All right, everybody. Welcome to day two of the 45th annual Canaccord Growth Conference. I'm Joe Vaffi, equity research analyst here focused on fintech. And we are very pleased to have back with us again the management team from Blend Labs, Nima Gamsari, who's the head of Blend. And in the audience back here, we have Amir Jafari and Jason Rehm. And so we'll talk about some things going on there in a little bit. But in our view, Blend is a truly cutting-edge software company whose platform is used by leading financial institutions to take a lot of the pain out of what's always been a tedious process in getting a mortgage done, both on home purchase and refi. The company's leveraged its bank workflow know-how and technology platform is now offering a broader consumer banking platform for functions such as opening savings and checking accounts and other key functions in banking. Blend touches probably 20% of U.S. mortgage applications with a per-transaction revenue model. and while the interest rate environment remains a little bit elevated, the company's well positioned to benefit from any rate cuts on both new and refi mortgages. We think investors stay current on what's going on with the company. Any rate cuts coming up soon or upticks in mortgage volume, I think this stock will react pretty quickly. So with that little intro, thanks for being with us, Nima.

Thanks for having me, Joe.

So some investors know the Blend story, some don't that well. But maybe we just kind of give a quick intro of the company and we'll get into some questions.

Thanks for having me again. So Blend was founded about 13 years ago when me and a few other people saw that this industry is the mortgage industry and banking more broadly is the technologies from the 70s, 80s, 90s and not built for, at the time, a digital world. And we'll talk about AI later. And so we were wondering why nobody had built a modern technology platform for banking. And it's just not a cool thing to do when you're in Silicon Valley. And so we set out 13 years ago to build a new platform for mortgage lending. And fast forward 13 years, now we have six or seven of the top ten banks. We have six or seven of the top ten credit unions, many of the largest independent mortgage banks in the country, many of the largest mortgage servicers in the country on our platform, and it's pretty simple. When you click apply for a mortgage on their website, all the way through that closing process that used to be sitting in a title office, we've digitized, and so that'll be our platform. It's always white-labeled. We don't have a public-facing brand, and like Joe said, we do charge a per-transaction model, which has its pros and cons, but we do charge a per-transaction model uh for for the funded loans and then about four or five years ago because we're a vertical software company uh our customers the banks and credit unions pulled us in and said hey we want to bring modern technology to all of our other software all of our other product lines and we want to have modern software for all of our other product lines and that included initially home equity lines and loans and then it expanded to deposit accounts and credit cards and personal loans and auto loans and now i think what how i would simply describe blend is we're an origination platform that sits on top of the sort of legacy loan origination system players uh and works across all the product lines that a consumer bank would offer including also now small business

lending that's great thanks nema and um maybe we just stay at a high level for a minute here Talk about, you know, how the mortgage market is acting right now. And then just some other moving parts away from your, in particular, in your story. You know, what banks are thinking about, what they're preparing for. And then we recently had Rocket, right, acquire Mr. Cooper and vertically integrating more in the, you know, with their digital platform in the mortgage market. and, you know, implications for banks and then, you know, the implications for you through the banks.

So let's start with the mortgage market. From 2010, after the last mortgage crisis, which is right around when Blend started, until 2021, it was, you know, up and to the right for the mortgage industry volumes. And relatively low interest rates, although 2020 and 2021 were very low interest rates. and then it shot up in the other direction to the other extreme where in 2022 it started the rate started to increase and mortgage volumes dipped and just to put in perspective um you know coming into that 2020 cycle we had about in 2019 we had something like six or seven percent market share and we were chart our revenue per funded loan was in the 60s um something like that and uh in that year in 2021 the the biggest year there were about 14 million units and then in 2022 that dropped to about 6 million and then in 2023 and 2024 that dropped to approximately 4 million units and so just to put that you know that that means that the industry dropped 70 percent uh in a very short amount of time and it's because homebuyers couldn't afford to buy new homes and nobody was refinancing or buy existing homes and nobody nobody was refinancing. And so, you know, we at Blend were obviously affected by that. And we used that time to really clean up house and get everything in order. And now I'm happy to say that, you know, despite these still, there are still very low mortgage volumes. We're expecting somewhere around four and a half million units this year or something like that in 2025. But, you know, we now have almost 20% market share, like Joe said. We have, you know, our revenue per funded loan is about $90. So we've grown our revenue base, we've grown our customer base. Consumer banking is about 36% of our revenues. That was, you know, single digit percentage probably in 2019, 2020. So that's grown a ton, growing over 40% year over year. And so in some ways, you know, I'm grateful for the mortgage downturn because it really did allow us to figure out, you know, what are we really special at? What makes Blend really important to our banks and credit unions and independent mortgage companies, build up our customer base, and build up our consumer banking business. And so I do feel like we're a coiled spring right now. You know, when mortgage rates ticked down a tiny bit, we saw this in September of last year. I don't know if you guys remember, but...

