Blend Labs Stock

Thank you. Hello everyone. Thank you for joining us and welcome to Blen's Financial Results Conference Call for the second quarter of 2026. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to management for their prepared remarks. Please go ahead.

Meg Nunnally Good afternoon and welcome to Blen's financial results conference call for the second quarter of 2026. I'm Meg Nunnally, Blen's head of investor relations. Joining me today is Nima Gamsari, our co-founder and head of Blen, and Jason Rehm, our head of finance and administration. Before we start today's call, I'd like to note that we will refer to certain non-GAAP measures which are reconciled to GAAP measures in today's earnings release and in the appendix of our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results unless otherwise stated all financial measures we'll discuss today including our profitability, gap. Also, certain statements made during today's conference call regarding Blend and its operations, in particular our guidance for the third and fourth quarter of 2026, other commentary regarding 2026, and our expectations about markets, our strategic investments, product development plans, and operational targets, may be considered forward-looking statements under federal securities law. We caution 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 differ materially from those described in these statements.

Please see the risk factors we've identified in our most recent 10Qs, our 10K for the fiscal year 2025, and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. The financial information presented on this call is based on continuing operations and Any prior periods have been recast to exclude operations that are now discontinued. Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call and an audio replay will also be available soon after the call. I'll now turn the call over to Nima.

Thanks Meg, and welcome everyone. The second quarter was another disciplined, profitable quarter for Blend. Revenue came in near the high end of our guidance range and non-GAAP operating income came in above the high end. and Jason will take you through all the financial details in a few minutes. But today, I wanna spend my time on the two pillars of our strategy. Autopilot, the agents we build for our customers, and Blend 3.0, the agents we are building inside Blend to help us do our work to serve our customers faster, better, and cheaper. Let me start with autopilot. The big news for us last quarter was that autopilot became commercially available on July 1st. If you're following along on the webcast, I'd invite you to advance the slide with the words, our AI strategy, guiding our customers at the top. This is the first of two slides that I'll reference today, and the charts on these slides are also available in the supplemental slides on our Investor Relations website.

The chart shows cumulative loans processed by autopilot from a standing start in February to more than 45,000 today, and it's still compounding. The curve is the proof behind everything I'm about to tell you. During this four-month window, more than 65 lenders activated Autopilot. They stress tested, surfaced the hard edge cases, and shaped what we shipped. And the preview data backs up why this matters. We're starting to see evidence autopilot is driving faster clearance times, higher conversion rates and potentially reducing fulfillment costs. Based on our preliminary data of these loans that have gone through our system, our customers are seeing a 10 to 15 percent improvement in pull through rates and two to four days of cycle time improvement.

Furthermore, we estimate that Autopilot is automating 4.5 hours of loan fulfillment tasks on average per loan. This is huge and our customers are just beginning to grasp the potential. Now that we are commercial as of July 1st, six lenders have already signed contracts that include Autopilot, including Onity, which is one of the largest mortgage servicers in the nation, which is also building its own experiences on top of Autopilot through our Autopilot MCP server. On Moniton, we're executing the plan we described in May, with customers signing flat-fee one-year contracts for full access. There's going to be a base level of intelligence built into our workflows, but the paid tiers are where the full product lives. We call our underwriting intelligence, where autopilot is reading documents, running calculations, reconciling against guidelines, and driving the full loan file forward. Over time, our intent remains to move the paid tiers to a per funded loan model, just like the real estate. the rest of our mortgage suite.

And when seed-based pricing, which we don't think survives the agentic world, when software does the work, you can't charge by the person. It doesn't make any sense. And others are also moving the consumption models to get paid for the activity their AI generates. We made a different choice, which is we get paid on success. get paid on the outcome, not for the tasks along the way, but for the outcome. So if autopilot does 10 times the work on a file that never closes, our customers shouldn't pay 10 times more for it and under our model, they won't. Our revenue scales with our customer success and that alignment is the business model we've always had. Agenda AI just makes it more. valuable and more scalable. Since I get asked about the competitive landscape constantly, let me be direct about it.

What gives Blend the right to win? Our answer comes down to four advantages that are hard to replicate. First, where we sit. Blend is the borrower's first point of contact. And because we're there, we see the problems and we fix the problems as they come along. More than half of borrowers apply outside of business hours, and over 90% of people who complete an application do so within 24 hours of starting. Autopilot catches friction the moment it happens, at 10pm on a Saturday, not Monday morning, the exact moment the borrower intent is the highest and the engagement is the highest. Next are data. The question behind every AI question I get is, in a world where anybody can call a frontier model, like Claude, is a software like ours replaceable? We believe the answer is no, and the reason is our data. Models are converging and everyone has access to the same models, including us.

But what isn't a commodity is what it takes to get the model to perform on a mortgage that has tons of context, tons of loan documents, guidelines, and lots of things that have to be taken into account to make the right next action on the loan. And that's a combination of 15 years of experience and tens of millions of loan application data processing through our platform, which you can't buy. And you can't synthesize 15 years of real borrower behavior. And that compounds. I actually see this in our early autopilot benchmarks against a typical Claude plus skills. And we see that autopilot performs better in those tests, and much better and much cheaper, about 1 third the cost. Third, the harness. Autopilot is not a wrapper around a generic model. It runs inside of the infrastructure.

The data layer, the integrations, the compliance architecture, orchestrating what the agent sees, what tools it can use, which guidelines to apply to a specific loan in front of it, and what happens when it isn't sure. It hands the file back to the loan team. People stay in control of the decisions that matter, and this harness is part of what makes Autopilot more accurate and cheaper than a generic harness. And last, our relationships. We've spent 15 years building alongside lenders, and Autopilot was built the same way, with lenders, for lenders. And with Autopilot MCP, we've opened up our infrastructure so customers and other technology providers can build on top of us rather than around us. And when you step back, this is the bigger thesis. Blend is and can be the agentic infrastructure for relationship banking.

The original promise of banking was a relationship, a lender who got to know you and could make a call based on more than just a credit score. That promise didn't disappear because bankers stopped carrying it. It disappeared because there's so much process, and there's so much manual work and manual effort that has to go in to every single loan. But when autopilot is handling that grunt work on the loans and helping the people who historically did that focus on the customer, autopilot is handling those conditions, the follow-ups, the questions that come in at two in the morning, and the loan officer can get back to the capacity of serving the customer. I started Blend with my co-founders back in 2012 with a simple thesis that the mortgage process should drive itself. not because humans aren't needed, because the right technology can handle everything that does not require a human. autopilot is finally that thesis arriving. And because of what we're seeing in mortgage, the most complex, most heavily regulated process in consumer finance, we believe the same infrastructure extends naturally to home equity, deposits, auto, card, personal lending. And I think probably broadly, given how much we've honed the harness and the evals around autopilot, beyond that to other aspects of underwriting.

Agentech AI doesn't replace and doesn't need to replace relationship banking, but it makes it possible to have our customers, the lenders, be even more focused on their customers once again at scale. Shifting gears, if you're following along the webcast, I'd ask you to advance this slide with the words, our AI strategy transforming how we work at the top. This slide gives you a glimpse of how Blend itself is transforming and how it is going to look in the future. And we're calling that Blend 3.0. Where if you think of Blend 1.0 as the first 10 years where we built a market leading company and we're growing quite a bit, growing our market share, growing our customer base and rolling out our first product. and Blend 2.0 is the last four years where we were creating a profitable long-term sustainable entity. Blend 3.0 is an agentic first company. And that doesn't mean just for our products, but that also means how we work internally.

And last quarter I described this pattern. an agent will, in the end, say, to blend, take the first pass of the incoming work, especially the grunt work that I described earlier, before a team member even touches it and applies their judgment. So I won't repeat all that today, but I want you to look at the graph. And the graph shows one specific team in the company, which is actually one of our biggest teams, which is the engineering team. And if you look at the gray line, and you look at pull requests, which is the gray line in 2025, it was pretty flat throughout the year and during the holidays it trailed off. And then you look at the blue line this year, we've 3.6x-ed our throughput as an engineering team with roughly the same headcount just since January of this year. 3.6x the throughput. I don't know if you remember, but I told you in May that we were running roughly one and a half times compared to what we were doing in January. And that was the average. That was just three months ago.

And now we're 3.6 times. It's a profound thing to think about, which means if we continue at this pace, we could be doing 10 times as much throughput on the engineering team by the end of this year as what we did the end of last year. And I think that will continue to compound as an advantage for us to turn into velocity of fixing customer bugs, handling customer feature and enhancement requests, building the new things like autopilot that power the future of our industry. industry at a faster and better pace. And that's really important because the essence of any software company is, how do you serve your customers and create value for your customers? And I think that trend will continue to steepen as we adopt further AI within our organization. and as the models get better over time. But given the success that we're seeing in engineering, The next phase that we're doing, and what I believe is our job, is to take this to the whole company. And so this past quarter, we expanded our efforts in agentic first approaches, and we expanded to our go-to-market organization. where agents now are reviewing support tickets that come in immediately. And if it's a bug that needs fixing, it can open a pull request. If it's a simple response that they want or a configuration change, it can draft that up for a human to go and click, yep, that's right or no, that's wrong, I need to change that.

And it's also doing work on our customer calls and helping draft coaching notes and follow-ups that used to take the team's hours and in our finance organization, where agents are doing the first pass of work on parts of our closing process. In every case, the process is the same. The agent takes the first draft. A person reviews and approves. And in some cases over time, I think where it's less of a security issue or less of a code issue or less of something that doesn't even need a human approval, I think eventually over time, we'll even not need human approvals for some of those things. It's different functions that I'm talking about, but it's one operating model of how I think the future of a GenTech technology is. And it's still early days, but this is one of the most active topics inside Blend right now. Our leadership team is meeting regularly about it because becoming an agent-first company is an operating decision, not a side project.

It's a whole company effort to figure out how would we reimagine this amazing company and customer base from the ground up because we now get that opportunity because we're profitable. We have our house in order and all these technologies are accelerating right in front of our eyes. And I said in May that we aim to be in the top 1% of all companies in agentic AI adoption, and that's still the goal. We're tracking our progress by function. We're taking it one piece at a time, and I expect to share more with you in the coming quarters as this rollout matures. And lastly, I want to talk about growth, because I know that's a question on everyone's mind. Well, to start with the bad news, the macro is not helping us right now.

Mortgage rates moved from 6.4% or so in May to 6.8% in recent weeks because of wars and things that are going on outside of our control. And that keeps activity in the market, especially refinance activity, but also purchase activity muted. Um, and so I've always said, you know, we can't control the macro. I just want you to be aware of it because we're obviously paying close attention to it and it might sort of mute future quarters like Q4 if we expected a certain amount of refinance activity. and it doesn't come because rates are high, just more being aware of it. But that's OK. Our ultimate goal is has been and is to generate long term sustainable growth regardless of the macro environment. In the quarter, we signed 14 new deals and expansions, and there's two that I want to highlight. The first is a new logo with a large credit union that included Autopilot right out of the gate.

So I think this will be the new norm with our customers as they sign with us. We have some more deals in pipeline that have the same shape, but it's the first time a customer chose Blend and chose Autopilot as part of that initial package. A Gentic AI is becoming table stakes and our customers want it and need it in fact to be the best versions of themselves. And I think, like I said, it's a preview of how many of our deals are going to look going forward. The second deal I want to talk about is a cross-sell of our RapidRefi and RapidHomeEquity into a top five credit union, which they signed with us a couple of years ago. They got rolled out. They're happy. And this is a great example of how we can expand and deepen with customers as we drive the initial projects to success.

And our pipeline continues to build. On our last call, I told you our overall pipeline was up more than 40% year over year. And that overall pipeline is still growing. What I'm more excited about as the year goes on is a narrower one. We brought in new sales leadership this year, at the start of this year, and our late stage pipeline, the deals we aim to close within the next quarter, grew nearly 40% just between March and June. Late-stage pipeline is what actually is near signing, so it comes with a lot higher level of visibility and confidence. Just to put some color around this pipeline, that includes another large mortgage customer, a top 20 financial institution. and a solid set of rapid and autopilot deals, which, for example, we expect two additional large rapid deals to close in the coming months.

Now, I want to be honest about timing. We expect our pipeline to become signed deals in the coming quarter or so, and maybe some slip. And those signed deals become revenue. But this is all dealing with some of the largest financial institutions in the country. the country. So as they sign and they turn on, we expect them to show up in our financials in the medium term, but it does take some time for very large financial institutions to get through their governance around things like agentic tools. So with all that said, I want to say the direction is very clear. Our customers are excited about it.

Our largest customers are really leaning in and my confidence is very high. Our sales discipline that Matt has put in place isn't just limited to new business. It extends to how we manage renewals. We're doing a better job of getting our customers discussions around renewals with us, you know, earlier in the process, which means more relationship aspects to working with them, renewing customers for longer terms, broadening the relationship at renewal and and making sure that our pricing reflects the value we deliver, which Jason will give you some more color later on, you know, how we're thinking about this, you know, where we're seeing renewals and upsells, where we're seeing churn. So let me give you that other side of the coin right now, which is the core of our customer base is renewing for longer and for more. So to wrap it up, the short-term market with the macro, it sort of is what it is, but we're staying disciplined and profitable inside of it. The medium and long-term is what we're focused on, 2027 and beyond.

As we get autopilot going commercial and growing that, the pipeline we're building, the speed we're gaining with the agentic transformation internally, I am extremely energized about what Blend looks like on the other side of this cycle. not just for us, but for our customers. And ultimately, because we have a value-based pricing model, what that means for our financials and for our investors. And so with that, I'm going to turn it over to Jason to walk through the financials.

Thanks, Nima, and thank you to everyone else joining us on the call. We delivered a solid second quarter with total revenue of $33.8 million, up 7% year over year and near the high end of our $32 to $34 million guidance range. Mortgage Street Revenue was $19.2 million, up 7% year over year, within the growth range we discussed on our last call. Funded mortgage loans on our platform were approximately 233,000 in Q2, up 14% year over year and in line with our expectations coming into the quarter. That volume growth was partially offset by a lower year over year economic value per funded loan, which came in at $79, consistent with the 79 to $80 range we guided to in May. As a reminder, the step down from $83 in Q1 is primarily mathematical. Q1 is seasonally the high watermark given its lower mortgage volumes, and higher volumes in Q2 mechanically lower the per loan calculation given that there are some fixed fee arrangements within our customer base.

Consumer banking suite revenue for the second quarter was $12.2 million, up 6% year over year, slightly above the high end of the growth range we shared on our last call. And professional services revenue for the second quarter was $2.4 million, consistent with our expectations. Turning to profitability, non-GAAP gross profit was $26.5 million, and our non-GAAP gross margin was 78.3%, up from 76.1% in the second quarter of 2025, and consistent with the normalized gross margin framework of 77 to 78% we described last quarter after the first quarter. after backing out the one-time benefits we saw in Q1. That gross margin improvement is despite the model costs for autopilot, which were relatively low but growing in Q2. We expect those costs to remain fairly insignificant relative to our P&L for the near future, but we will update you if we see anything different on the horizon. Non-GAAP operating expenses were $19.5 million in Q2, roughly flat year over year. Non-GAAP operating income was $7 million above the high end of our 5.5 to $6.5 million guidance range and represented a non-GAAP operating margin of 20.6%. improved by 2025.

Free cash flow for the quarter was $6.9 million. We ended the quarter with $44.9 million in cash, cash equivalents, and marketable securities, and still with zero debt. During the second quarter, we repurchased 11 million shares at an average price of $1.65 per share. Year to date, we have We have repurchased 22.2 million shares for $36.8 million, leaving approximately $13.2 million remaining under our most recent share repurchase authorization of $50 million. We continue to believe that share repurchases are an excellent use of capital, especially at current valuation levels, though future repurchases will also be balanced against our aim to maintain ample liquidity to run the business. Before I give you the specific numbers, I want to frame how we're thinking about the environment because it shapes everything that follows. On our May call, and consistent with what we've said historically, we noted that our own outlook for the back half of 2026 was closely aligned with Fannie Mae, which at the time was forecasting roughly 19% full year growth in mortgage market volume.

Since then, Fannie has lowered that outlook to about 17%. Our current view is slightly more conservative than Fannie Mae, as we expect refinance volumes to remain muted in a higher for longer rate environment. Specifically, we struggle with Fannie's forecast showing refi growth in the back half of the year, despite higher interest rates. Fannie Mae update their forecasts, but until then, we're taking the more conservative view. Additionally, we saw an uptick in churn notices this quarter relative to recent quarters. These are customers who are notifying us that they plan to roll off of Blend, though the timeline and ultimate impact is still to be determined. In most of these cases, customers plan to move to lower cost or free point solutions.

