Blend Labs, Inc. (BLND) stock intrinsic value fair value estimate & owner earnings analysis

Blend Labs sells cloud software that banks, credit unions and mortgage lenders use to take applications, verify borrowers and close loans. The continuing business had $123.6 million of revenue in 2025, mainly from the Mortgage Suite (about $63 million, down 6% on customer churn, lower verification-of-income and insurance revenue, and repricing of one large contract at renewal); the Consumer Banking Suite (up 34% to about $46 million as several large customers went live with home equity and deposit-account opening); and professional services (about $10 million). Gross margin was 74%. Mortgage revenue depends on how many loans its customers fund, so it moves with the mortgage cycle. The Title business, bought in 2021, has been put up for sale and is excluded from all figures here. The 2024 sale of the homeowners insurance business is also excluded. What the business earns for its owners. We measure cash from operations, strip out working-capital swings, and subtract stock-based pay and the capital spending needed to maintain the platform. Stock compensation is a real cost here. It was $29.0 million in 2025, and in 2025 and the first half of 2026 the company spent $62 million buying back shares, largely to offset that dilution. On this basis the business has never earned money for its owners. Owner earnings were -$299 million in 2022 (including Title), -$163 million in 2023, -$58 million in 2024 and -$28 million in 2025 (-$0.11 a share). The improvement came from deep cost cuts and from repaying the term loan in April 2024; interest paid fell from $27.8 million in 2023 to zero in 2025. The last four reported quarters, the second half of 2025 and the first half of 2026, ran at about -$13 million a year. Part of that gain came from spending on equipment and capitalized software falling from $7.9 million to $1.9 million in the half-year comparison. Four quarters of evidence is enough to move our starting point from the 2025 figure (-$28 million) to about -$13 million. Earlier years included the Title business and a much larger cost base, so they describe a different company and are not used for the level. The $449.7 million goodwill and intangible write-off in 2022 did not use cash and is not charged again. It shows that the Title acquisition destroyed capital. What ranks ahead of the common shares. There is no bank debt. The claim that matters is $150 million of Series A preferred stock sold to the investment firm Haveli in April 2024. It pays no dividend. It converts into common stock at $3.25 a share (about 46.2 million shares). From April 2029 the holder can force the company to buy it back for cash at 150% of the $150 million ($225 million), rising to 175% in 2030 and 200% ($300 million) from April 2031. If the company is sold, the holder receives at least 200%. The company has nothing close to $225 million. At June 30, 2026 it held $44.9 million of cash and short-term investments, plus $39.4 million of stakes in private companies at book value. We count all $84.3 million in the shareholders' favour. We charge the preferred at the present value of the 2029 buyback, $193.6 million, in the base and bull cases. Base case. Owner earnings hold at about -$13 million a year, the level of the last four quarters. We give no credit for further margin gains, for growth in the mortgage market or for new customer wins. None of these is contracted, and this is a turnaround that is not finished. Contracted backlog was $168.5 million at mid-2026, down from $189.4 million at year-end 2025. It supports today's revenue but not growth. We carry the losses for ten years and assume nothing beyond that. The business is worth about -$96 million, cash and investments add $84 million, and the preferred claim takes $194 million. The company appears to owe about $205 million more than it is worth: -$0.85 a share. Bear case. Mortgage Suite churn and renewal price cuts continue, as disclosed for 2025. Backlog keeps running down, and owner earnings fall back to the 2025 level of -$28 million a year. With no cash to meet the 2029 buyback, the likely outcome is a sale or recapitalization in which the preferred collects its 200% change-of-control amount ($300 million, $258 million today). The business is worth about -$207 million; with $84 million of cash and investments and a $258 million preferred claim, it owes about $381 million more than it is worth: -$1.59 a share. Bull case. The company's own levers work. Revenue grows 7% a year, matching 2025, as contracted Consumer Banking deployments ramp. Half of each new revenue dollar reaches owner earnings, which turn positive in the third year and reach about $50 million by year ten. That level holds for another ten years on the strength of lenders' multi-year contracts and the cost of switching platforms. The business is worth about $315 million. After adding $84 million and paying the preferred's $194 million buyback value, the common is worth about $205 million, or $0.86 a share. Converting would give the preferred holder only about $64 million, so even here the holder takes the cash buyback. The shares appear to be worth less than nothing in the base and bear cases. Even the bull case is worth under a dollar, because the preferred's buyback right sits ahead of the common. For this to be wrong, the business must earn positive owner earnings after stock compensation soon, and do so reliably. Or the preferred must convert or be refinanced on terms that leave most of the value with common holders. Neither has happened. The first-half 2026 figures are rebuilt from the quarterly report's cash-flow data, and a small unexplained difference of about $0.2 million remains. The private-company stakes are carried at book value, and their real worth could be different.