Mortgage tech company Blend incurred a whopping $769 million loss in 2022, leading some mortgage tech analysts to question the company’s runway and survivability.
Nima Ghamsari, CEO and co-founder of Blend, acknowledged that the company was focused on “too many things” a year ago. But Blend is now focused on cutting costs, growing its mortgage business and its Blend Builder platform – which Ghamsari noted will be the future platform of mortgages and consumer banking products.
“All those too many things that didn’t directly help our mortgage customer base, or help us re-platform, I’ve cut all of those things out,” Ghamsari said in an interview with HousingWire following a deep dive feature on the company.
Blend’s goal is to cut its operating losses to $20 million per quarter by the end of this year, Ghamsari said, giving the company about four years to burn through the liquidity of $350 million in its balance sheet.
“That’s assuming we don’t keep improving from that $20 million,” Ghamsari said.
Blend is also confident in its growing customer base. Despite the mortgage industry suffering from thinning margins, some of Blend’s mortgage customers are growing their market share, and the firm’s non-mortgage customers are rapidly growing — positive signs for the company, Ghamsari emphasized.
However, getting acquired by another firm is not in the cards, according to the CEO.
“We feel very confident in our customer base and our product set, and our revenue base and our balance sheet.”
Read on to learn more about Blend’s priorities, its focus on improving mortgage companies’ business, and the firm’s plan to cut down costs.
This interview has been condensed and lightly edited for clarity.
Connie Kim: Blend is focused on being a platform company, but the firm’s major customers are mortgage lenders right now. How is Blend navigating to overcome the time needed for customers to see the value of the new platform?
Nima Ghamsari: First and foremost, our mortgage business is by far my biggest focus. We have got to make sure those people are successful. We still have over 200 people working on a mortgage suite of software – building more features and rolling out existing features. What we’re saying is, we want to keep investing. We also want to build for the future.
The Blend Builder (platform) is taking all these components of income, identity, assets, credit decisioning, everything and saying we want to make that drag and drop. And we want to make all the configurations, because that will enable us to move faster and build more products. I want us to be able to enable our customers to take some of the things that we don’t want to build and be able to build it themselves over time.
I also want to eventually have third parties to be able to add more capabilities to that platform to get more vendors and partners into that ecosystem so that they can help our customers benefit. I get called by vendors and third parties all the time who want to be better integrated with our customer base. This (Blend Builder) will enable that to happen faster; I think it’s just going to add speed to the industry as a whole.
This is not just for consumer banking. I know our mortgage suite will be on Blend Builder. So this will be re-platforming as a company.
Kim: How do you bridge the gap between now and the future when customers see the value of the Blend Builder platform?
Ghamsari: One, I would say that (Blend Builder platform) is a pretty meaningful part of our revenue base already. Navy Federal is a big mortgage home equity customer of ours, but now they also signed on to the deposit account side on the Blend Builder platform. We have a lot of non-mortgage customers.
Just from a purely financial perspective, as of last quarter at $350 million in the balance sheet, we have $225 million debt that’s due in the second half of 2026. So we have over three years before that debt is due.
I’ll be the first to admit that we were probably doing too many things a year ago, so all those too many things that didn’t directly help our mortgage customer base, or help us re-platform, I’ve cut all of those things out. That plus the combination of our customer base today and the strength or balance sheet, we don’t foresee any issues given the three-and-a-half year time horizon.
Kim: Following up on the balance sheet — particularly the $350 million liquidity — Blend’s operating cash burn was about $190 million last year. I’ve heard an analyst say that it gives less than two years of runway. What is your perspective is on this?
Ghamsari: We’ve told the street (Wall Street) that we will get our operating losses – through cost cuts and through revenue growth – to $20 million a quarter by the end of this year. And $80 million a year off of a $350 million balance sheet is four-plus years to get that.
But that’s assuming we don’t keep improving from that $20 million. What we’ve also told the street is we will improve that net operating loss throughout this year sequentially. And so we don’t intend to stop when we get to $20 million given the investment we want to make in re-platforming. It’s the right thing to do at this instant.
Kim: A lot of investors are mentioning the loss – the $796 million loss that Blend incurred last year. An analyst even mentioned Blend being an acquisition target. Is an acquisition in the cards for Blend?
Ghamsari: Obviously we hear from people all the time, and if there are ever serious offers made, I’m required as a fiduciary to take it to the board. But the board and I, we feel very confident in our customer base and our product set — and our revenue base and our balance sheet. So it’s not something that’s top of mind for me right now.
Kim: Before Blend went public, the company raised about $665 million over its lifetime. Is another round of funding in the cards for Blend?
Ghamsari: We have nothing planned as of now. The strength of the balance sheet is good. Markets are so low right now; it would just be very expensive to raise money. We are focused on building the company and getting the cash burn down so we can then drive the outcomes that we think are possible.
Kim: What factors do you see as being crucial for the company to post profitability?
Ghamsari: We have to make sure that we are growing our customer base. One thing that’s been encouraging for me is I’ve seen some of our customers grow market share in this time already.
And we successfully show that the non-mortgage consumer businesses – which is actually a really fast-growing part of our business – can continue to grow at the rate that has been growing, and then we get some continued improvements in the cost structure. That will show how do we get the net losses to zero and then positive in the next two relatively medium-term time horizons.
Kim: What are some of the risks you monitor externally and internally?
Ghamsari: I obviously pay attention to macro. Inflation, we look at what the Fed does, the job market every month. We look at our own application volumes internally, because that’s an indicator for loan closings.
We have some other conditions monitoring internally, [such as] what is the health of our customer base? How much are they using our product? One thing we’re monitoring very actively is, what functionality are our customers able to benefit from today? And what are they not benefiting from? How do we put together a roadmap in front of them?
If they’re not getting the benefits from Blend, there’s only two outcomes – they are in a tight market environment or they are just not getting full value from the product. So they’re going to want lower pricing or go to a competitor that’s cheaper. So we’ve got to pay really close attention to that.
One of the things I want to do is, I want to be out there more, making sure our customers know how much we’re investing. I think before you and I talked, you probably wouldn’t have guessed that we had 220-plus people working on our mortgage product today.
Because so much of our marketing and marketing effort is public-facing, we’re so unknown in consumer banking. People don’t realize how much we’re investing in the mortgage product and how valuable Blend Builder is going to be to them in the long term.