We expect the revenue impact to be manageable in the low single digits of annual revenue, but it's a dynamic we're watching closely and as such, we have reflected some caution in how we're thinking about the second half of the year. With that context, let me walk you through how we see the next two quarters. Starting with the third quarter, we expect total revenue to be between $31.5 and $33.5 million, representing approximately negative 4 to positive 2% year-over-year growth. Underneath these headline numbers, we expect a total mortgage market of 1,200,000 to 1,260,000 units, which is up 5% at the midpoint, and blend funded loan volume of approximately 200,000 to 210,000 loans, which is up 2% at the midpoint. This translates to mortgage suite revenue change of approximately negative four to positive 3% year over year. We expect economic value per funded loan of approximately $80 to $81. We expect year over year consumer banking sweet revenue growth up between negative five and positive 1% in the third quarter, consistent with the moderation we discussed on our last call.

And we expect Q3 non-GAAP operating income to be between $3.5 and $4.5 million, implying a non-GAAP operating margin at the midpoint of approximately 12%. As a reminder, the third quarter expense includes our annual Blend Forum customer event. consistent with prior years, which we expect to drive approximately $1.5 million sequential step-up in sales and marketing expense quarter over quarter. Looking beyond Q3, I want to give you our current view on fourth quarter volumes. Fannie Mae's most recent forecast is calling for roughly flat market volume in the fourth quarter. As I mentioned earlier, that forecast may get updated at some point, but for now, our own outlook is a little bit more conservative, and we expect total market size of 1.105 million to 1.165 million units, or down about 11% year-over-year at the midpoint. Against that backdrop and factoring in the final tale on the roll off of the large customer we've discussed on prior calls. We'd expect blends fourth quarter funded loan volume to be approximately 180 to 190,000 loans. down approximately 10% to 15% year over year.

While this is our current best estimate, I should note that the macro backdrop remains highly fluid and sensitive to rates. Finally, on autopilot, as you heard from Nima, we are very excited about the early commercial momentum, but we continue to encourage you to be cautious about incorporating autopilot revenue into your models at this juncture. We plan to provide additional information on the potential impact to our model as customers and prospects move through the funnel and we have more time under our belt. In summary, we delivered the quarter we aimed for. Revenue near the high end, profitability above the high end, and a strategic return of capital through our share buyback. The macro remains a headwind, and we've tried to give you a clear view of how we see volumes in the market. But the underlying drivers we control, our customer wins, our product velocity, and now the commercialization of autopilot, are all moving in the right direction.

And they set us up to reaccelerate growth as we head into 2027.

And with that, let's open up the call to your questions. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.

Your first question comes from Erin Kimson with Citizens. Your line is now open. Please go ahead.

Oh, great. Thank you. Nima, last quarter you commented that you thought agents And autopilot provided a path to potentially see 10 to 15% incremental revenue growth in 27. Given you're now a month into selling the one-year flat rate autopilot contracts, you've got six lenders signed, and the commentary on it takes a little while to get through governance at large financial institutions, does that sentiment hold today?.

Yes, I don't wanna give any additional further guidance there, but yes, the pipeline is both good in terms of what we sign, but also I would say, a large number of our largest finance. I think the thing that surprised me last quarter and this quarter was how much our largest financial institutions were leaning in. And I'll give one anecdote about that, which is, that some of the biggest banks in the country, it's always been an executive priority, But the way we're seeing the business line and the tech lines at these places push the rest of their organization to get this into place has been surprising to me. I mean, it takes a lot to go and say, we really need to make this happen for our business, but they're doing that. I think that's why our largest customers are leaning in. Some are in either late- stage trials with us or in final approvals with their internal committees. But like I said, those things take time and were very excited about it.

And probably more importantly, and I sort of said this quickly in the prepared remarks. But the early numbers from autopilot, man, I mean, we have, you know, about 50,000 loans that have gone through in the last few months. We get to see some of the differences between the numbers before and after for those lenders. It's really cool to see, especially given how early it is and the dual tailwind we have of our own work accelerating and the models getting better, our own work around the harness, I should say, accelerating, and then the models that are underlying it getting better. the way that we've set this up is to become this compounding machine for us. And like I said, it's early, like I said, it's early, but you know, the early signs are more encouraging than I would have thought if you had told me in January of this year, we're going to be creating this product from scratch and here's where we are six months later.

Understood. Yes, I think that chart on slide eight with the cumulative loans process every two weeks is fairly compelling. And then the second question I have, for Blend 3.0, how do you think about the balance between faster innovation and better products versus OpEx leverage? That's one of the main questions I get from investors, I guess. Based on today's update, when does the 3.6 times increase in pull requests turn into either revenue or operating leverage?.

That's a great question. I think some of the revenue side is answered by even the previous answer I gave, These products, they take some time to become a reality in a market as regulated as this. It's part of our moat actually, and that we have these great relationships with these customers that bet on us and give us right of first refusal on their hardest problems, which is in this case, it's their operations of how do they underwrite and process this mortgage is better, faster, and cheaper. But it does take time. That's why I kept focusing on, I focused our team internally on the medium term, which is 2027. As these deals mature, as they get live and they get at scale, how do we use that as a weapon for us, but not focus on how do I drive immediate today results at the expense of maybe 2027 and 2028 results? And that's the beauty of being a profitable company right now in this terrible mortgage market with the macro working against us is that we can focus on the medium term and long term, which I know our investors care so much about. Like, what does this company look like, you know, with an agentic? core product that's driving a lot of the growth and with a macro that comes back to life, what does it look like in that environment? So we're very focused on that. I'm proud of the way the team is executing in this moment. Obviously, there's a lot more work to do for us.

And just the level of focus and intensity that the team has put in place around these have been great for me to see as someone who's obviously been here from day one.

Thank you. A reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. Your next question comes from the line of Pilev Saini with Canaccord Genuity. Your line is now open. Please go ahead.

Good afternoon. Thanks for taking the question. First off, Neema, it's great to see the impact Autopilot is having on the mortgage side. I'm just wondering, is Autopilot also available? to your consumer banking clients, and maybe you can speak to the opportunity there if there are any updates and I'll follow up.

Yes, it's built into our platform. And so, you know, we have the baselines in place to support all of our customers, which they're excited about. It's a big request we get from our customers of how can you help some of them have multiple product lines with us? How can you help this other business line that's still manually verifying IDs or forms that get filled out and sent to them? And so we do not have that live yet, but I'd say stay tuned. It's something that we're thinking hard about and we have some early customer engagement around. And just to share a little bit our approach on building products like this is pick a few Lighthouse customers, drive it deep with them, prove the value, and then expand it to the market shortly thereafter. And I don't mean over the course of a year. I mean over the course of a quarter or two and drive that as quickly as possible.

Got it. And you mentioned two deals in the credit union channel. Maybe we can get an update on the channel in general and what the pipeline there looks like. Thank you.

Yes, we don't have a specific breakout of credit union versus bank versus independent mortgage company or other financial institutions. But I can say, I mean, we have such a good base of customers with some of the largest credit unions down to medium and community credit unions. And they're the ones who are, I'd say, of the segments we have, they're very member self-serve first. And so they're very aligned. to our sort of product principles of how do we help someone who's applying at two in the morning get a full approval? You know, the rapid suite that we talk about is a great example of this, you know, alongside autopilot, especially how do we help someone get a full approval and offer initially, and then a full approval in the middle of the night. I think that's what, that's what makes us so aligned with this segment is that they, they just want to serve as many members. as they can. They love the self-serve member experience and it fits really well with our product sort of vision long-term.

Thank you. That's all for me. Your next question comes from the line of Ryan Tomasello with KBW. Your line is now open. Please go ahead.

Hi everyone, this is Juan Chong on for Ryan. Thanks for taking the questions. I just want to double click on Jason's comment on the uptick on chart notices in the quarter. You know, I understand that the impact is pretty small, but could you share a bit more color here? Are these going to be like the AI native point solutions that have just gone on the market or maybe customers are.

or moving to build-in house? No, it's a good question. Really, we saw people going to existing low-cost providers. And it's hard to call it a trend. We don't have enough data points yet, but one of the things I would say is look, We're suffering a little bit with this rate environment and the macro and what that's doing to mortgage volumes, but our customers are suffering at least as much. And they're looking for ways to save money and it's a tough environment for them as well. So I think that's what we're seeing in the few cases that we've had.

Yes, that's helpful. I have a follow up. Just one of the broader trends across the mortgage market has been market share shifting towards the broker channel. How do you think this could affect blend and where do you think trends are going?.

Yes, we've noticed that over the past few years, actually, not a short-term trend. It went from maybe single-digit percentages to 15-ish, maybe up to high teens percent in the broker channel. But the thing I would say is I think our customers... whether it's IMBs of all sizes or banks of all sizes or credit unions of all sizes, you know, I think that a lot of them are leaning into this market. One thing that I hear, the ones who are our customers, even going back to the last question, you know, The ones who are our customers are the ones who are betting on the future and betting that as they get these new technologies in place, as they make the most of our system, the most of the other systems they have in place, going to keep growing. And so I'm seeing, I'd say this year especially, maybe 2025 and 2024, people were getting their house in order, just like maybe we were. But this year, especially, we're seeing people in our customer, companies in our customer base, say it's time to invest in the future. I think that that was probably a part of the cause of some of the shift to other channels, where maybe some companies couldn't invest in 2023, 2024, or part of 2025.

But as the market is stabilized, I think our customers are investing in the future. So I can't speak for the market as a whole, but I can say for our customer base, people are really leaning in. They want new solutions. They want to be able to serve their customers better. They want to have better internal operations. And so our customer base given how much they're focused on improvement, I think that our customer base is going to continue to win in this market.

Got it, yes, that's super helpful, thanks. A reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. Our next question comes from the line of Dylan Becker with William Blair. Your line is now open. Please go ahead.

Hey, Nima, Jason, Meg, appreciate it. Nima, for you on autopilot, encouraging early interest, but wondering, and you gave some good statistics around the improvement and pull through reduction in cycle time, and each of those on an individual basis is compelling, but wondering how you're thinking about your opportunity to kind to orchestrate the entire funnel of the workflow. And all of those kind of individual points compounding on each other as it pertains to customer ROI. maybe how that's driving conviction and the autopilot strategy and really what's differentiated from some of those potentially alternative tools or capabilities here.

Yes, and maybe just to give some color, because I think this is a really profound question, just to give some color on how typical solutions in the market that I see, and I see a new thing pop up, whether it's from an existing back office or middle office player, or even from others who are in our space, and a lot of what they do is they take the an existing process and they layer on something new. Like, you know, you have a document that was uploaded, create a button or, you know, a little entry text box on that document to say, hey, did this document meet the guidelines? And that's basically saying we think the existing process needs more intelligence built in, which is the exact opposite of how I view this concept that I've talked about now for two quarters around the background worker agency, the ambient intelligence that I referred to in past quarters. And it's the antithesis of autopilot, in fact. And so I think you're spot on with your specific comment around how do we orchestrate the entire process. And a lot of what I have worked with our team on in terms of the vision for autopilot and especially coming together with rapid where rapid gets you a real time offer and then autopilot should get you in that first session from that real time offer to clear to close. Like that's where the market needs to go where a consumer can come through and have a self driving process where they get a great personal. personalized offer and they're ready to close. And that was all done at two in the morning.

And that's all possible today, regardless of existing infrastructure out there. It's sort of, you know, the beauty of autopilot being an open harness that can hook into our system or any other system is it doesn't care what systems are in place. It's just saying, this is the work that needs to get done. Let's get this done right now. And it's not there yet in terms of of getting a customer, you know, an offer with Rapid and then all the way to clear to close in autopilot. But that's the direction that it's heading. And we're going to keep working until the loans are ready to close at 2 a.m. in the morning.

And, you know, with the system checking checking every document, requesting new information, working with the consumer in real time to get that information. I mean, that's the direction intelligence is going. There's no reason in a market, in any market like this. You know, on a credit card, it would be confusing if you had to wait 48 hours or two weeks to know if your credit card application was approved. approved. And there's no reason that in this market, now that this technology exists, that that should be the case. And I'm saying this as someone who's been working in this market for 14 years and truly understands the depth and complexity of processing thousands of pages of guidelines and hundreds of pages of loan documents and the way the autopilot harness is set up to do that in a contextual. incremental underwrite or underwriting sort of assistant, if you will. I mean, that's the type of thing that I think is possible now.

And that's what we're driving towards. And that's where this compounding benefit, you know, to use your words, will come into play for our customers who will be able to do things at rates that they didn't think were possible.

Got it. Very helpful. Thank you, Nima. And maybe a quick one for Jason. Appreciate the color on the mechanics of of the outlook, if we look at EVPFL, that's brought into queue expected to kind of step up, I guess, just clarity around how much of that is kind of the mechanics of, lower volume uplift versus maybe incremental product cross-sell. And I know we're not saying autopilot is layering in any capacity, but.

if at all any extent the best driving some of that uplift as well. Thanks. Yes. I mean, our volume expectations aren't that much different for for Q2 and Q3, so I think I think it's mostly just the dynamics in the business. Obviously we're not guiding to a very different number. It's not a big change either way. So I would think about Q2 and Q3 as sort of steady state with each other.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, everyone. Thank you for joining us, and welcome to Blend Labs First Quarter 2026 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to management for prepared remarks. Please go ahead.

Good afternoon, and welcome to Blend's financial results conference call for the first quarter of 2026. I'm Meg Nunnally, Blend's Head of Investor Relations. Joining me today is Nima Ghamsari, our Co-Founder and Head of Blend; and Jason Ream, our Head of Finance and Administration.

Before we start today's call, I'd like to note that we refer to certain non-GAAP measures, which are reconciled to GAAP measures in today's earnings release and in the appendix of our supplemental slides.

Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial measures we'll discuss today, including our profitability, refer to non-GAAP.

Also, certain statements made during today's conference call regarding Blend and its operations, in particular, our guidance for the second quarter of 2026, other commentary regarding 2026 and our expectations about markets, our strategic investments, product development plans and operational targets may be considered forward-looking statements under federal securities laws.

We caution 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 differ materially from those described in these statements.

Please see the Risk Factors we've identified in our most recent 10-K for fiscal year 2025 and our other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. The financial information presented on this call is based on continuing operations and prior periods have been recast to exclude operations that are now discontinued.

Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call and an audio replay will also be available soon after the call.

I'll now turn the call over to Nima.

Thanks, Meg, and welcome, everyone. It's been a whirlwind 2 months since our last call. We reported our Q1 numbers today, which Jason will spend time on, but came in higher on revenue and non-GAAP operating income than expected. We also signed 15 new deals and expansions in the quarter, including an eClose deal with a top-20 bank, along with a new mortgage deal with another top-100 bank.

Our pipeline as of March 31st is up more than 40% year-over-year. And that doesn't include the Autopilot pipeline which I will cover in a minute.

But the world has shifted underneath us in those 2 months, increased global conflict, inflation and a rise in mortgage rates. And that leads me to be a little conservative in the short-term numbers. But I am incredibly optimistic about the future.

My optimism comes from 2 things, and they are both tied to artificial intelligence. The first is Autopilot, which is our AI agent and orchestration layer we put right alongside our customers' work as they work with consumers.

The second is the agents we are building inside Blend, which are starting to do our own work. Together, I believe these 2 pillars give us a path to see 10% to 15% incremental growth already for us in 2027 on the top line and more efficiency and speed as a company internally.

Let's start with Autopilot. For those new to the story, Autopilot is our flagship AI agent. We unveiled it and rolled it out in beta almost exactly 2 months ago, telling our customers they could use it for free and try it out for all of Q2 to see it in action and help their business.

As of Monday, May 4th, 65 lenders have activated Autopilot, 22 are running it live in production and over 7,000 applications have already been touched by Autopilot since we moved to live production.

And we're seeing their early results are improving, both in cycle time and in conversion rate. Two of our largest lenders are actively implementing Autopilot right now with go-lives planned for Q2 and we have 3 more top-20 logos in our net-new pipeline that we expect Autopilot to be a meaningful catalyst for closing those new logos.

In total, we're already sitting on $10 million in pipeline because it solves a real problem for our customers and the consumers they serve. But the more important story for me and for our company and for our customers and our shareholders is how quickly that product is evolving. We've been publishing details for our blog every week and there are 2 that I want to call out.

The first is Autopilot chat. That was rolled out about a month ago, a conversational interface where a borrower can ask Autopilot questions about their loan in plain language as they're going through the process. What documents are still needed? Why do you ask me for this specific thing? Why does it matter in my situation? What happens next?

Instead of a static task list or making a phone call, the borrower can have a real contextual understanding of what's going on to help them through the process. This is the kind of interaction that consumers are trying to expect and we are right on top of it.

The second is something I'm even more excited about, which is Autopilot MCP. That opens up the Blend Platform so that our customers can build their own agents on top of Blend or use Blend in a headless way in their existing workflows and still get the benefit of all the compliance, all the data model, the workflows, all the native integrations we built and the intelligence layer of Autopilot.