That had fake when people thought the Fed was going to start to ease. Yes, right.

They had faked everyone and mostly me.

And refi volume started to just kind of pick up like almost instantaneously, it felt like, right?

They picked up instantaneously because there's so much untapped capacity in the mortgage industry right now. And as we've been growing our customer base and getting ready for this next boom, our customers are ready. You know, they've been ready for three years now, going on four years. And so I do feel like we're a coiled spring, and I'm also very proud of our consumer banking business. And I'm also proud of the fact that our team was able to, in a market which is, it is abnormally depressed right now, four and a half million units, like four million units two years ago and last year, historic lows. Hasn't been this low since people weren't really getting mortgages. And so those were historic lows, and four and a half million units not far off that. So I feel good about the fact that we were able to get profitability starting mid last year till now, despite that. But, yeah, I think we're feeling good about the future. And the other thing I'll say is this is something I said on our last earnings call that I want to highlight. 2023 was every mortgage company had way too many people and, you know, way too few loans. And so almost all of our customers in 2023 were deeply unprofitable. and and then banks at the same time while they weren't unprofitable as banks there was a first republic bank crisis and svb crisis in that year and so that was just sort of a and that was also the first year mortgage volumes dipped to be that low and so that was a really rough year for the industry and we we did you know in that year we lost a good amount of customers not a not a crazy amount but a good amount and uh and i can say now the industry is stabilized like they're investing in the future. Not only is our pipeline really, really good, including some big names we signed in the last six, seven months that we announced publicly, some of the largest servicers, a top 10 bank, top five credit union. But our pipeline going forward is also really good. And probably the thing I'm most proud of is that in 2025, we have gotten zero notice of churn from our customers because we are sort of the lone company that's been able to both become profitable and innovate and be a good partner to these banks and lenders during this time. Like, that's really hard to do in a market like this. And so, you know, I'm super proud of the team for that. And that is what I think of as the foundation for the future and probably the thing I'm most proud of in the company.

You know, I just underscore, you know, the company is nicely profitable now at these still depressed mortgage volume levels. Extremely depressed. And, I mean, that was a big lift over the last couple of years. But, you know, here we sit being profitable, waiting for, you know, a potential rebound in the mortgage market. And not just waiting.

I mean, we're building. We're building our customer base. We're building more, you know, we're being more operational disciplined as a company. Yeah. And we're adding, still with those things in mind, we're adding amazing new product lines, like the rapid product lines.

I don't want to talk too much about rapid refi, rapid home equity.

These are product lines that we have, I think of as the next generation that is sort of an add-on to our existing platform. So it's easy to adopt, but it adds a decent amount of revenue per funded loan for us. And what it does for our customers, it drives conversion. And the difference between our old, not our old, but our current products and these add-ons is it has a very detailed, very high conversion flow around an actual offer for you specifically as a consumer, which says here's exactly what your old rate was and what your new rate will be. Here's exactly how much equity you have in your home and how much you can tap and the rate it will cost you. And here's the debts you can consolidate. And so we're building cool things in this time, too. And we're not just sitting and waiting. although I think that would actually be a winning strategy as well.

Sure, fair enough. And for those that don't know the, as you call it, economic value per loan or basically the pricing on your rapid refi product is materially higher than your current refi or the legacy refi product as you roll out rapid, right?

