter, well below the $20 million target we set out last year and achieving this in one of our seasonally lowest quarters for industry volume. The midpoint of this outlook represents a nearly 65% improvement when compared to our fourth quarter operating loss in 2022 highlighting the progress we’ve made this year along our path to profitability. This operating results guide remains within the implied guidance that we shared at our Investor Day. We believe we have built the business and operating model to respond swiftly to the market fluctuations and we will continue to adapt as conditions evolve. I want to reiterate that we remain confident in the longer-term targets we’ve shared with you and are encouraged by the strong set of opportunities we have in front of us as we continue to execute we are building resiliency in our model against the short-term fluctuations in the market and adding further diversification in our business that will serve as countercyclical offsets in the future.

This is paramount to our strategy within our second phase and we look forward to continuing to update you on the progress here. With that let me turn the call back to Nima for his closing remarks.