One of our large mortgage company customers has already built a voice agent using it and I'm seeing this really important and really promising for our customers who want to own more and more things they can do, but to move really fast. And that pattern, customers innovating with us and around us rather than instead of us is exactly what we want and exactly what we expect to see more of going forward.

What this all adds up to is something I think is really powerful. Our customers can now see a path from initial borrower touch all the way to clear to close without a team member ever having to touch a file. Now they still can work on the file, but they won't have to.

That is fundamentally different value than we could ever offer before or the industry could ever offer and something that I dreamed of being able to offer when I started the company in 2012. And now Agentic AI has made that dream possible.

And on top of that, 8 weeks in, we're shipping at a cadence that Blend of years ago and most enterprise software companies would measure in quarters. And every one of those updates is ground on what our customers need, what they're telling us they want and how we could help impact and improve their business.

With adoption well underway, let me give you an update on how we're going to monetize this. Autopilot has been in preview to date and our priority has been getting real customers live and proving the value.

Starting at the end of June, we're going to move to paid tiers. Now just like any modern software company, there's going to be some base capabilities just built into our workflow that are going to provide intelligence, like did you upload the right document. But -- and that's useful. That's going to lower some friction for consumers to get started and understand AI.

But the paid tiers are where the full product lives, what we call underwriting intelligence, where Autopilot is reading the documents, taking real action on the loan file, running calculations, reconciling against guidelines and driving the work forward.

Over time, our intent is to move the paid tiers of Autopilot to a per funded loan model, just like the rest of our mortgage suite. It's the right long-term structure. And our customers like that because it allows them to see and track the value on a per loan basis and we get paid when they make a successful loan.

And so that's a great product for us. It's a great alignment for us with our customers and it incentivizes us to make sure this is providing real loan level funded value improvements. When Autopilot helps a lender fund more loans with the same number of people, our revenue scales with their success, not with their headcount. And that is how we've always built Blend and that's even more important today in agent-first world.

We're going to continue to provide updates on Autopilot as more customers sign on, but I want investors to understand this is not a small incremental line item for us. Autopilot is a whole new leg of growth for the company on top of the great mortgage and consumer banking suites that are already growing and we plan to keep growing it.

Before we move up Autopilot, I want to spend a minute on something that I think is really important and I keep getting asked about from investors. The billion-dollar question is, where does the durable value in enterprise AI actually accrue?

This is an ongoing debate and it's important to understand where Blend fits and where -- how I see this. For the last couple of years, the focus of the industry and the world broadly has been on the foundation models, which model is the fastest, the smartest, the best in benchmarks and the cheapest and that focus is understandable.

But as models converge in capability and keep innovating, the durable value is shifting up the stack to the orchestration layer between the model and the workflow to the area of what people call the harness and the thing that's driving actual end business outcomes.

The harness, to put it clearly, it's a system that channels the engine and all the tools around it into a reliable, controlled outcome, which is so important for an industry like ours like financial services. And the data and the documents and the specific context of any moment is the fuel that makes any of that work actually useful.

And Autopilot is exactly that. It is not a model. And Autopilot use the best available models underneath. And instead, it's the orchestration layer that decides what to do given that exact moment in the loan, it retrieves the specific guidelines, gets the full context of the loan, runs the right calculations, validates the outputs against investor and regulatory requirements, updates the loan file and triggers the native Blend workflows that move the file forward.

That logic is specific to that exact loan and exact consumer in front of it and it's the kind of work that generic AI is not built to do. It needs a system around it and that's where Autopilot fits in.

And Autopilot MCP just takes that to the next level. It allows the Blend Platform users to build their own agents, or even build -- work with Blend in a completely headless way, which means the harness becomes a platform for them to move really fast because they get all the regulation, the compliance, the integrations and the Autopilot intelligence out of the box and they can build their own experiences and their own agents around that, which is just a meaningfully different level of importance because now you become more of the engine, the powered by instead of the interface.

And that's where agents can be really powerful. And that compounds more as we open up more capabilities for our customers to build faster and on top of us. And that is why I get more confident every quarter about where Blend sits in the AI landscape.

We are the vertical industry harness for origination. We have the proprietary data to make that harness work. We have the business model already to help capture the benefit of automation and still get most of our -- the benefit to the customer and hopefully the consumer, but that's the durable place to be. And that's why I'm excited that's where Autopilot is.

And yes, so we're bullish on our first pillar, which is agents for our customers. But I'm even more bullish on something which is what our internal work, how we're using agents there. And so over the last few months, we've been building something that we're boringly calling Blend Background Agents. It's not a new idea, but it's a simple idea.

Any time we get an input from the outside world, it could be a ticket, a customer issue, a feature request, before that reaches a team member, we want an agent to take the first pass of that work and do action, take action on that. And the team member reviews and approves it.

And in practice, that could be something like a ticket comes in that outlines a bug in our system. An agent immediately picks it up from our support queue, looks at it, identifies the bug, writes the code to fix the bug, tests the code to make sure the bug is now fixed and then send it to a human and says, "Hey, I had to change these 10 lines to 50 lines of code, can you approve this?"

And that moves our team from manually driving the car and making the turns and figuring out how to get from A to B to playing air traffic control with hopefully dozens of cars. And so to support that, we've given our agents access to our internal tools, our entire code base, the ability to stand up environments. And they will now take up the first pass before our engineers, our support team ever see that issue.

When I look at the numbers, the new process of how we're adopting AI at Blend has already resulted in more than 1.5x productivity in 2026 versus 2025 based on number of pull requests our engineering team is doing. And we're just getting started with that.

Prospects and customers are already taking notice of how fast we're moving. I get notes from customers all the time. And I've been on site with our biggest customers in the last month and I can tell you that momentum is palpable. Our customers have noticed a change in our quality and speed.

And I want to be clear, this is not a one-team experiment. This exact same pattern of agents doing the first pass of work should apply to every role in every company and specifically in Blend, it will apply to our roles here. And that could be something like onboarding a new customer, preparing for a customer business review where we're going on site with them or even something as esoteric as getting a manual Excel worksheet that comes in that outlines what loans have been funded for our accounting team, doing that work before our accounting team has to pick it up.

I said on the last call that we aim to be in the top 1% of all companies in terms of Agentic AI adoption. And I really meant it. We're going to do it. It's something I'm very passionate about and we're going to keep driving for that.

When done, I believe this effort, combined with Autopilot, that's created the path to 10% to 15% more top line growth and a lot more efficiency and speed for us. And that speed is probably the most important thing for any business and especially for a company like Blend.

Means more customer issues fixed, more great features developed, more things like we've done with Autopilot, continue to grow Autopilot, faster time closing a quarter, better preparedness for customer business reviews, these will be the new Blend.

To wrap up, transforming a company of our size into an agent-first company is definitely more work and more complicated than the world understands, but it's worth it. We have a really important mission.

Our customers serve millions of consumers across the country every single year. So this change cannot come fast enough. We are taking it as fast as we can and we feel like to be quite candid from my perspective, the best positioned company in the space. It is something that I spend a lot of my time on and the team is even more passionate about.

So while the war and tariffs and oil and all those things might have to create some conservatism around short-term mortgage market numbers because the macro and the rollout time for what we're building might also take some time, I have never been more energized about kind of the medium term and hopefully even the long term for our customers, our team and our investors.

And with that, I'll turn it over to Jason to walk through the financials.

Thanks, Nima and thank you to everyone else joining us on the call. We delivered a strong start to 2026 with both revenue and non-GAAP operating income above the high-end of our guidance ranges. Revenue grew 15% year-over-year and our non-GAAP operating margin expanded to 13%, reflecting growth across the business and reflecting the operating leverage we have continued to build into the model.

Total revenue in the first quarter of 2026 was $30.8 million, above the high-end of our guidance range, driven by growth in Mortgage and Consumer Banking alike. Mortgage Suite revenue was $17.2 million, up 18% year-over-year.

Funded loans on our platform were approximately $187,000 in Q1, up 29% year-over-year and slightly better than we had assumed coming into the quarter. That strong volume growth was partially offset by a lower year-over-year economic value per funded loan, which came in at $84 in Q1, within the $84 to $85 range we discussed on our last call.

We are at the lower end of our range, primarily because of higher mortgage volumes, which mechanically lowers the per loan economic calculation given some of the fixed fee arrangements that we have within our customer base.

Consumer Banking Suite revenue for this first quarter was $10.8 million, up 12% year-over-year and consistent with the color we shared on our last call. Professional Services revenue for the first quarter was $2.9 million, up sequentially from $2.1 million in Q4.

Of the $2.9 million in Professional Services revenue, approximately $600,000 related to work completed in prior periods that was recognized this quarter under our revenue recognition policies. We would not expect a similar catch-up amount in future quarters.

Turning to profitability. Non-GAAP gross profit was $24.8 million and our non-GAAP gross margin was 80.3%, up from 72.9% in the first quarter of 2025. I would note that gross profit in the quarter benefited from the PS catch-up that I just mentioned as well as some one-time cost of revenue benefit that together brought gross margin for the quarter up by about 2 to 3 points. Please keep that in mind as we think about modeling gross margin going forward.

Non-GAAP operating expenses were $20.7 million in Q1, up 10% year-over-year. As a reminder, the year-over-year comparison reflects the change in our internally developed software capitalization methodology that we discussed last quarter, where we are capitalizing less of our R&D personnel costs than we did in 2025.

This is an accounting treatment change rather than a change in the nature of our R&D investment. As a result, the reported R&D looks elevated on a year-over-year basis, an effect that will persist to some extent throughout 2026 until we lap prior year periods.

Non-GAAP operating income was $4.1 million, above the high-end of our $2 million to $3 million guidance range and representing a non-GAAP operating margin of nearly 13%, an improvement of approximately 10 points compared with the first quarter of 2025.

Free cash flow for the quarter was $7.3 million compared to $15.5 million in the prior year. We're pleased with the strong cash flow generation and want to remind you of our seasonal patterns where Q1 is typically a strong collections quarter in our business.

And our balance sheet remains strong. We ended the quarter with $59 million in cash, cash equivalents and marketable securities and 0 debt.

Putting our cash to work, we repurchased 11.2 million shares during the quarter at an average price of $1.66 per share under our share repurchase program, deploying $18.6 million of the $50 million authorization we announced on our last call.

As we said last quarter, this program reflects our conviction in the long-term value of the business and our commitment to disciplined capital allocation. With 0 debt and a solid liquidity position, we have the balance sheet to invest in both the business and in our shareholders simultaneously.

Before I turn to outlook, I want to spend a moment on market share and on the macro environment. On market share, the initial release of 2025 HMDA data in early April showed approximately 4.4 million originations for the year, which puts our 2025 mortgage market share at approximately 17%, squarely in the middle of the 16% to 18% range we guided to back in November.

The HMDA data will continue to settle as late filings come in, but we don't expect that figure to move meaningfully.

As we look into 2026, we expect a market share headwind of approximately 100 basis points, primarily reflecting the volume roll-off of one large customer that we have discussed previously. At this time, we don't see any other significant headwinds to our market share.

On the macro side, the spring housing market started on stronger footing than many had expected, supported by improving affordability and slowly rebuilding inventory. That said, the recent rise in mortgage interest rates adds uncertainty to the outlook.

Fannie Mae's most recent forecast calls for total mortgage market growth of approximately 19% year-over-year in 2026, but Fannie reduced both its second quarter and full year 2026 outlooks earlier this month as rates have moved higher.

Our own 2026 view is anchored to that updated Fannie outlook. We will remain cautious in our outlook until rates come down meaningfully and Refi activity picks up. But we have the platform and the customer base in place to capture the upside when conditions improve.

Now let's turn to guidance. For the second quarter of 2026, we expect total revenue to be between $32 million and $34 million, representing approximately 1% to 7% year-over-year growth. Underneath those headline numbers, we expect Mortgage Suite revenue to grow 4% to 10% year-over-year, driven by mortgage market volume growth and partially offset by a year-over-year decline in economic value per funded loan, which we expect to be in the $79 to $80 range in Q2.

The decline in evPFL from Q1 to Q2 is primarily driven by increased volume, which, as I mentioned earlier, mechanically lowers evPFL.

We expect year-over-year Consumer Banking Suite revenue growth to be between negative 2% to positive 4% in Q2. We expect Q2 non-GAAP operating income to be between $5.5 million and $6.5 million, implying a non-GAAP operating margin at the midpoint of approximately 18%.

A few additional notes on what's embedded in our expectations. Our Mortgage Suite business continues to be subject to macro volume fluctuations. And depending on the trajectory of mortgage rates and the broader housing market from here, Mortgage Suite revenue could moderate or even flatten out in the back half of 2026, particularly if Refi activity remains soft.

On per loan economics, Q1 is typically the high watermark due to seasonality, which is why we are guiding to a Q1 to Q2 step-down from $84 in Q1 to $79 to $80 in Q2. In the absence of an uplift from Autopilot, which is too early to quantify and is not baked into any of our expectations, we would expect evPFL in the second half of 2026 to fluctuate with seasonality, but still stay below Q1 levels.

On Consumer Banking, growth is moderating based on the headwinds we discussed on our last earnings call. In addition, we've also seen softer macro-driven volumes on home equity as rates have moved higher.

Combining these 2 factors, we expect single-digit year-over-year growth in Consumer Banking in the back half of 2026, with Q3 growth likely lower than Q4 given the year-over-year compares. And there is macro sensitivity in the home equity portion of our Consumer Banking business. So if rates rise from here, our expectation would be to see additional pressure on those growth rates.

Finally, I'd like to touch specifically on Autopilot. While we are incredibly excited about the potential for Autopilot to generate revenue upside, we'd encourage investors to be cautious about incorporating this into models at this juncture. We hope and plan to provide additional information on potential impact to the outlook as we get past the free trial period and have a little bit more time under our belts.

In summary, we feel very good about the shape of the business heading into the rest of 2026. Q1 marked our second consecutive quarter of year-over-year growth in Mortgage. With churn now stabilized and the partnership model transition behind us, we expect most of the variability in Mortgage revenue from here to be macro-driven.

Cost discipline remains intact. We expect to continue to drive additional productivity and efficiency over the year as AI-enabled workflows compound across our internal processes, an effort that, as Nima discussed, is now well underway across the company. This is indeed an exciting time for Blend. We hope that you're excited to be part of it, too.

And with that, let's open up the call to your questions.

[Operator Instructions] Your first question comes from the line of Ryan Tomasello with KBW.

Nima, in your prepared remarks, you mentioned that Autopilot and your AI initiatives present a path, I think, to what you said was 10% to 15% more top line growth. Can you just put a finer point on what you mean by that and what underpins your confidence in quantifying the benefits at this stage?

Yes. Great to hear from you, Ryan. I mean I'd say -- I'd start with our current pipeline. Our current Auto pipeline is about $10 million. We've only been in the market for just over a month now with pricing with our customers and we have a lot of customers who've turned it on, really positive feedback we're getting.

I mentioned 2 really -- 2 very large go-lives with customers. And so if we can keep up that momentum, I think of it as 10% to 15% incremental on top of whatever other growth you may be forecasting coming from Autopilot is what we're -- as we see a path to right now. And so we obviously have to keep executing. We have a lot of work in front of us, but the product is awesome and our customers love it.

Great. And then maybe just turning to Consumer Banking. Given the noise in that segment from the large customer churn, maybe you can just help us understand where the underlying revenue growth is running in that business? Both for 1Q -- and then just at a higher level, based on the data points you've given previously about, I think, it was a $2.5 million impact from that large client in Consumer Banking.

It just seems like the growth profile there is coming in a bit weaker than what was initially hoped for. So Nima, just your broader commentary around how you feel about the strength of that business going forward.

Yes. I'd say yes, the biggest impact is from that large customer and they had a pretty big Consumer Banking line item that you called out. And so -- but I'd say on the positive side, we have some very good-sized financial institutions going live with our wall-to-wall suite this year. Those rollouts are in progress. And so we're excited about that. And once that hits, I think that will be a positive benefit.

And then we also have great customers rolling out our rapid home equity product as we speak. And that's another -- that will be another positive catalyst for us as that happens. And so obviously, the home equity market has other macro things as well that are going on. But there's enough new things that are happening on the Consumer Banking side broadly that makes me feel really good about the Consumer Banking business.

Your next question comes from the line of Dylan Becker with William Blair.

Nima, I appreciate all the color on Autopilot and Autopilot MCP, I guess. It sounds like, obviously, a lot of customers here are interested in piloting. I think you called out some of the early proof points around improved cycle times and conversion rates.

I wonder if you could kind of provide a little bit more color on like what that looks like relative to a non-automated process to kind of just tangibly put some value on what customers are seeing and learning. And then maybe how you're also thinking about the deployment or utilization of the first-party agents versus kind of some of the MCP-enabled agents and maybe the economic variability between those.