Yeah, so the list price, so our average economic value per fund loan across our customer base is $88. So for every mortgage that's done through our platform, just on the mortgage side, it's different on home equity, it's different on deposit accounts and consumer loans and things like that, credit cards. But $88 in the mortgage suite, and that includes two core offerings primarily. The first is our mortgage application process that gets you through all the application, the conditions, making sure that you upload all your documents, sign all your documents. And then we have another product called the BlendClose product. And blend close is the way that you don't have to sit in a dingy title office to close your loan. It's actually really good for lenders, too, because they can get loans sold into the secondary markets faster, which helps their carrying costs. And so those are the two primary products. Those add up to about $88. The economic value per funded loan of our Rapid add-on, which we announced late last year, and we've been signing a very good amount of customers this year on, and we've shared some numbers in the past few earnings calls is about 1.5 to 1.7 x the core mortgage offering in terms of the add-on so it adds 50 to 70 percent in economic value per funded loan and it drives the roi for the customer so they're willing to pay it in fact our go to market on that was go try it for a few months as an add-on for free and you can turn it off if you don't like it and so if it's not creating enough conversion for you enough savings on the operational side then then don't use it like we're that you know we see it in the numbers we know how much better it is for our customers and so we're we're confident in that number of what we can charge

that's great yes um you know i think blend's known as still today more of a play on on the mortgage market, but your broader consumer banking platform is now almost, well, I mean, we're still at depressed mortgage levels, but it's now 40% of revenue from a standing startup a few years ago, right? How big could that product be? And I mean, it's probably a larger TAM than mortgage, you know, theoretically. And even in a more normalized mortgage market, could it, you know, could it be as big as mortgage over time? And, you know, maybe just give people, you know, a flavor for the growth right there and kind of the pace of new logo signings over there.

Yeah, sure. It's actually a similar play to when we started in mortgage. When you go and you look at how, let's pick some large regional bank in Ohio, how they do personal loans or home equity loans or something like that today, it's on a system. I mean, most of them are actually working in green screen systems that are hosted on mainframes on their sites. And so, and I mean, not just the front end, the consumer workflow, which is a small part of it, but of course we offer but the end-to-end process and you know it's again same thing I said out mortgage the reason people haven't built technology for these banks some of it's the lack of understanding when you're leaving college you're leaving you know MIT it's not the first thing you think of is how do I go serve fifth third bank but part of it is also you have to have it's chicken and egg you have to have enough relationships with the banks where they can trust you uh but you also you you need to have customers for them to trust you but then you also need your first few customers and so it's not an easy sales cycle it's not easy regulated it's super regulated super regulated right um and and yeah we already have those relationships and not every case but in a lot of cases, we have those relationships. And so I haven't been surprised at how fast that's grown. Like I said, I think it's grown 43% year over year. It's now 36% of our revenue. And it's a simple, these are simple products, but they lead to the overall value proposition for our customer of driving depth of product penetration with consumers. So if you just sign up for a bank and all you get is a checking account and a debit card, that's good. But if you sign up for a bank and you get a checking account and a debit card and it notices that you have maybe some debt that you need to consolidate in our flow, we will actually drive the consumer to consolidate it with that bank at a rate that's good for the bank and better for the consumer than their current debt rates. And it builds deeper relationships. You're providing more value to consumers. And so, and then I think mortgage, the fact that we have mortgage on the same platform is this is the first time a bank can look at technology across the enterprise instead of in vertical silos. And historically, you know, mortgage has been over here in one bucket and home equity has been over here and deposit accounts have been one team over here. but this is the first time the chief lending officer or the chief digital officer or the head of the consumer bank can look at one platform and say, wow, I can do a lot with my customers in one place and help serve our customers and their broader needs.

That's great. I wanted to circle back again to one of my first questions. Let me just say one other thing, Joe.

