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Cloud banking software provider Blend Labs Inc. says it’s on a faster track to profitability despite continued declines in revenue from its mortgage customers, thanks to a $150 million cash injection from Haveli Investments.

“Blend is now debt-free and just achieved our best ever free cash flow and operating income quarter as a public company, despite continued high interest rates in the mortgage industry,” the company said Wednesday in announcing a $20.7 million first quarter net loss.

Blend lost $66.2 million during Q1 2023 on the way to posting a $179.9 million 2023 net loss. The improvement in net loss was due to the fact that while Q1 revenue was down 6 percent from a year ago, to $34.9 million, Blend was able to cut operating expenses more drastically — by 49 percent, to $39.3 million.

While revenue from services Blend provides to its consumer banking customers was up 29 percent from a year ago, to $6.7 million, revenue from the company’s title segment was down 12 percent, to $11.1 million. Blend’s biggest source of revenue — the services it provides to mortgage lenders — also shrank 15 percent from a year ago, to $15.1 million.

Blend said its platform handled 14.1 percent fewer mortgage transactions during Q1 2024 than it did a year ago, with refinancing volume taking the biggest hit.

“We attribute the majority of this decrease to relatively high interest rates, decreased housing affordability, and uncertain worldwide political and economic conditions,” Blend said in a more detailed quarterly report to investors.

But the big news for Blend was a development it announced on April 29, after the quarter ended — a $150 million private equity cash injection from Austin, Texas-based Haveli Investments, which Blend used to pay off the debt it took on to get into the title insurance business by acquiring Title365 in  2021.

Blend paid mortgage loan servicer Mr. Cooper $422 million for a 90 percent stake in Title365, financing part of the deal with a $225 million term loan and $25 million in revolving credit. Two weeks later, Blend raised about $360 million in an initial public offering,

“This is a big deal for our company,” Blend CEO Nima Ghamsari said Wednesday on a call with investment analysts. “By recapitalizing our balance sheet, we’ve taken the pressure off of any near-term capital obligations and can focus without distraction on what’s most important to us: Serving our customers and building for the long term through modern solutions that enable our customers, mortgage companies and consumer banks to better serve their customers.”

Ghamsari said Blend expects to save $18 million in annualized interest expense, “which we expect will help us achieve our goal of positive cash flow generation sooner than we previously planned.”

“It’s important to emphasize that this investment has no coupon,” Ghamsari said. “The Haveli team is making a long-term bet on the company’s technical, financial and customer success, and are fully aligned on growing the business.”

Brian Sheth, Haveli’s founder and chief investment officer, is joining Blend’s board of directors as part of the deal terms.

Blend said it expects a non-GAAP net operating loss of between $7.5 million and $10.5 million, which would represent an improvement from $11.2 million in Q1.

Shares in Blend, which in the last 12 months have traded for as little as 80 cents and as much as $3.40, were up 6 percent from Wednesday’s close of $2.36 in after hours trading following the earnings release.

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Email Matt Carter