Yes. So on the impact, there's 2 anecdotes I'll share for 2 of the customers who have been sort of the biggest users of it. We help them track the cycle time and the conversion.

The conversion is less obvious why the conversion is. And so I actually have talked to one of our customers about this. I'll get to that in a second. The cycle time with one of the customers, for example, from application completed in Blend to closing docs being sent to the customer or closing disclosures, I should say, being sent to the customer, it went from 29 to 21 days in one of the customers that we had.

And that's a pretty meaningful improvement in their cycle times. And it makes sense, I think, fundamentally because customers have a lot of back and forth with consumers.

And what Autopilot does is in real time, as the consumer is in the flow, it finds those things that are going to be that got just down the line. It shows the consumer, hey, we noticed that this account is in the name of a trust, we need to get your trust documentation right now versus asking for it a few days later once an underwriter reviews it and sends it to a processor, which sends it back to the loan officer.

So it sort of short-circuits the process in a positive way to allow the -- our hope with Autopilot plus some of the Rapid products, as you put those 2 things together, I'll call it RapidPilot, you can get an application started approved because Rapid gives you an approval and an offer upfront.

And then once that customer is ready to go, get them clear to close in a matter of minutes. And that's the world we want to enable for our customers and consumers or maybe conditionally clear to close on an appraisal if there's an appraisal necessary for a mortgage.

So I think that's a -- those are some positive numbers. I think where I've been more surprised is why the conversion is so much better. But I guess it makes sense when you can give people more certainty faster, we're seeing good conversion uplift, too, which obviously it's early, but that's even more valuable to our customers because those are consumers that would be walking out the door that you'd spend time and money on as a lender, not just on things like credit pools and other data pulls, but also your team's time and energy that went into that.

So if we can shorten these cycles and make the process of lending more real time, I think it fundamentally transforms the industry.

And one thing I wanted to say about Consumer Banking because we're in the process of building out the integrations to all the Consumer Banking products for Autopilot. I think there's opportunity there.

Now there's fewer manual tasks in Consumer Banking, but there's a lot more volume of those tasks in terms of number of units that these customers do. And so while it may not be worth thousands of dollars a loan to our customers long term in Consumer Banking or per new account, the scale of these things does really matter to them and they have very big operations teams managing these processes. So it's an important thing for them to be able to do a lot more volume with those teams and I think Autopilot enables that.

One other thing. Yes, just reminded of this. The other thing that I think has been a historical struggle and I mentioned this in my prepared remarks, is rates are -- they really drive refi activity in particular. So if you're a mortgage servicer and you have a lot of your volume in refi, your only way to handle large amounts of volume is to scale up and scale -- historically it has been to scale up and scale down teams.

And we don't get to really predict when rates go down. I mean, you try to, but it's very hard to predict when the next new numbers are going to come out, what the numbers are going to be.

And so the ability to create elasticity of workforce when now you have agents that a lender can spin up and spin down alongside their team before their team is doing the work, the agents are taking a first pass, I mean it just changes the economic profile of servicing and recapture of servicing.

I mean, I think for our large servicing customers, which we have many, it's going to change -- I think it's going to change the way that they're able to do business because it's going to allow them to handle these fluctuations in the market even better than -- even more importantly for them than someone on the purchase side.

Makes sense. And then maybe for Jason, as a follow-up to that, too, you kind of called out the per funded loan dynamics and market share dynamics. I'd love to kind of double-click again, if you can remind us, it sounds like you're actually increasing market share with the customer momentum and the customers that are coming online or being onboarded.

But that's kind of working inversely upfront against per funded loan volume. So I guess remind us kind of the mechanics as to that as well as maybe when we would expect that to flip in those 2 tailwinds maybe to work in tandem or in parallel to where you see market share growth inflection as well as per funded loan expansion over time.

Yes. Good question, Dylan. I think we're seeing volume growth, as I mentioned, we had better volume in Q1 than we had expected even coming into the quarter. Part of that is, I think, our customers doing better.

Part of that was the market was a little bit better than we expected in the quarter. And then of course, yes, we're always trying to add share and bring new customers onto the platform.

As far as the per funded loan, putting aside the seasonal variability that comes from the mechanics I talked about, we are, I think, doing a much more concerted effort now to drive growth year-over-year with existing customers.

I think that -- look, things like Autopilot give us better pricing leverage coming into new customer situations. Obviously, that drives its own revenue stream, but it also gives us leverage in sort of the core platform as well.

And then I think Rapid remains a driver as well on the refi side, in particular. And as Nima mentioned, refi is even more sensitive to rates than purchase. And so -- and we don't have a rapid purchase product.

We have a Rapid Refi product. And so as rates come down, we should see a benefit in volume and revenue in that sense, but also as we get more customers up on Rapid Refi, see a benefit in PFL as well.

Your next question comes from the line of Joseph Vafi with Canaccord Genuity.

Nima, just update on the Rapid product uptake, how you're seeing market reaction to them. Obviously, the market backdrop isn't as strong as we'd like, but just some of the feedback you're getting. And then I have a follow-up.

Yes. I would say -- I'd reiterate what I said about this RapidPilot that seems to be getting the momentum and focus from our customers, Rapid plus Autopilot together. It's a lot of what I spend my time on.

I've had 2 on sites with 2 very large banks and lenders in the last 2 weeks about this specific thing that they want to get live in Q2 because in practice, our customers want to be able to -- especially for refis and home equity, they want to be able to make an offer in real time and then they want to be able to fulfill the work they need to get done on that offer in real time.

And so the combination of those 2 things has been incredibly powerful. And on top of that, we have, like I said also earlier in a previous question, we have some very, very large customers going live with Rapid home equity, including some of the top home equity originators in the country.

And so it's definitely a good time in the industry. I'd say if I had one criticism of myself here, it would be how do I make this so easy to adopt that they flip a switch and they turn it on and now they have Rapid Refi enabled in their environment.

I mean that's -- I think, that's a challenge for us, something we're thinking about going into the next couple of months. And we intend to make that happen. But it's something that as we make that happen, our customers will be able to adopt it so much easier.

And that was actually a key learning for us from the Autopilot work and rollout that we did where we made it truly self-serve for a customer to turn that on and we're seeing the adoption. I mean, the numbers that we shared in terms of number of lenders that have turned this on as a percentage of our total, but just think about large financial institutions turning on a new AI agent for their organization with a flip of a switch without even calling us.

I mean, the most surprising part was we had fairly large banks, very large banks turning this on in beta and production without us even knowing about it. And then we found we saw it start to stream through our logs and we said, "Oh, we should probably reach out to them and talk to them about it."

And I mean that's -- not to say we're a product-led growth company. We do like to talk to our customers to help them get the most of our product. But making things easy to adopt is going to be very good for Blend and everything comes back to speed.

So speed of adoption, speed of iteration for our team. If we're able to do those things, which I'm very confident we showed that with Autopilot, I'm very confident we can do that and take that micro culture and micro product, those concepts to the rest of all the things that we do at Blend, then I think we can help fundamentally change the landscape of how our products are used and how they can impact our customers.

And I'll end with one last anecdote that I think Autopilot MCP, this wasn't exactly your question, but Autopilot MCP has unlocked a lot of doors for us because I was on-site with one fairly large customer last week and they had the head of engineering in the room.

And they -- the first thing the head of engineering asked was like, hey, we want to build this into our mobile app. And I was like, great, you now have a way to do that. It's called Autopilot MCP.

You can get all the capabilities of Blend and the intelligence layer of Autopilot entirely in your own environment. And so he was like, wow, okay. And his first question to me, which is like a compelling one, was, can I use this in other parts of my business?

We don't use Blend for these other kinds of loans and you named a couple of other kinds of loans. And I was like, yes, sure, Autopilot works. You can put custom guidelines in there yourself. You don't even need to talk to us and his eyes lit up.

And he asked for -- the first thing he asked while we're in the room, it was a pretty big room, was a copy of the Autopilot document -- Autopilot MCP documentation, which we sent to him itself. And so those are people who have historically struggled with how to fit themselves into this Blend world or fit their tech stack into the Blend world and now we've opened that up.

And we had another really interesting sales call with a fairly large bank and the digital leader came on the call and that's historically another one that feels a little bit displaced by us in sometimes when we're brought in. And his first question was, can I use this with my current digital stack?

And as soon as that -- the answer to that was yes, of course, now with Autopilot MCP, he went from probably being somebody who would be a detractor to someone who was saying, oh, wow, this is actually really interesting. Now I can give new digital capabilities. I can help improve my customer experience in a powered by way that would take months, if not years for them to do internally and building agents that are this powerful and this complex. And so I know that wasn't exactly your question, Joe, but I just was remembering that as I was talking.

Yes. No, it's an exciting setup for sure. Thanks for that color and looking forward to progress on that front.

[Operator Instructions] Your next question comes from the line of Aaron Kimson with Citizens.

Nima, in your conversations, how customers perceive the value that Autopilot is providing today? Do you feel like it's still primarily being thought of as a component of tech budgets? Or are financial institutions increasingly open to viewing agentic products like Autopilot as a component of their labor budgets?

It's interesting. I think right now, companies are figuring this out, as we speak. So they don't know the answer to that exact question that you have. And so it actually goes to how we price this in the short term to allow our customers in the short term to use it both for a few months free of charge.

But even after that, we're going to have sort of flat pricing that's obviously good for us economically, but also good for our customers to give them time in the short term to make the right changes they need to make to their process, their organizations. And so -- but I'd say long term, they're all aligned to the fact that labor is something that doesn't need to be scaled up and down with the volume anymore.

And I was having a conversation with the CEO of one of our large customers. And the idea of being able to scale their organization without having to add thousands or more heads is so compelling.

And so it naturally ends up being a labor question. But I think probably the more important value proposition as these numbers around conversion rates sort of get set in stone and we have better understanding of that, that's going to be even more valuable to our customers because there's so many consumers in this country who can benefit from lower interest rates or equity from their homes or consolidating debt or all these things that are happening that, that has been historically hard for our customers to capture and it's hard for consumers because they have to go through a very lengthy process.

So now if we can make it really transparent with something like Rapid and then really automate it with something like Autopilot, it's going to change -- it's going to make it so that consumers will have less friction in this process and therefore, more consumers will do it and they'll do it with our customers.

Got it. That's helpful. And then one more. You've been working with financial institutions for a long time now. Can you talk about the appetite for adopting new products faster today than in the past? And how they're thinking about build versus buy, the balance between adopting AI products and AI native start-ups versus established software vendors like Blend and then where the Frontier Labs fit in? I think we're all trying to figure this out for application software in general.

Yes. I think we're kind of in this interesting place where a switch flipped sometime in the first quarter of this year, I think, February time frame, where our customers started to realize and maybe it was because of all the Anthropic Claude Code explosion that has happened in the market, they started to realize how important of a transformation this was going to be and they've all put budgets behind AI and AI initiatives because they know it's important.

It's important for their customers. It's important for their users and it's really important for their long-term economics of the business. It can do really powerful things. And I think people are starting to believe that. It was no longer something that they felt was a future 2027, 2028 thing. It was like, well, I can actually do this now.

And so I think it sort of speaks for itself and just the sheer number of our large financial institution customers that have turned this on, turned these capabilities on, on their own and are in active discussions with us or in process with us of rolling out these capabilities broadly. But yes, I think the switch flipped sometime early this year.

And they do sort of think through how do they fit this into our -- into their stack. Is it a company like Blend that's already driving a lot of their work internally and for their customers? Or is it -- are they working with Anthropic or OpenAI or some other company in a sort of a big project in a consulting like fashion?

Or are they working with a small start-up? I'd say in the Blend versus -- or Autopilot versus small start-up, where I view that is because we have so much of the workflow happening in our system already, which are natural entry points to invoke and spin up AI agents and then spin them back down, we have a pretty good advantage there to help move very quickly in those ways for our customers.

And so our job is to make sure Autopilot is the best product on the market for the exact types of work that our customers need to do. And in this case, maybe it's underwriting intelligence like I referenced in the prepared remarks.

And as long as we do those things, I don't think they're going to go to a small start. Like we have to move fast and we are moving fast. And we have to build a great product and Autopilot is a great product. It's doing things that a year ago would have seemed like science fiction to our customers.

And so I think -- and then there's a separate discussion around how do they think about the labs versus the large labs like Anthropic and OpenAI versus someone like a Blend. And I think some of that still remains to be seen. I've heard of really great things the labs are doing with a lot of our customers.

And I think there's so much of the industry that's going to change. The size of the pie is probably a lot bigger than anybody really understands. And the labs won't go in and try to build something into our workflow so that they can drive value for our customers.

I mean, I don't think they would. But even if they would, we're already there. We already have it. And so speed is very important in adoption. And if you have to do a 9-month or 12-month project to get something versus being able to flip a switch, our job is to make that possible.

We have now reached the end of the Q&A session. This concludes today's call. Thank you all for attending. You may now disconnect.

Hello, everyone. Thank you for joining us.and welcome to the Blend Labs Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] I will now hand the call over to Meg Nunnally, Head of Investor Relations. Please go ahead.

Good afternoon. and welcome to Glenn's financial results conference call for the fourth quarter and full year of 2025. I'm Meg Nunnally, Glenn's Head of Investor Relations. Joining me today is Nima Ghamsari, our Co-Founder and Head of Blend; and Jason Ream, our Head of Finance and Administration.

Before we start today's call, I'd like to note that we will refer to certain non-GAAP measures, which are reconciled to GAAP measures in today's earnings release and in the appendix of our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial measures we'll discuss today including our profitability, refer to non-GAAP.

Also, certain statements made during today's conference call regarding Blend and its operations. In particular, our guidance for the first quarter other commentary regarding 2026 and our expectations about markets, our strategic investments, product development plans, and operational targets may be considered forward-looking statements under federal securities law. We caution you that forward-looking statements involve substantial risks and uncertainties and a number of factors which are beyond the company's control, could cause actual results, events or circumstances to differ materially from those described in these statements. Please see the risk factors we've identified in our most recent 10-Qs, our upcoming 10-K for the fiscal year 2025 and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law.

The financial information presented on this call is based on continuing operations and prior periods have been broadcast to exclude operations that are now discontinued. Furthermore, the financial information presented reflects preliminary estimates and remains subject to completion of the company's financial closing procedures and review by the company's independent registered public accounting firm. Financial results will not be final until Blend files its annual report on Form 10-K for the period.

Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call and an audio replay will also be available soon after the call. I'll now turn the call over to Nima.

Thanks, Meg, and welcome, everyone. I'm pleased to report that Blend finished fiscal year 2025 with a strong fourth quarter, coming in near the high end of our revenue guidance and beating the high end of our non-GAAP operating income guidance. But the headline numbers, $32.4 million in revenue and $5.4 million in non-GAAP operating income tell a more important story. They show that we navigated the cycle successfully to emerge as a fundamentally different company.

Our consistent performance is not an accident. It is the direct result of the focus and discipline of the entire blend team. By maintaining a lean software first cost structure, we have created significant operating leverage. We are generating cash, not spending it. We ended the quarter with 0 debt and over $68 million in cash and securities. We have such conviction in our intrinsic value that we repurchased 5.1 million shares worth $15 million in Q4 alone. And our Board authorized a new program that allows us to repurchase up to another $50 million in stock and we'll continue to strategically execute against this authorization. We are now in a position where we can lean into offense, ensuring that as the market recovers, benefits flow directly to our customers and our bottom line.

Let's start by talking about our customer wins and strategic expansions. During the fourth quarter, we signed 10 new deals and expansions. As we look forward towards a potential market recovery, we are seeing a fundamental shift in how financial institutions view their technology stack. And our focus continues to be on winning high-quality logos and deepening our relationship with our existing base. In Q4, we saw notable activity across both mortgage and consumer banking suites. Along those lines, deals included 2 new notable new mortgage customers, 1 of which has been a consumer banking customer since 2023 and represents a great motion for us, a cross-sell from consumer banking into mortgage. Both deals include bundled mortgage and close and should be incrementally accretive to our unit economics.

And in Consumer Banking, notable new deals include rapid home equity cross-sell for a large bank which -- this has been a customer with us since 2020 using our flagship home equity product, but now it allows them to use rapid workflows in other parts of their process like prequalification. We also signed a new logo with a top 40 credit union with product scope across credit cards, deposit accounts, personal loans and auto loans, highlighting the ability of our consumer banking business to bring a new 7-figure per-year logo in addition to selling into our existing mortgage customers.