Yeah, the short answer of can it be bigger than mortgage? mortgage. The reality is that the scale of transactions, so I said that, you know, in a normal year, in a great year, there's 14 million mortgages. In a terrible year, there's 4 million. The expected amount of mortgages in a year is somewhere in between around 8 million mortgages a year. And, you know, in times when interest rates are declining, it's higher than that. In times when interest rates are going up or elevated or staying elevated, it's lower than that. But in, you know, we have one customer on the deposit accounts product that does almost 2 million transactions a year alone of new accounts. And so the scale of the transactions are so much bigger. So even though we're charging less on a per unit basis for all these consumer products, the scale of the transactions is much bigger. So yeah, the opportunity is, I think, is larger than mortgage but it doesn't mean we're not focused on mortgage too it's just means that

we now have two and it's a little bit two irons in the fire and it diversifies out the the revenue stream a little bit for sure right so that's a nice it's a nice side effect but

actually just when you're a vertical software company part of the magic of you know I like I like to think about Viva as a software company Viva what they did is they started with one product crm for pharma and then they kept adding things like vault and other components that create a lot of value for their customers based on what their customers needed and in this case for our customer base the top 200 financial institutions in the country what they need is a better software origination stack because originations is how they drive a lot of their revenue and their net income loans uh and and new deposit accounts like that's how they drive most of the revenue almost unless it's a very heavy commercial bank and so they need better tools to support their revenue generating activities and they dropped they dragged us in there it wasn't us saying we want to diversify our revenue it was them saying we need help right but it happens to be a nice side effect that it diversifies our revenue right on the war for

the war for deposits among the banks continues and they need the tools to attract and retain those guys. I just wanted to also go back to Mr. Cooper buying, I'm sorry, rocket buying Mr. Cooper and what that means for the industry, what it means in the quote-unquote arms war of technology for banks and other players in the mortgage market. I mean, I think the really good companies

our really good customers in this space have similar similarly to what rocket is doing they've done a combination of and actually to what blend it a combination of really you know clean up their house simplify the things that they're you know drive the things they're really good at and then consolidate market share and so rocket's doing that a little bit with mr cooper they already had a mortgage servicer at rocket they just wanted to grow it and they wanted to add more capabilities there. And I think that what that's done is that's opened the eyes, especially of our largest customers, to say, what does it look like to compete with Rocket when they now offer personal loans and they offer auto loans and they do servicing of all these loans? They're not a bank, but they do most of the things in terms of value add that banks can do for consumers. And so it's really, I think it's been a catalyst. I think I give them some credit for our pipeline being so strong this year. And really, I guess, since late, I can't remember exactly when the Mr. Cooper rocket announcement was early this year, maybe late Q1, something like that. So I give them a lot of credit for driving some pipeline to us. But it's good. These are the types of things that have historically helped blend. I mentioned that they're super long sales cycles. Well, our first couple deals, it was chicken and egg. I couldn't get any of the big banks to bite in 2015 uh when we were you know first getting our product off the ground and then at the end of that year rocket did a super bowl ad that said push button get mortgage and then i was already talking to all the banks the time i was trying to get them to move but there's inertia uh to to do something to do whatever's happening day to day already and and then suddenly within six months i i like the floodgates opened and i think a similar thing probably a little bit less extreme than that now but similar thing on the pipeline side

today got it we we have a lot to talk about nema but we're going to run out of time i just wanted to just one last question for you um um you announced the other you know the other day i think um that you are having a cfo change amir jafari's done a great job for the last few years he's here but um jason rehm is taking that position just you know why you know why the change now and you know um any other comments you have on that yeah sure so yeah mir joined us about

when i said 2023 was a rough year he joined us at the you know it was already known that it was going to be a really rough year and he joined us at a time when i don't think many people would have joined us and we were pretty unprofitable and while we had a lot of good things going for us good technology good customer base we had a lot of things to fix and amir spent the last almost three years i'll call it fixing that and now we're profitable and we're simple a much simpler company and we're growing um and then you know jason coming in you know amir sort of said hey like i you know it's time i think i feel like i did my tour of duty here and and uh jason coming in and take the reins and you know there's there's a there's a lot in our future too you know it's while we did a lot of good things last three years um i think jason coming in will help us over the next three or five years hopefully so i'm very excited about thankful very grateful to amir and and excited about jason joining last week that's great um blend labs just watch those

mortgage volumes everybody and uh watch um watch them watch the 10-year treasuries yeah yeah exactly All right, thank you. Thanks, Joe. Thanks, Nima. Sorry.