Looking ahead, our overall pipeline remains robust, which is up about 40% year-over-year. And it's not just the volume of the pipeline that excites as with our new focus, it's the composition. We're seeing a structural shift towards bundled deals and that means that we have opportunities that span mortgage, rapid, close and consumer banking. Momentum we're seeing now is fueled by our customers' desire to build more scalable businesses. Lenders are exhausted by painful hire and fire cycles and by stare and compare and manual work dictated by interest rate volatility and consumer -- state of the consumer, and they're no longer willing to ride the highs and lows of the market by simply adding and removing human labor. They want a technology company that can automate the intractable complexity of lending, which will lead to them having elastic capacity, the ability to handle volume spike seamlessly without adding fixed human overhead. And that turns their businesses into massively efficient businesses that can be 10x efficient as they are today. But the numbers and our customers and our products and our financial results to date, they only tell the story of where we've been to date.

So I want to spend a moment on where we're going because this is an area of personal passion for mine. I've been deep in tech since I was a kid. I was building computers and building programs and building games from my childhood. And when we started Blend, we didn't build Blend just to be a slightly better way to do mortgages. That was a great application form and a great way to ability to close the loan digitally. We built it to completely rewire how the financial system operates and how origination is done. And then as we expanded into consumer banking, the same approach, we wanted to make those processes as beautiful and as streamlined as they could be. But that's a difficult problem. That's been an intractable problem because technology to solve such complex regulated originations is not a trivial thing to build. And as a result, as I look at that, and I look at the market turmoil recently as investors are grappling with how AI will impact the software industry, which people are calling the SaaS packalipse. And we're seeing valuations battered as the market worries about AI and how it will commoditize traditional SaaS and destroy seat-based pricing models. I view this completely differently than them.

I view this as the greatest filter of our generation. There's a brand-new frontier technology available to us. That's going to bring some transformation. But it's not going to be a generic approaches and generic AI wrappers that win in these highly regulated industries. At Blend, we operate and we have operated deeply within the origination space, the revenue generation funnel of financial institutions of all sizes, some of the small ones and some of the largest ones in the country. For them, we're not just a user interface, we're a trusted secure workflow system of record that reconciles immense complexity across some of the most complicated financial products in the world. And critically, for us, operating at this depth means we continuously are collecting and analyzing and storing data on what's going on in the loan and how it can move along in the process. And that's something the combination of our expertise and our passion around this frontier of technology is something that no competitor can replicate.

So I think this is a rich body of structured financial data, including borrower behavior, document processing, underwriting processing, and that sits entirely within how we collect documents, how we process these documents, how we process closings in the Blend flow today. And that compounds over time. That will make our customers smarter or AI smarter, our platform smarter and stickier for our customers with every single transaction that flows through it. And for our business model, because we monetize the success of our customers, which was always somewhat controversial. People loved seat-based models in the last decade. We've always been a success-based model, and that's a funded loan based model rather than user seats.

AI-driven efficiency in a success-based model is exactly what our customers want and what we want and what you, as our investors want. We want to find a way to drive more success for our customers. So if that loan officer closes 5x as many loans, they're more successful and our revenue scales with their success. That's how we've always built this company from the very first day and not their headcount. Growing their head count is not a sign of success, growing their seats is not a sign of success for our customers. The , as they call it, that's happening right now, I think of that as our greatest catalyst. And we're using this moment to stay aggressively on offense in 2 distinct ways. And I always like to start with our customers first.

So first, we're going on offense to make the products we deliver to our customers, agent first. And by agent first, what I mean is that the agents are taking a first pass of every single piece of work that's done behind the scenes. And so that means when a new piece of data comes in, a new document comes in, something that's updated on the file, agents take a first pass of underwriting, security, compliance, regulatory checks, all the things that happen manually today behind the scenes that our lenders are required to do, we want the primary way that our customers engage with their customers to be like -- to be this new way where agents are taking a first pass and the humans that live there at our customers are the oversight layer to make sure that agents are doing the right things and checking the right things.

And in this industry, which requires absolute precision, security, compliance. Blend has been a trusted and is a trusted enterprise-grade bridge to AI adoption, agentic AI adoption. And while I think really highly of the generative AI models that are out there and the foundation model companies as thoughtful knowledge bases and delivering really great tools around building agents. What Blend has built is to drive the right outcome from the right actions. And that's especially important in a heavily regulated industry, subject to fair lending laws, and our customers can't afford hallucinations and they -- the calculations around things like income and income verification have to be perfect. And they have to know when they have to jump in to oversee what the AI does.

They need a system that doesn't just look at documents and make sure they're the right document, but actually understands the documents and reconciles those documents against complex 100-page or 1,000 page guidelines that are imposed on them by the credit risk teams, by regulators and investors. And that's a moat that I don't think generative AI companies really want to cross. I think they want to be the tooling layer. It's so specific to the industry. And so that's where I'm excited. It gives us an opportunity as an existing workflow layer for our customers to really step in.

And so just a few days ago, exactly a week ago, in fact, on March 3 we officially launched our flagship product in this space called Blend Autopilot, which is simple. It's an agent that lives alongside every aspect of the blend origination process as the customer is going through it. And it serves as the product that looks at every data field, every document. Checks it against guidelines, runs calculations, creates additional follow-ups, takes action, if necessary, on that file. Generates artifacts so the customer can see all the work that's being done. And it's familiar with the most technical guidelines out there that some of them are 800, 900 pages long.

I'm thrilled to share that we now have 7 large customers who have turned us on or wanting to turn this on in the coming days, and that's just within a week of us launching it. That's in the preview period. And so we're very excited about that. And that came on the backs of -- we have a small group of customers that serve on our Customer Advisory Board, which was last month. And we previewed this for them before our public launch last week. I have to tell you, for me, it was a profound moment because we spent the morning there and there were -- people were talking about the cost in banking and how much manual work there is, how much stare and compare that is, there is -- and then that was in a morning session we had a third-party comment and demonstrate that to them and what's going on in the industry.

But then when we demonstrate autopilot live, showing them that if you had a really smart brain that was taking a first pass at everything that was doing it could instantly detect something coming in from the consumer and where it needs more data and more documents, validating that against guidelines, doing calculations, updating the loan file without human intervention. I mean you could feel the energy in the room shift.

For these leaders, it wasn't just another software update, another little feature improvement from Blend. It was a genuine moment of inspiration because they wanted to have this elastic capacity where in order to grow their loan volume, let's say, mortgage rates come down, where they're growing their personal loan business or whatever it may be, they didn't want to have to hire hundreds of people. And then if volumes come down, have to go back and fire those people. They wanted to rewire how they do things. And I think this is their first shot at really being able to do that, and it's thanks to some of the generated AI capabilities that we built into our platform.

And so traditional just to give you a little more color on the product. loan officers or underwriters of manual review documents that come in as an example, and borrowers have to wait a couple of days for that to happen because that's a human process and somebody has to go through all the pages of their documents and all the pages of their loan application file and then go back to them and do some stare and compare and go back to them and say, "Hey, I need these 3 or 4 other things. And then there's this back and forth that takes a few weeks, which is why it takes so long to close a mortgage loan, for example, -- that's something that Blend autopilot flips entirely on its head.

And so there's 4 key things that lend autopilot brings for our customers. The first is real-time intelligence. So like I said, everything that autopilot sees comes in, in real time, it does the checks. And within 15 to 30 seconds, it's going back to the consumer and saying, "Hey, I need this additional thing based on the fact that I saw that your bank accounts in a trust." And that could be with out-of-the-box guidelines like Fannie Mae and Freddie Mac or it could be complete custom guidelines. A lot of our customers do home equity lending or auto lending or personal lending. And so we launched with the capability of custom guidelines because we know our customers have their own credit boxes that they have to be able to fit these things into.

So the first is that real-time intelligence. The second is contextual workflows. And by that, I mean, the agent is triggered by events in our system that have a lot of context to them. And then as the output, they have the ability to trigger native workflows that already exist within the Blend infrastructure. And that's which has always been part of our core value proposition. We've always wanted to and we have driven a better experience for the consumer, where we aren't going to them when they need to provide an explanation for something and saying, "Hey, right up an explanation, print it, sign it, take a photo of it and upload it." When we need an explanation from them, they enter in plain text.

And so when we have those things that we need from the borrower, just like a human request that in our system, the agent requested in the same way. with that nice workflow that guides the borrower through that. And so it's almost like you're working on a dynamic experience that is aware of everything that's going on in your credit file as a consumer. And so we have made a ways of handling that Blend already and the agent is where of that and takes the right actions. That's the second, which is these contextual workloads.

The third is the seamless updates that we get allow autopilot to automatically update application fields. So for example, income calculation is a very complex part of the lending guidelines usually. Because it's just -- it's 1 the things where there's such a variation in how people make money in this country. And just to give you an example, I ran this on my income, which was tax return at W2 with bonus and some other kinds of income and then K-1s and 1099s. And I ran it dozens of times to see the outcome. And it was calculating my income perfectly every time. And so that's the power when you orchestrate the generative AI in the right ways and you orchestrate the agents in the right way and you give them the right context, you can be almost deterministic in the outcomes that you've got, which is very important for this industry.

And last, the fourth thing I'd say is it's built for compliance. Autopilot is not making credit decisions. It's taking a first pass, which is overseen by a human ultimately. It's not triggered by a human, but it's overseen by a human. And I think that's the future where agents are going to live. And I said that earlier today, but agents are going to take a first pass of all this busy work and humans are going to be there to make final decisions, and that's exactly how Autopilot is built. The borrower data that our customers have. I know they're very -- that's never used to train or improve AI models. So we're not risking our customers' data, which is important in this regulated industry and especially for banks and financial institutions, it's very important that we do that in the right way.

So in summary, to say about automating the stare and compare and calculations and guideline work that's plagued this industry for decades. I talked about the $11,000 problem on our last earnings, and this is our approach to help them solve it head on. But I don't want only our customers to have access to an agent first world as somebody who is very passionate about this and thinks about how agents can do so many things today and they're only getting better.

I also want Blend to be an agent first company, where agents are taking a first pass of our work. And so we're reimagining everything internally at Blend. And it started with how we build and to now how we sell, how we manage and support our customers. And that, to me, that doesn't mean just getting our teams access to new tools like Quad cowork or Gemini or chat gpt, which, of course, we've done those things. But it means fundamentally changing who does the work, when and who reviews it. And it's the same model that we're building for our customers. The agent gets triggered, it executes something and it goes to the employee to oversee. And I am personally so passionate about this effort. I'm driving this effort myself, and our goal is to be in the top 1% of all companies, not just public companies, but all companies and how we adopt and operate with AI agents at Blend.

So what that means for us is that, in practice, our software developers are working with agents to write the code already, but I actually want the agents to take a first pass. So as new tickets are created, new support tickets come in that outline a bug. The agent should take a first pass and saying, "Hey, here was the bug. Here's a pull request of the code that needs to change." But then goes to an agent -- sorry, to a human to do a final review of to make sure that fix the bug in the right way.

I want the agents to be doing the grunt work and passing network onto our software engineers to make sure that it's solved. And that means that we're able to handle things like new things -- new -- building new things or fixing things 24/7. And that's the same with go-to-market. If there's an upcoming business for you, I want the agents to take a first pass or if there's internal back office teams, IT support our revenue teams, I want -- I just want to get agents working for them as well, surfacing output and letting people the humans that we have focused on judgment and final decisions and reviewing the work the agents do. And for me and for Blend broadly, I think, this means we'll be able to move a lot faster and we'll be a lot more efficient.

We'll be able to handle growth in our company without having to have tons of new capacity because agents scale really well and we'll use that to grow our margins. But more importantly, in all of that, because it lets us move faster, we'll be able to do a lot more for this industry. When agents are handling all this work behind the scenes. We're no longer bottlenecked with the same multi-day or multiweek cycle that exists for our customers that we have internally with some of the things we have to do. Something comes in, the first pass is done within minutes and we become a leaner and more agile organization and one that I hope can simply outpace anybody in our space.

And so to wrap up, I don't think a blend is -- the market recovery and all those things that I said in the beginning, those are fully in the rear window. We have spent the last 2 years doing the hard work of clearing away debt, simplifying our business and building a foundation for sustainable growth. And I'm not even thinking about those. Now I'm thinking about how do we build an agent first world both for ourselves and for our customers. And so we have a profitable, scalable platform that is ready to win in any environment. And whether rates stay flat or they come down and we see big improvements in volume, we are in polll position to serve our customers and drive massive value for our shareholders. So with that, I'll turn it over to Jason to walk through the financials.

Thank you, Nima and thanks to everyone else on the call. I am pleased to report that we delivered another quarter of solid financial performance to close out 2025. This quarter's results once again demonstrate the resilience of our core business and the significant operating leverage we have created through disciplined cost management.

Total revenue in the fourth quarter of 2025 was $32.4 million, which was just slightly below the high end of our guidance range and was up 7% year-over-year. This performance was helped by a return to growth in our mortgage suite, which generated $18.8 million in revenue, up 3% year-over-year. Stabilizing churn and stronger-than-expected macro bolstered our mortgage revenue results, and Blend's funded loan growth was solid, growing 11% in Q4, and our economic value for funded loan came in at $83 in the fourth quarter, within the guidance range that we gave on our last call.

Consumer Banking suite revenue for the fourth quarter was $11.5 million, representing 21% year-over-year growth. The sequential decline of 10% from the third quarter was driven primarily by the churn of 1 large customer that we talked about last quarter as well as seasonality in home equity, but partially offset by new deployments.

Shifting back to the consolidated results. Our total gross profit was $24.5 million. After excluding stock-based compensation and the amortization of capitalized software development costs, our non-GAAP gross profit was $25.8 million, and our non-GAAP gross margin was 80%, up from 78% last quarter. Non-GAAP operating expenses were $20.3 million or down 4% quarter-over-quarter. Non-GAAP operating income was $5.4 million, above the high end of our guidance range and representing a non-GAAP operating margin of 17%. And free cash flow for the quarter was positive $1.3 million for the full year of 2025, we generated total free cash flow of positive $2.8 million.

Our balance sheet remains strong. We ended the year with $68.3 million in cash, cash equivalents and marketable securities and with 0 debt. During the fourth quarter, we continued to execute our share repurchase program. We repurchased 5.1 million shares worth approximately $16 million, concluding our $25 million repurchase authorization. This last repurchase, like the new $15 million authorization that we are announcing today is driven by and reflects our confidence in the long-term value of the business and our commitment to disciplined capital allocation.

Before I turn to our guidance for the first quarter, I'd like to talk about how we're thinking about the business right now and what that means for how our results might play out over the coming quarters. First, our mortgage business returned to year-over-year growth in the fourth quarter. And based on the stability of our customer base, new deployments that are ramping up in 2026 and a positive mortgage market outlook, we expect to see that trend continue. We will remain cautious in our optimism until rates really come down and mortgage volume, particularly refi really picks up. but we have seen early signs of improvement and are ready to take advantage of a market uptick.

Second, we remain optimistic about our Consumer Banking business. But as we told you before, we are still concentrated at the higher end of the market for consumer banking and both wins and losses can create lumpiness in our results. To give you some specifics, 2025, in which we saw consumer banking growth 35% year-over-year, was bolstered by a large customer that went late -- that went live late in 2024, contributing about $5 million to growth in 2025 and which is now at a steady state.

Conversely, we talked last quarter about the roll-off of a large customer that was acquired. This customer contributed approximately $2.4 million of consumer banking revenue in 2025 largely through home equity loans, and we do not expect any consumer banking revenue from this customer in 2026. Net-net, you should think about consumer banking starting off with a little under $11 million of revenue in Q1 and then having similar seasonality in 2026 as it did in 2025. We'll remain conservative in our outlook for the Consumer Banking business, given the shape of the customer base, but we do see a lot of opportunity going forward, and we're excited about what is to come.

Third, as you know, we have been very diligent regarding our costs, both in terms of trimming unnecessary spend, as well as being judicious about any spend that we add. We will continue that mindset going forward. And in fact, I expect that over time, we will get even more effectiveness and efficiency from the leverage of AI in our internal processes. An effort that Nima talked about and that is already prevalent across the company, not just in software engineering.

As you model Q1, please note that our early adoption of ASU 202506 significantly changes how we report software R&D expense. Because we are now capitalizing less software development costs, you will see a divergence between the growth of our reported expense and the growth of our actual cash outlay for R&D. Specifically, for the first quarter of 2026, we expect non-GAAP R&D expense to be approximately $7 million, which represents a 20% year-over-year increase. However, our underlying cash R&D expense before capitalization and amortization is actually expected to decline by roughly 15% in that same period. While this creates a year-over-year headwind in our reported leverage for Q1, we expect this gap to narrow as the year progresses, and we lap prior period comps. You should view this Q1 $7 million figure as the new baseline run rate for your models and ignore the seasonal patterns in our R&D expense that you saw last year as those were influenced by our prior capitalization policy.

Now turning to our expectations for the first quarter. We expect total revenue for the first quarter to be between $28.5 million and $30 million, which represents approximately 6% to 12% growth over the first quarter of 25%. Underneath those headline numbers, we are expecting mortgage suite revenue to grow at or above the high end of that range, but for consumer banking growth to be more muted based on the factors I discussed earlier. We expect mortgage suite revenue growth to be driven by solid growth in mortgage volumes, where we expect the market in Q1 to be between 1.1 million and 1.2 million units. This growth should be partially offset by lower year-over-year economic value per funded loan, which we expect to be in the range of $840 to $85 in Q1. And with the decline primarily due to the transition of certain products to a partner model.

Turning to profitability. We expect first quarter total non-GAAP operating income to be between $2 million to $3 million. This range implies a non-GAAP operating margin at the midpoint of just under 10%. Seasonality typically pushes down operating margins in the first quarter of the year, but the accounting changes I discussed earlier also had a material impact, especially as you compare year-over-year trends.

Before we turn the call over for questions, I did want to add through our assessment of internal control over financial reporting, we identified a material weakness in our revenue process for the year ended December 31, 2025. While the material weakness was confirmed in the fourth quarter, we're also disclosing immaterial out-of-period adjustments related to the first quarter -- first 3 quarters of 2025. Revised figures are available in the appendix of our supplemental slides on our website, and will also be detailed in our upcoming 10-K filing.

In conclusion, I want to say that we are incredibly excited about a number of aspects of our business in terms of what we can deliver to customers through some of the innovative product initiatives that Nima talked about, in terms of our execution as we focus on what matters and we leverage AI to get more done than we ever have before. In terms of our mortgage revenue returning to year-over-year growth last quarter. And in terms of a market that looks like it might show some real improvement for the first time in several years. We hope that you all are as excited about the journey as we are. And now let's take your questions.

[Operator Instructions] Your first question comes from Dylan Becker of William Blair.

Appreciate the question here. And Nima, I appreciate all the comments around kind of the strategic positioning with vertical if were to think about autopilot, I know you kind of said the existing process today costs about $11,000. I guess how much of that is directly kind of targetable with your current Agentic capabilities? And as we think about kind of your -- those capabilities evolving over time, how much value do you think you can kind of extract away against that? And what does that mean for kind of long-term EVPFL economics in your mind as we kind of obviously look to kind of attack or chip away at that kind of relatively exorbitant cost in the process there?

Yes. Great question. Thanks, Dylan. My approach on this one is going to be to under promise and over deliver on the economics. Just to share sort of some context though, which is the cost of $11,000, about $4,000 is, I'll call it, operational cost, and then there's a decent amount of commissions and marketing costs that are also in there. And so I think there's a material amount of manual effort that goes into these. And so if we can make the humans in the process, 2x efficient, 3x efficient, I think there's a very good market opportunity for us, which is why we're attacking this so swiftly. And the team that's working on this, just to give you a little bit of perspective is we're moving day-to-day.

Like every week, our customers are going to see material new updates to this and new capabilities because it's an area that we're passionate about and we think can really move the needle for them. We've always been here for our customers, and I think this is sort of the our magnum opus if you will. And so I think for me, while I want to underpromise and overdeliver, I'll leave you with 1 anecdote, which is I was talking to 1 of our customers who does similar things, maybe a little bit less scope than what our product does today. And I was like, how should we charge for this long term. And short term, we have this preview period, which we gave to our customers. And he said, "Well, just so you know, I do this with an outside vendor and I pay them more than I pay you per loan by a decent margin just to do a part of the process that you do." And so I think the opportunity is there. It's on us to execute. And so let us go execute, and we'll come back to you every few months with updates.

That's helpful. Appreciate the anecdote. And I do think that's your point. the fact of kind of elevated customer momentum and activity despite it being in preview for less than a week does speak to that value proposition. Maybe, Jason, for you, it's pretty impressive what you guys have been able to do on the expense side and appreciate the color on kind of some of the moving accounting parts there. But as we kind of think about the potential recovery taking place, around the volume dynamic. I guess, could you remind us what to maybe expect from kind of like the potential for incremental operating leverage? How we should think about cost growth relative to potential revenue growth in that scenario? Just kind of any way to think about the operating leverage as you kind of think about and sit there looking at the model.

Yes. Don, good question. Obviously, we haven't guided to the rest of the year, so I can't give you that sort of guidance. But I think implicit in our Q1 guide is sort of a rebased lining and I think you can think about that as our starting point. Obviously, we do have some variable costs in our cost of revenue that will scale with revenue. But on the operating side, it's really a question of where we choose to invest and where we are able to get efficiencies. And I think you can think about Q1 as the starting point for that.

Your next question comes from Ryan Tomasello of KBW.

Everyone, sorry, am I coming through?

Yes.

Sorry about that. regarding the 2 new mortgage customers, I believe you cited that you won in the quarter. Can you just provide some color there on whether those were competitive takeaways? And if so, what you think were the drivers of those wins?

I think the driver of those wins is that we made a commitment to our customers that we would invest through the cycle. And we would keep innovating and we've innovated on our mortgage product. We've innovated in our consumer products. We've innovated on our closing product and now we're building an agentic suite that can live across all those things. And they see that. I mean it's not easy to rely on partners in this industry because it is such a cyclical industry and we made the commitment early on. And we're going to keep growing. And obviously, we have our own things that we've had to deal with the last few years, but I think people have seen that. There's our commitment and my commitment is there, and we're going to make sure that they're successful. And I think that that's ultimately what leads to customers believing in us and wanting to work with us.

Great. And then on the new rapid products that you've rolled out over the last few quarters, can you just talk about the level of uptake you've been seeing there if that's tracking in line with what you were expecting? And then on the pricing side, the type of uplift you're seeing from earlier adopters of the rapid products.

Yes, great question. And one of the -- we mentioned 1 of the ones in the that time with us in Q4. And it's a pretty material uptick in pricing from their EV PFL. It's not live yet. As an example, it's a fairly large bank. But the way I think of rapid, and it has been something that our customers do really want, and they want it for 2 reasons. So the 2 areas that we serve with Rapid are home equity and mortgage refinances. With home equity, it's definitely something that our customers care about and they want to be able to serve the $315,000 in equity that their consumers have and drive savings to them on their debt if they need to consolidate debt.

And so it's something where we have a flagship home equity product, and this is just more of a personalized real-time offer with a real-time pre-approval that is sort of a beautiful tailor experience to that specific consumer. And so I was on a call earlier today with a very large customer, 1 of the top 10 home equity lenders in the country who's going live here in a few months. And this is going to be table stakes for them going forward. And being able to serve a high conversion experience to that top of the funnel and then pairing that with Autopilot, which is going to lead to a lower cost of operation because of lower variable costs because they'll be able to have these things happen in real time as the consumer is going through, self-fulfillment, if you will.

I mean that's sort of the dream combination. And so the uptake has been good. I mean it is a big shift for them. I'd say business-wise, that's a much bigger change management exercise in some ways than the Autopilot product because it's sort of doing work in the background versus changing your entire up funnel. But yes, the uptake has been good. And again, let's let those results continue to play out, and we'll try to underpromise and overdeliver there as well.

[Operator Instructions] Your next question comes from the line of Griffin McMaster of Wells Fargo. .

Guys, thanks for the question here. I just wanted to ask on the top of funnel, and it's great to kind of see that consumer banking customer also kind of looking at you guys for mortgage solutions. Just wanted to ask you around if there's anybody to think about how many customers across the base or your kind of overall landscape could be target customers for both of these products? And then kind of along with that, with the recent hires as new Chief Revenue Officer, if there's any changes around the go-to-market and kind of how to think about this going forward?

Yes. Maybe I'll start with the second question, yes, we're excited to welcome Matt on board. And 1 of the key shifts we're making there is having a dedicated client sales team that's focused on our existing clients for the exact reason that you asked your question, I think. And helping our customers, existing customers, both adopt more products that are free as well as new products that can grow value for them and we charge for. And so that's a dedicated new motion that we have, which we're very excited about, and it will help those people be a lot more focused on the existing customer base and then a separate new client sales motion. That will help us go and get more and more of these great logos that we have added to our roster. And I think that's a nice change for us.

And then to answer to your first question around what's the target market for all of these things. It's interesting. I think when I look at what's actually in place and practice in the industry today, these extremely low friction conversion funnels tied to a very automated, self fulfillment process are basically in place nowhere. I mean some of the technology wasn't there until 6 months ago. And on the low conversion funnel, some of the data sources that were required to drive that level of low friction weren't really prevalent until about 1 year, 1.5 years ago. And so I think the timing is good for us in the market to be able to serve that.

And then I'd say maybe most importantly, the thing I'm most excited about across all of these things, especially for that customer you mentioned, that's using us for all the -- actually all the non-home lending products that we won a top 40 credit union. What I really want to do and what they're excited about is help them make their members, members for life. And so a lot of this is not dependent on the why that consumer comes in the door? Why that member comes in the door with them? In the sense that a member can come in thinking they want 1 thing from you. thinking, "Hey, I just want a new credit card." And you're like, "Hey, did you know that we can -- you have a ton of equity in your home, and we can save you a month if you consolidate these other credit cards and things that in personal loans that you have into a home equity line."

And so this idea of serving the best thing up for the person at that moment in time. It's something that I'm excited about long term for our customers. To be clear, we haven't executed on that yet. That's something that we're excited to start working on at some point soon. But that's where we can have not just individual product lines in these consumer and mortgage and home equity, but have it be a holistic solution for our customers and their consumers and members that are coming in the door. And so -- and almost all of our customers, even the INDs that work with us now offer multiple products. They'll offer a home equity and a cash out refi, for example, for somebody who wants cash. And some of them want to start offering things like personal loans. And so I think that this industry is in need of having unified technology across these things alongside the agentic experiences that I mentioned earlier.

And so again, I think we're just scratching the surface. We obviously have a lot of work to do. And the fact that we're moving a lot faster as a company is great promise towards that, but I realize that we have to show the outcome, show the ultimate outcome to you all before we can really claim victory.

Your next question comes from the line of Aaron Kimson of Citizens.

Great. The better partnership made headlines late last week, and I think the most interesting part of that announcement is -- there's a bit of a pivot there for better, which is historically focused on originating loans. And now the company is talking about doing more of what you do using technology to help accelerate the mortgage process for banks and credit unions and. Do you view that partnership as a validation of your business model? And can you help us think about why in an agentic world, it may make sense for banks, credit unions and INDs to try and take back some of the mortgage market share they've seeded since the GFC?

Yes. I mean I view -- I think that kind of highlights 2 things. One is that there is a big opportunity in this space. And I know that team very well. I think very highly of them. And it's just different. Building software is different than building technology. It's something I explained to our customers a lot. Building technology is one thing, but building software that's integrated and actually delivers your end workflow is just different. And so I do view it as a big validation of our space. And I view it as something that I'm hopeful -- I mean, I think I talked about this in 1 of our calls, maybe I don't know, a few years ago. But about 10 years ago, Rocket Mortgage came out and said, "We're going to make a see you can push a button and get a mortgage." And I think that really catalyzed the industry and feeling like, hey, the sky is the limit for us. We don't have to do things the old way. And that was a big catalyst for Blend.

So I view this all these things that are happening with AI and some of their competitors doing things with AI and maybe some of their potential partners doing things with AI, as I think it's going to drive up awareness and that's a good thing. That's a good thing for the industry. The industry is actually, I would say, 1 of the most surprising things I know we said we've been live for a week with this autopilot product, but the fact that we had 7 people turn it on without us even -- actually without us even really knowing except for the 2 that e-mailed us because they had -- they wanted help turning it on. 1.5 years -- and a lot of those were banks and some of those are very large banks. And 1.5 years ago, if you had told me that large banks would adopt AI, I would have said, yes, I think they will, too. I think it's just going to take a long time to convince them and a long time to make sure they understand that it's trustworthy. And now I'd say that the momentum and the appetite and the desire to do something great is it's not just limited to tech companies. People are trying to feel and see what's possible.

And so obviously, I have different thoughts on what's possible. And I think the approach is something where humans are the central drivers in doing the first pass the work. I mentioned that in my prepared remarks. I don't think that's the right future. I don't think that's a future you want to drive towards. I think the future we want to drive towards is a lot of this work is done in a first pass by these agents that are really, really smart and winning international math competitions. That just need the right context and the right instructions, and they can do things that before has to look at it, to prepare it in a nice package way for a human. And so that's our approach. It's a little different than the approach of the rest of the market. I think that background agent background worker approach has only really been possible for a few months and something that we're betting heavily on it because we think it's the highest leverage way for this industry to adopt agentic AI.

Okay. I appreciate that perspective. And then as a follow-up, Autopilot is the first agent for bond intelligent origination how should investors think about the cadence for additional agents to be rolled out? And what type of consumer loans would you be most excited for next. .

Well, we're going to make autopilot available for all product types. It currently works for mortgage and home equity and custom overlays or custom guidelines or overlays, which could be used for other product lines as well. But we don't think of that capability, which is call it a real-time underwriter -- pre underwriter that's looking at all this work. But there's other things that I think it could -- you'll see coming from us and some of that might be an agent around analytics.

So instead of having to go to dashboards, the agent should be pushing you the insights as a customer of ours. What loans that -- how did your -- for the loans that had autopilot. Just use for the loans that an autopilot on, are they closing faster is doing all that background work helping you. And so we're building out some agents there. We're building agents around the closing process where the QC is very important, making sure that every single signature line and initial and everything is perfect to make sure that our customers don't have any issues at the closing table. But we really want to build, I would say, with all that being said, we really want to build on autopilot and grow that out as a capability because it is something that we're just scratching the surface on, and I think can be something that can manage a lot of the things that humans are required to trudge through today.

[Operator Instructions] Your next question comes from the line of Seth Gilbert of UBS. I will invite Pallav Saini, your next speaker to ask a question. Pallav Saini of Canaccord Genuity.

Nima, you mentioned in the prepared remarks that the pipeline is up 40% year-over-year and that you're seeing a shift towards bundled deals, which is great. Roughly what percentage of the pipeline would you say is leaning towards bundled deals right now for you?

It's a good question. I don't know the exact percentage customers. I don't know, Jason, if you have that off the top of your head?

I don't have that in front of me, but I would say, directionally, that's sort of a key driver of momentum is customers that are interested in multiple products from us, either multiple products within the mortgage suite, but more and more customers are interested in the fact that we can deliver mortgage and consumer banking products, all with similar feel, similar capabilities and integration.

Got it. And any commentary on your market share in Q4? And how do you see it evolving in 2026?

Yes. We only release our actual market share as we calculate it once a year when the HMDA data is released in the fall. What I'll remind you is that we talked about last quarter, 1 large customer that was going to be with us from a contractual standpoint for some period of time, but we expect the volume to be rolling off. And when the volume rolls off, we no longer count the volume in our market share. And we mentioned that, that customer will probably have a circa 100 bps headwind for us. And we talked last year about I think we ended the year at 17% market share. So if you put that headwind on top of there, is the right way -- probably the right way for you to think about it, building from there.

Your final question comes from the line of Seth Gilbert of UBS.

Maybe just first, a quick 1 on the revenue restatement. It looks like it was just in the neighborhood of about $15,000. So I just wanted to make sure I got that right, fairly immaterial. And is there anything else you wanted to add on about the restatement .

Revision, first of all. But yes, no, we essentially just reallocated some of the revenue between different quarters in 2025. .

Got it. Okay. That's helpful. And then maybe on the RPO side, you signed 10 new deals expansion. I think you mentioned 1 big annual 7-figure customer as well. by our model, you have around $100 million in the short-term RPO. So I was just curious if you can talk about when we should maybe expect some of this to fall off into revenue more materially.

Yes. Look, I'll say that it's always great to have RPO in the sense that it is committed and it will turn into revenue at some point. I do want to caution you that in our business, especially on the mortgage side where we're primarily based on funded loans, as Nima talked about, success-based pricing. RPO isn't really a great gauge for you. But other than that, yes, the short-term RPO, obviously, will roll off within the next year.

Got it. And then maybe just a quick follow-up. On Blend Autopilot, it sounds like the pricing is still being mapped out. But can you talk about applicability? Is it applicable to your entire base of mortgage customers? Or are there certain customers you think who never use AI for cost, security, other reasons?

Yes, I'd say 1.5 years ago, Seth, if you'd ask me who's going to use it. I would say there's going to be fast movers and slow movers. And I think -- now -- I mean applicability in terms of the work, the human work of stare and compare and back and forth and reading guidelines and doing calculations, I think that exists no matter what kind of customer of ours you are. So applicability is pretty broad. Do I think we'll get 100% adoption? No, of course not. But I do think that our customers are much more eager around AI I think something is in the air this year. 2026 has been sort of a statement year for AI and people are seeing what it can do on their desktops and Microsoft made a big announcement today around their copier yesterday about their copilot co-work and Anthropic has been making headlines around that.

And so people are starting to see what it can do when they're driving with AI and it opens their eyes to the possibility of, "Hey, couldn't it do that in the background while I'm sleeping." And so yes. I mean I haven't yet heard a customer in all of our discussions. I'll just tell one more anecdote, I was giving an early preview to a customer who came to our customer advisory board, they wanted their longer -- their larger teams. This is one of the very, very large bank. And they wanted their larger team to look at the product because they were really excited about it. And the first question I asked on the call was, can somebody find me all the reasons why we couldn't possibly do this so we can work through these issues because we really need this.

And so the mindset has shifted from, hey, like let's look at this, let's consider it to, hey, we really need this capability because everyone's been through this cycle of staffing up, staffing down, having undercapacity when volumes are high and having overcapacity when volumes are low. And nobody likes doing that extremely, I shouldn't say nobody. It's not the favorite activity of most people to do that extremely tedious manual checking that the names on 2 different documents match letter for letter that the guidelines tell you exactly how to calculate and your calculation is exactly right. And so it's not something that is prized work, but it's real work that has to get done, and that's whether it's a car loan or a personal loan or a mortgage or a home equity loan or line. And that's work that actually, AI is really, really good at. And so I view this as something that they've all been waiting for in some ways.

They've probably been waiting for, for a long time, a lot long. They probably wanted us to deliver this 10 years ago. It just wasn't -- because there's so much complexity and so much unstructured content in this industry, it's something that non-generative ML or other AI approaches. It's just something we that wasn't that -- it wasn't good enough to do that a couple of years or 3 years or 4 years ago. And now the capability is there. And so the fact that we're launching this, and we're the first as far as I know, to launch these background agents to serve this industry. I mean that's something that was -- that's been our position from day 1. We want to be driving the frontier. We don't want to be copying the frontier. And the frontier is going to keep growing. And so as long as we're driving the frontier, I feel really good about our business.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. My name is Amy, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Blend Labs, Inc. Third Quarter 2025 Earnings Call. [Operator Instructions]

It is now my pleasure to turn the call over to Meg Nunnally. You may begin.

Good afternoon, and welcome to Blend's Financial Results Conference Call for the Third Quarter 2025. I'm Meg Nunnally, Blend's Head of Investor Relations.

Joining me today is Nima Ghamsari, our Co-Founder and Head of Blend; and Jason Ream, our Head of Finance and Administration.

Before we start today's call, I'd like to note that we also refer to certain non-GAAP measures, which are reconciled to GAAP measures in today's earnings release and in the appendix to our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial results we'll discuss today, including our profitability, refer to non-GAAP. Also, certain statements made during today's conference call regarding Blend and its operations, in particular, its guidance for the fourth quarter of 2025, commentary regarding 2026 and expectations about our markets, our strategic investments, product development plans and operational targets may be considered forward-looking statements under federal securities law. 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, can cause actual results, events or circumstances to differ 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.

All comparisons made in the course of this call are against continuing operations for the same period in the prior year, unless otherwise stated. Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call, and an audio replay will also be available soon after the call.

I'll now turn the call over to Nima.

Thank you, Meg, and welcome, everyone.

Our third quarter results demonstrate our team's strong execution and the increasing resilience of our business model. We delivered total revenue just above the midpoint of guidance and more importantly, non-GAAP operating income that exceeded the high end of our guidance. This marks our fifth consecutive quarter of non-GAAP operating profitability, a trend we expect to continue into the fourth quarter. For all of this, I want to personally thank the entire Blend team. This 5-quarter streak of profitability is not an accident. It's a direct result of their focus, their discipline and their deep commitment to our customer success. Their execution is what gives us the stability to invest in our future from a position of strength. This profitability is a result of deliberate work to right-size the business over the past few years and build a foundation for sustainable long-term growth.

While our overall top line was steady, it reflects a tale of 2 dynamics. We saw continued strength and growth in our Consumer Banking Suite, which was offset by some headwinds to revenue in our mortgage business, but this was not a surprise to us. It reflects the intentional strategic transitions that we are navigating, specifically moving from lower-margin services businesses to higher-margin partnerships and managing the final roll-off of legacy customers that we've discussed in prior quarters. We expected and are managing these headwinds, and they are clearing the way for a healthier, more profitable future.

I want to spend our time today on 3 topics. First, the quality of our new customer wins and the strength of our future pipeline. Second, the incredible energy and pull-through we're seeing from our customers around our Rapid Suite and AI; and finally, our key strategic priorities as we drive towards 2026.

To start out, in the third quarter, we signed 14 new deals and expansions in line with the prior year. But the quality of these deals is what's most important. Our largest deal was a 7-figure expansion with a top 20 U.S. bank for solar home equity lending. This is a prime example of our platform strategy at work, using our core technology to rapidly deploy and configure complex, high-value solutions with our largest clients. This is precisely what we mean by our platform. Customers can launch new high-margin products in weeks, not years, leveraging the technology they already have.

We also had another major renewal and expansion with a consumer banking customer across 6 product lines. This same customer is now evaluating our mortgage solution, which is a fundamental shift. Our flagship mortgage product used to be the only door in the blend. Today, we have a multi-product platform that allows our customers to land and expand. This is the flywheel we have been building for years, and it is now actively turning.

Our consumer banking products create deep daily engagement with customers, which in turn builds trust and provides a natural data-driven pathway to a mortgage. And our mortgage platform creates a high-value data-rich event that our customers can use to offer those consumers deposits, cards and home equity loans over time. Each side of our business now feeds the other. And this platform momentum is why the small handful of churn notices we saw this quarter are not a strategic concern.

The 4 small customers who left were outside the core market and represented about $200,000 in aggregate annual revenue. We are successfully trading low-value non-core churn for high-value strategic platform expansion. The only noteworthy churn on the horizon is the expected roll-off for Mr. Cooper, which Jason will detail further. So in all, the real story for me is not the legacy share that we're shedding, but the future share that we are building.

Our pipeline activity is strong, building sequentially from Q2 and is up approximately 60% year-over-year. This pipeline is our future, and it's robust. We are actively pursuing multiple 7-figure consumer banking deals, sizable top 10 banks in mortgage and several cross-sell opportunities for our Rapid and Close products. This is the high-quality platform-based business that we are building. And this energy was on full display at our Blend Customer Forum in September. This was our largest forum yet with 120 executives, and the tone was completely different from last year.

Last year, AI felt like a science project. This year, we're at an inflection point. The question from customers is no longer what is AI? How can it help me? But how fast can you get it into our hands? The reason for this urgency is clear. The cost to originate a mortgage loan is still stubbornly high, nearly $11,000 and roughly 90% of that is human labor. The industry is realizing that bolting on more point solutions only adds complexity and costs. What we demonstrated at Forum is the only real path forward, Blend Intelligent Origination. This isn't another tool. It's an entirely new operating model for lending.

By embedding agentic AI directly into our core Blend workflow, we can autonomously orchestrate and execute end-to-end processes. And because it's embedded natively into our platform, it's not just another tool for employees to learn or another chatbot for people to talk to. It's a system that works with the rest of the Blend platform and learns for them. This is a fundamental architectural advantage that point solutions simply cannot replicate. Our customers see this as the definitive answer on the path to the industry's $11,000 problem. They are excited, and we are, too, because this is the future and we are building it with them.

We also saw tremendous buzz around our Rapid Home Equity product, which is a very important product for consumers in this day and age. And this was the first forum where early adopters could share their results with peers. The value of this product is its seamless data connectivity and personalized offers in real time, which drive higher conversion by radically reducing the time to an approval. The momentum here is palpable. This momentum and the energy from our customers at Forum is what gives me such great optimism about Blend where I stand today. It is a great way for us to lean into 2026 on offense, where we are laser-focused on 3 key areas.

The first area is our take rate with our customers in the Mortgage Suite. A primary measure of this in our Mortgage Suite is economic value per funded loan, or evPFL. While evPFL has come down in recent quarters, this pressure is a direct and intentional result of our platform strategy, specifically transitioning to higher-margin partnership models and navigating one renewal in this tough market. While this impacts the near-term metric, it is the right decision for our long-term margin structure and profitability and customer base.

Our focus is not on this near-term pressure, but instead on the long-term prize. And for 2026, our priority is driving the adoption of the products that create exponential value for our customers in the mortgage case, Rapid Refi and Blend Close. These products are the powerful levers we have to grow our take rate and deliver on the full long-term potential that we see ahead of us.

Our second focus is the continued expansion of our Consumer Banking suite. This business is already a strategic powerhouse for us. It now represents 39% of our total revenue, up from just 29% 1 year ago. Our customers are using to solve their most pressing problems, driving high-margin non-interest income and capturing sticky deposits in a highly competitive market. And our engine provides a powerful less cyclical revenue stream that enhances the stability and resilience of our entire company. For 2026, the goal is clear: expand adoption with large accounts and accelerate our speed to market by standardizing more of our out-of-the-box solutions for the rest of our customer base. This is how we scale our business effectively.

Our third and final focus is on building the next horizon of growth. As I talked about earlier, we are making targeted disciplined investments in AI and our suite of Rapid products to solve our customers' biggest problems. The great news for us is that these are not massive speculative bets. We are building these world-class solutions with nimble, focused teams. And this innovation is what will keep us and our customers well ahead of the curve.

To summarize, when I look at the macro environment broadly, and I see it finally showing signs of life, particularly the potential for us when rates come down, and then I combine that with the specific momentum we are generating for ourselves, I have never been more excited about our business. To be clear, our entire 2026 plan is built to succeed in the current environment and win in the current environment. But the disciplined, profitable and simpler cost structure we have built over the last 5 quarters gives us incredible operating leverage in a recovery.

When the mortgage market turns, we are in prime position to have that recovery flow to our bottom line, all on top of the organic platform growth that we are already driving with our rapid solutions, our closed solution, new customer growth and over time, AI solutions as well. The team has done the hard work to build a resilient, profitable and scalable platform. We are no longer just ready for what's next. We are building what's next.

With that, I'll turn the call over to Jason.

Thank you, Nima, and to everyone on the call today, thank you for joining us.

As this is my first earnings call with Blend, I'd like to reflect on my first 3 months here before I talk about our results. First, the team that I've been lucky enough to join is one of the best I've ever worked with, and they are passionate about making Blend successful. Second, we have a strong portfolio of products that will continue to improve under the leadership of product-focused executives like Nima and Srini. And lastly, the best word I can use to sum up our relationship with customers is partnership.

I had the great fortune to be able to attend our annual customer forum only 1 month into my time at Blend and to talk to a number of our customers. While our customers, of course, have lots of requests and suggestions for our products, everyone I talk to believe that Blend is the best option in the market and that they are on a journey with us. That gives me great confidence in the foundation of this business and our right to win long term. I'm sure I'll talk more with many of you about that over the coming weeks and months. But for now, let's dive into our third quarter financial results and an update on market share trends.

Total revenue in the third quarter of 2025 was $32.9 million, ahead of the midpoint of our guidance and down 1% year-over-year. Digging below those headline numbers, Mortgage Suite revenue was down 18% year-over-year, driven by the strategic transition to lower revenue but higher-margin partnership models for some of our products by some churn and by the effect of the large renewal with lower pricing that we talked about last quarter.

On a side note, our work with that customer continues to be very positive, and we continue to believe that the customer can provide meaningful upside to 2026 and beyond. Mortgage Suite revenue was down approximately 1% from Q2 to Q3, driven by the ongoing ramp down of several customers that gave churn notices last year, the continued effect of our strategic transition to partnerships and by some seasonality.

Consumer Banking Suite revenue was up 11% quarter-over-quarter based on go-live deployments on some large customer wins as well as ramping usage at some of our larger customers. The increase came across both core consumer banking products and home equity lending products, which are included in our Consumer Banking Suite.

Shifting back to consolidated results. Our total gross profit was $24.5 million. After excluding stock-based compensation and the amortization of software development expense, our non-GAAP gross profit was $25.6 million, and our non-GAAP gross margin was 78%, up from 76% last quarter.

Non-GAAP operating expenses were $21 million, up 9% quarter-over-quarter, almost entirely driven by a Q3 specific sales and marketing expense related to Blend Forum and by higher non-GAAP R&D expense due to a lower capitalization rate of software development expense. Non-GAAP operating income was $4.6 million, above the high end of our guidance and representing a non-GAAP operating margin of 14%.

Free cash flow for the quarter was negative $5 million, bringing our year-to-date total free cash flow to positive $1.5 million. Our balance sheet remains strong, thanks to the work Blend did in 2024 to eliminate debt and realign the cost structure of the business for sustainable growth. As of September 30, 2025, we had approximately $82.3 million of cash, cash equivalents and marketable securities, inclusive of restricted cash.

In the third quarter, we repurchased 1.6 million shares worth more than $5 million, bringing the year-to-date total to $9.2 million and leaving $15.8 million remaining under our repurchase authorization as of quarter end. Our evPFL for Q3 was $86, in line with our guidance. We do see some near-term headwinds. And as we look to Q4, we expect evPFL to be approximately $83 to $84. We are not providing specific guidance beyond Q4, but believe that most of the recent issues negatively impacting evPFL will be largely behind us as we enter 2026. It is important to remember that evPFL, while a useful metric, is somewhat incomplete as it does not capture home equity loans, an area where we see significant momentum in our business and which are included in our Consumer Banking Suite.

Next, I wanted to provide an update on our market share. We've included a slide in our supplemental deck that provides additional numbers and context, including Blend's annual funded loan volumes. As a reminder, we use Home Mortgage Disclosure Act, or HMDA data as our benchmark for total market size and the market share we report is measured by dividing Blend funded loans by total market volume per HMDA.

As anticipated, our 2024 HMDA market share is down from the high watermark of 21.7% in 2023 and landed at 18.6% in 2024. The decline is primarily driven by churn notices that we received from customers in 2023 and 2024 when cyclical pressures in the mortgage industry were at their peak. Since customer roll-off is often a long process, we've continued to see some of the impacts of volume from those customers into 2025. We anticipate further market share headwinds in 2026 of approximately 100 basis points, primarily due to lower volume from Mr. Cooper.

As we have said before, we signed a contract with Mr. Cooper shortly before their acquisition by Rocket was announced. That contract runs through June 2028 and protects a significant portion of our revenue from them through that time period. As we look to 2026 and beyond, the trajectory from here is encouraging, given the stabilization of churn trends and the new customer wins and expansions that we've been talking about.

For the first 9 months of 2025, we've only had a few smaller customers indicate their intention to churn, which in aggregate represent less than 10 basis points of 2024 HMDA share. We believe we've created a solid base for long-term share growth. We're not providing any formal macro outlook or company-specific guidance for 2026 at this time, though we will have more to say in February. Still, it's fair to note that we generally agree with the current consensus expectation that lower mortgage rates in 2026 will drive industry growth, which should more than offset the market share headwinds in mortgage.

In consumer banking, we have a solid deployment pipeline heading into 2026, though we expect that consumer banking will face some headwinds from the expected churn of Mr. Cooper's home equity business. Please also keep in mind that consumer banking revenue has a tough prior year comparison due to a large customer that went live late in 2024, contributing about $5 million to growth in 2025 and which is now at steady state.

Now, turning to our expectations for the fourth quarter. We expect total revenue for the fourth quarter 2025 to be between $31.0 million and $32.5 million, with the midpoint representing a slight decrease from the third quarter. Within total revenue, we expect Mortgage Suite revenue to be flat to slightly down quarter-over-quarter, driven by some one-time revenue in Q3 that we do not expect to repeat in Q4 and partially offset by flat to slightly up mortgage volume. We expect consumer banking to be down mid-single digit percentages quarter-over-quarter, largely driven by the impact of Mr. Cooper that we mentioned earlier and by typical Q4 seasonality, and partially offset by increased revenue with several large customers that went live in Q3 and which will have a full quarter of revenue in Q4.

Lastly, we expect fourth quarter total non-GAAP operating income to be between $2.5 million and $3.5 million. In August, we shared our Q4 2025 market size expectation of 1.13 million to 1.23 million units and we think this is still a reasonable range. For Q1 2026, we expect a sequential volume decline, in line with normal seasonal patterns. Our current expectation for the first quarter of 2026 is for mortgage volume to be between 1.07 million to 1.17 million units.

And now let's take your questions.

[Operator Instructions] Your first question comes from the line of Aaron Kimson with Citizens.

Nima, you talked on the 1Q '25 call about the inflection in pipeline after the Rocket-Cooper deal was initially announced. I appreciate the commentary about Forum in September and pipeline up about 60% year-over-year at the end of Q3. But since the Rocket-Cooper deal closed on October 1, has there been any change in the tone of conversations with FIs that want to keep their largest consumer lending relationships that know they need to upgrade their tech stack to remain competitive?

Yes, good question. Yes, definitely, I think the Cooper-Rocket acquisition has been -- I'd say, what one thing that I've seen happen there is big mortgage servicers are starting to think through their strategies, and it's an area where we're very strong. We work with most of the top 10 servicer -- mortgage servicers in the country. We're the ones who are primed to be able to take advantage of both the current situation with cash-out refis and home equity loans. And then if the rates -- if the mortgage rates get into the mid- to low 5s, there's a huge volume of customers between 6% and 7% who need to be able to take advantage of lower rates, especially if the economy gets worse.

And so I've definitely seen companies react. And I've also seen some of the very largest lenders who are our customers say, we got to do something really important with AI. And so they were the ones calling on me on the AI front saying, we want to not just remain competitive, but we're going to use this time when potentially some companies might be busy integrating or distracted with other things, and we're going to put our best foot forward and to come out of this next 6 to 9 months with a much more automated, much higher quality operation than we used to.

That's really helpful. And then switching over to Jason, it's great to have you with us. Given that you were a senior MD at Haveli in April '24 when Haveli made its investment in Blend and with Haveli owning about 20% of the company today, can you talk a little bit about your history with Blend dating back to Haveli? How involved you were in that investment process? And then how you came to be the Head of Finance and Administration at Blend? Was it through prior relationships or third-party recruiters or something else?

Yes. So I -- Haveli is not a huge firm. So, I obviously had visibility into what was happening. I wasn't part of the investment team that made the investment in Blend, but I did have some contact with the company. And primarily as an operating partner, I was here as a resource for all of the -- sorry, I was there as a resource for all of the port cos that Haveli had. But the switch that I made was really wanting to get back into an operating role.

Given the fact that Amir was -- had made the decision to leave Blend, I was looking for a good opportunity -- everyone at Haveli had a really high view and estimation of the team at Blend. And I had gotten to know Nima and the team a little bit as well, but that's a really great opportunity. They need a CFO that has experience with public markets, and I was looking to get back into the operating role. And so essentially, the stars aligned.

Your next question comes from the line of Ryan Tomasello with KBW.

On Mr. Cooper, can you just help us synthesize the moving pieces you called out there in terms of sizing the revenue impact in 2026, just juggling the handful of commentary that you gave between both the mortgage and the consumer banking segment?

And then beyond 2026, you're mentioning a part of the revenue still being protected through the expiration of that contract. So, just help us understand exactly what that looks like and what that cumulative impact might look like post-2028?

Yes, Ryan. This is Jason. So the specific commentary we gave on the call is that there will be a share headwind, and that is essentially because we do expect the volume of transactions coming through our system from Mr. Cooper to come down now that the transaction has closed. We didn't really give specific revenue numbers around that. But what I will say is that the majority of the revenue that we've had in the past is protected for some period of time. So, there will be some revenue headwind. We didn't call out a specific number, but the majority is protected through the second quarter of 2028.

I'm sorry, the second part of your question, I think we missed that.

No, I think you covered it, but I mean, I have a related follow-up. I think last quarter, you called out a mortgage pipeline consisting of roughly 400 bps of market share. Can you provide an update on where that stands today? And then it sounds like net of Mr. Cooper, we should still be expecting market share growth next year, but correct me if I'm misunderstanding it.

Yes. Sorry, go ahead.

Yes. Again, we haven't provided guidance for next year on market share, and we'll give you more color on the call, the Q4 call at the beginning of the year. But yes, look, we still have a very strong pipeline for mortgage. Our strategy here is a combination of factors. As Nima talked about on the call, we've got the flywheel effect now going where the mortgage side feeds the consumer banking side, the consumer banking side feeds the mortgage side. And so we're looking for growth on both sides of that. And obviously, share growth in the mortgage industry is something we're driving towards, but we're also driving towards growing consumer banking. And as you'll recall, home equity, which is a big potential upside for us, feels a lot like mortgage. It is lending, but it is -- we reported in the consumer banking side. So, I think you should look to see big growth on both sides.

And we didn't -- I talked about this in my prepared remarks. We talked about we have some top 10 lenders, banks in our pipeline right now. We're actively pursuing -- we believe, and I think the market sees that we have the best product in the market for someone like them. I got to spend a lot of time at the Mortgage Bankers Association Conference with these prospects. And we've weathered these headwinds, and we've kept our reputation good and we've continued to innovate.

And so it just puts us in the pole position to be the right partner for some of these big guys and especially as we continue to build capabilities that makes us a true platform for them, building AI into the platform, building the rapid products on top of the platform. It just allows them to get a lot out of us. And so that's why we've seen the pipeline stay strong and why we're excited about even just in our existing customer base, the growth of the existing customer base is where I spend most of my time because those existing customers are the ones that can move faster with us and want to do more with us.

Your next question comes from the line of Joseph Vafi with Canaccord Genuity.

Just wanted to maybe just drill down on the big renewal a little bit. Just kind of what was maybe going on there in a little more detail, if possible? Do you see more renewal risk in the pipeline? And it feels like you provide a pretty high-value product to customers. So kind of just wondering why there needs to kind of be a pricing discussion when you're already adding so much value for customers? And I have a quick follow-up.

Yes. Really good question, Joe. And just to put the timing of when that that initial discussion around renewal started happening, it was in either late Q1 or early Q2 of 2024. So, we're talking 18-plus months ago and before Jason's time here. And it was a different time for Blend. I mean it was before our Haveli investment, before we had taken a new capital, people were worried about our debt in the market. They're worried that we weren't going to necessarily be around. And so to answer your question, pretty candidly, no, I don't see renewal risk in the rest of our pipeline. In fact, most of our renewals -- if you sort of normalize -- we took an internal look at this, this week.

If you normalize for the contribution that our customers are giving us per loan outside of this one renewal, the value per loan is up actually year-over-year from Q3 to Q3. We looked at this as a one-time view for ourselves because I know there's a lot of moving pieces. There's this one renewal. There's the partnership model transition, which I'm super bullish on, and we think is going to drive more upside for us next year. And so, yes, we did have this one moment with one very large customer in 2024 that we're feeling some impact for. But interestingly, they were the ones who were on stage with us at Forum doing a demo of the AI functionality that they're adopting with us. They were the ones on stage with us talking about Rapid home equity and talking to us about what they can do with us more on that front.

And so I view these things as maybe short-term headwinds where we built -- we use that moment together in the trenches to build long-term partnership. And this customer is so big and has been such a good partner for us. There are so many things we're talking to about them. And I'm very happy we did the renewal. I do that renewal even at the same rates today, if I could, because there's just so much more upside. We're talking about this $11,000 problem in the industry, and we're $80-something into that $11,000. So while we had to spend a couple of years cleaning things up internally, getting debt off our balance sheet, getting the company in a good profitable state, we're there. We're on offense. We're building really cool things, and I'm looking forward.

Your next question comes from the line of Michael Turrin with Wells Fargo.

There were just a few different mentions throughout the call I wanted to unpack a bit if we could. So it sounded like some of the market share impacts you're seeing likely continue into next year, but there are also some comments from Nima around macro showing signs of life and pipeline growth building back a bit. So, just any more context you can give us to help square those 2 factors? And big picture, just the factors within Blend's control and driving better growth into next year is helpful.

Yes. I think, Michael, thanks for the question. There are 2 dynamics you're referring to. One is our share and the other is sort of the market itself, the macro. I think as we mentioned on the prepared remarks, the general consensus expectation out there is that there will be lower rates in 2026, and that will drive higher mortgage activity, higher refi activity and that will lift the market overall. We haven't guided to that yet, but we do see that that's our belief as well falling in line with what the sort of general consensus expectation is out there in the market.

On the share piece, we do have -- we called out one specific headwind, which is Mr. Cooper, right? And as I mentioned on one of the earlier questions, a significant portion of our revenue with them is protected under contract. But regardless of the revenue, if they move their volume elsewhere, we're not going to count that in the share. right? And so that is a likely headwind to our share in 2026. That doesn't mean that the share has to stay with just that -- that's not the only impact to share, right? Obviously, we can win new customers, we can get new customers live, et cetera, and that can drive additional share for us. We haven't guided to 2026 yet. But just calling out, we highlighted one headwind, but that's not an indication of where we see the overall going yet.

Okay. That's actually -- that's useful supporting color. And just, Jason, on margin, you're delivering above the high end of the prior operating income guide with revenues within the range. So just where the efficiencies are coming from and how you think about different investment levels for the business and various growth scenarios as some of what you just framed potentially plays through?

Yes. Look, in terms of where efficiencies are coming from, it's hard to call out one specific area. Obviously, we are growing our presence outside of the U.S. And in some cases, those are lower-cost geographies, and we're able to get talent that's as good, but at lower costs. That's one specific area of efficiency. But I would say more broadly, there's just a focus on doing things in a lean way and trying to use small teams, trying to focus on output as opposed to just creating an org structure to deliver something. It's really more of a mindset than it is on specific efficiencies. And as we look forward, I think 2 things.

One, sort of as a foundation, we want to think about -- obviously, look, this industry is cyclical on the mortgage side at least and to some extent, perhaps on the home equity part of consumer banking. We're not going to allow our investment decisions to just follow the macro market. In other words, just because revenue increases, if rates were to drop really far, we're not going to say, "Oh, great, let's spend a ton of operating expense just because revenues are high right now." We're sort of building a business that's resilient regardless of macro.

The second comment I would make about investment philosophy going forward is that we have some amazing opportunities in front of us. And today, we think that we're well positioned to address those opportunities within the envelope that we've built for the business today. To the extent that we continue to get traction with those and we see the top line materially shifting independent of macro, we may pour more fuel on the fire in certain areas where those new initiatives might require it. But we're really being judicious about the ROI essentially of the investments that we make and making sure we have places where we have a very clear line of sight to getting a return on additional expense put in the business.

[Operator Instructions] The next question comes from the line of Michael Ng with Goldman Sachs.

I just have 2. Just a big picture one. Just on the economic value per funded loan, is there a way to think about where that could be in the long term? I appreciate that you're guiding to $83 to $84 for next quarter. But like where do you see that going in the next 2 to 3 years?

And then secondly, we've seen some good revenue growth in Consumer Banking Suite revenue. Just as you think about the business more strategically, what's the right mix to think about now between consumer banking and Mortgage Suite? Like where are you focused on and where do you see the biggest opportunities?

Yes. Thanks, Michael. I kind of like to work backwards from what the opportunity size is. And we talked about Rapid Home Equity and Rapid Refi in our prepared remarks and in the last few quarters. And those products themselves as a standalone are a multiple of our core mortgage and core home equity rates. And so I think we're just scratching the surface. Now to answer your question on where we'll be in 2 to 3 years, I don't want to necessarily -- we haven't guided that yet, but we are aggressively going after deploying those products to our customers.

In fact, I would say that's kind of the top priority for us, given that there is a big market need right now for Rapid Home Equity and then people are looking forward to -- there's a lot of participants in the market that want to help consumers take advantage of their equity, and we want to help them help their consumers. And so that's very important to us. And that has a very high price per unit, although that's in our consumer banking segment.

And then on top of that, on the Rapid Refi side, a lot of these companies are seeing mortgage rates coming down. I don't know if you all saw the jobs numbers today or the job cuts numbers today. But they want to be in a position where for the people who are able to get the benefits of lower rates once the rates get into the mid- to low 5s, that will be kind of an inflection point, I think, for the industry in terms of number of consumers that are eligible, but they need to be able to do that extremely effectively and in a very automated fashion. And our Rapid Refi solution is the best way to do that. And so we're -- we've got good interest in that. We have some customers that have deployed it and that are scaling it up. And we're excited about it and our customers are excited about it.

And so while I don't -- we don't want to guide exactly where we'll be in 2 or 3 years, maybe in a future Investor Day, we can spend more time on that given the traction we're seeing. I think the opportunity is really large. And that's not even withstanding the -- what the AI brings to the table in this case, which is there's a significant amount of operational effort internally of manually reviewing the loan file and going back and forth with the consumer for days or weeks, and it's something that AI was really built for. And we're happy to be part of that journey with our customers. And so I don't have a specific guidance on the 2- to 3-year medium term, but I can tell you in the long term, I'm very bullish. I think there's a lot of upside for us and our customers in particular. And I think a decent amount of that will be -- will come in the form of just continuing to grow our evPFL with our existing customers, first and foremost.

And what was it -- was there a second question, Michael? I think I might have missed it.

No, it was just about the long term -- kind of like the long-term trajectory of evPFL and then the right mix of consumer banking versus mortgage, but I think you've covered it.

Makes sense. Yes. I mean, you've seen our consumer banking segment grow because we've made some really big customer wins. And actually, one of our biggest deals this quarter was -- this past quarter was a consumer banking win. Now, also 39% is where we are as a percentage of our total revenue in consumer banking. That happens to be in mortgages cyclically low. I think both sides of this business can be much larger than they are today if we continue to execute with our customers and our customers continue to win in the market. And so we're not -- I wouldn't say we're sort of prioritizing one or the other. We're serving both. And it's sort of -- I'd say our focus is our existing customers to start with and growing them first and foremost.

[Operator Instructions] The next question comes from the line of Faith Brunner with William Blair.

Can you maybe double-click on the adoption cadence you're seeing across the different Rapid products within your existing customer base and maybe how that's driving durability into the different product suites?

And then just a quick one on top of that about AI and as you get early feedback back from the Intelligent Origination and some of these other solutions, how that can maybe unlock another long-term monetization opportunity for you guys?

Yes. Great questions. The flavor of the day from our customers and where we're focused on the Rapid Suite, although we haven't -- I think it's over 10 Rapid deals in deployment right now with our customers. I'd have to double check that exact number. But the majority of our big customers' focus is being able to serve a consumer a home equity line of credit or loan in 10-ish days. I mean that's -- there's a lot of consumers who have debt that they're revolving on, that's higher interest debt. And so our customers are interested in offering them something we can take advantage of the equity in the consumers' homes.

And the process today for getting a home equity line of credit is at a bank or credit union that a typical bank or credit union might be 30, 45, 60 days. But the technology is there now, and we have it with Rapid Home Equity to do that much faster and a much higher conversion. So, that is the focus for our customer base, I'd say, for our largest customers. But we're seeing kind of interest across the board on that and Rapid Refi, with just trying to get ahead of the rates that might come down next year.

And then shifting gears to AI. I mean, AI is one of those things. It's like almost like water for us at this point. It was such a breadth of fresh air because it allowed us -- we had this initiative a couple of years ago that we shared with you all around efficiency, and it helps us with our own internal abilities to do things faster and better. And so I think that was part of it. And then it also unlocked -- I mean, there was this part of the industry that always stumped me, which I referred to on the call as this $11,000 problem is that the $11,000 problem is that there's so many different -- there's hundreds or thousands of different scenarios of consumers' finances and there's hundreds or thousands of different rules you have to apply to those scenarios.

And so when you multiply those things together, it's like an intractable rules engine problem in the sense that you can't code all of those things effectively because they change all the time. And so it was sort of impossible to imagine a world where someone could build an engine that was so complex and so magical that it could work across all of those things. And then all of a sudden, out of nowhere, this AI boom came and it's actually capable of handling those hundreds of thousands of different permutations that might happen on any given loan or line of credit or whatever.

And we were demoing this. I was on site with a fairly large client of ours, and we were demoing this. And I can tell you, it was like the consumer is just going through their normal workflow in our platform, the same thing that everyone uses today and we were showing them what happens behind the scenes and the AI just ticks it up and it's just doing all the background work, just like a human would, prepping the file for them internally. And they were seeing that. And it's almost like -- it does almost feel like black magic because it's so hard to understand how it's even doing all that. And I don't think I even understand how it can even do all those things as somebody who's very deep in AI and goes to sleep thinking about AI and wakes up thinking about AI, but it is capable of doing those things. And then I asked them how much they spend fulfilling each of their files manually? And it was not a small amount of money.

And so yes, to answer your question, that wasn't -- that isn't really built into our financial models. It's not built into our -- and actually, one other thing I want to reiterate that Jason said is that the other thing that AI has allowed us to do in the spirit of efficiency is somebody who loves working with small teams is build these amazing solutions with small teams. And now getting the word out to customers and helping customers understand it and adopt it and buy it from us is a different conversation. But the actual building in these capabilities is best done with small teams where there's little communication gap.

Everybody is working on a very similar tight cadence together. And I work with one of the small teams that's building out this, what we call Blend Intelligent origination. And it's just so refreshing. There's so much energy around it. Our customers love it, and they're so excited about it. And so while we still have some work to do, I would say I've put that in the very early stages category, and it's not baked into our financial model and certainly not baked into our cost model in terms of us budgeting a huge amount of spend for that area. It is an area that I view as even more upside beyond some of the things we shared at our last Investor Day with you all about long-term upsides for the business.

Thank you so much. There are no further questions at this time. So on behalf of Blend Labs, Inc., thank you for joining. That concludes today's conference call. You may now disconnect.