OPEN - Earnings call transcript Q4 2020 | Opendoor Technologies Inc.

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to Opendoor’s Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. [Operator Instructions] It is now my pleasure to introduce, Whitney Kukulka with Investor Relations.

Whitney Kukulka

operator. you, Thank and ladies Good gentlemen. afternoon Thank you and Opendoor’s quarter us year joining XXXX for full financial fourth call. for results conference

Joining of in our our are today and additional Executive Wheeler, the are Founder results Financial on available commentary Chief details Chief Carrie Officer, Eric All Officer. earnings management and and me Wu, call on section which be found call of the investor.opendoor.com. at website that website. can on this section Relations release, Please be will the company’s corporate webcast simultaneously the of the Investor Investor note Relations

like business. guarantees start, cause those I meaning remind we promises These laws, following statements management’s to Before the Federal Opendoor’s and materially to discussion results are and that may risks the forward-looking would the including the nor and to actual uncertainties results within here. regarding you limited not from financial differ expectations statements statements that but and discussed securities for contains future involves of neither plans

Additional in results required in a information your as including law. result to assumes of and The today of SEC no can financial on developments forward-looking report the Opendoor’s call and XX, by to measures. questions whether Risk contain of current ended non-GAAP new responses the that found December otherwise, made Opendoor revise following on filings. or obligation based are expectations as except them as statements forward-looking annual year discussion other to section may or update could statements XXXX be XX-K differ this for Factors from conference Opendoor’s cause Form Any actual

each investor.opendoor.com. GAAP please the of see of our non-GAAP these a to comparable at financial metrics, most website directly For measures reconciliation

Eric. call will over Eric? I Now, the turn to

Eric Wu

you Thank Welcome call. and first thank earnings all for you, our joining Whitney.

and of families their like own the the sharing and their That first experience. buy We nationwide. value experience solving. are ground problem start are Opendoor, in on and is results Dominic importance we and process home said, words. start their Officers our vast end relentlessly consuming. take and million multiple every at few like X.X a are who on customer online for too story about we I the hand majority we focused and quarter the us people we and time At Meeting complex with can the Opendoor we moments momentum far months. the Mom are to this being a on still of for with seeing, of X% the to every inspired And us want stressful the would to the the get we with story Before Rhonda [Advertisement] customers’ span by of transactions than Board a share just every family coming involves the Chief I with the dozens Less sell to and steps the is customer coming thanks special the are impact improving year, same and tradition story for on the have and and

consumers deserved, founded I and and experience. build a So online XXXX certain Opendoor what fast in to crave simple,

and We of home it tap a a to are button. the sell possible at making buy

what in ground customer to component and each friction entire on from not the experience. best cost first. over and so over XX,XXX economics. have with As totaling billion as in XX We But have and is volume unit this we Vertically rebuilding experience the today integrating deliver the in it easy. the we category, in inventor, the profitable we hard $XX is have done exists necessary things be to in markets, up we leader the ourselves helped believe transaction over pride remove families transaction the to doing that move, scale

just we’ve So, operational to buy the taps. systems, sell past the homeowners so product, platform in technology for few can work and and seven done pricing the years, a engine, refine hard

As of on I for mission invent it and our reflect on each customers. XXXX, proud how our I was to focus our other, supported and teammates continued but a and unprecedented turbulent year, build am

In terms revenue. of $X.X finished results, we with billion XXXX of

with million with lower due in contribution X.X% margins this margins our margins COVID, at is of at While gross X.X% contribution delivered XX.X% saw than our pausing at strong of XXXX. of QX, levels, we we the and of XXXX acquisitions to revenue margins onset $XXX gross and XX.X%. margins In adjusted

scenes Opendoor the we As for building for moment. enter we’ve been years very like many XXXX, behind this feel I

also how favorite home. you your restaurant about reset has the and gym, the COVID consumers the their school, think night. are date lucky, now First, office, if Home is and

XX% time share worked Before That employees XX%. of the from pandemic, up full to now is home.

the estate. Additionally, almost same from work recent of result reason. additional and space, to are a in ability respondents to real and historical rate their of decided for move COVID-XX The for accelerating has anywhere, a demand low to additional survey, leave as city their plans XX% residential interest wanting an XX% created

is have their of selling the us. transportation, most tailwinds us iBuyer. These day-to-day, for is impact no would sharply, Second, recent In visible a estate created to exception. real product the we conducted, for shifts home sellers ecommerce seismic digital rising while significant and consider an of adoption said survey is XX% two delivery, on they food

off, online. to more more First home an Opendoor sellers to offer sell and to coming request are

A are and this XX% were more this sending converting more is exciting hot, offers now. that exceeding yes. like of choose over So are highs. and to a last year month, per more The answer to we will markets is, that, more time we the compared question we What’s are Opendoor previous that homeowners when home far right seeing year, often get sellers. these is we

future this our historical And points real XX, We coming year, is the promoter highs. net is XX exceeding is conversion is over importantly of most seller score XXXX. and is trending than estate Our this up which expected. faster from seller believe

our about talk let’s plans. upcoming Next,

best share our in be is a markets sell move. building seamlessly existing the one, and expanding are market; to online to digital place two, That sellers more to move. we and seamlessly means of nationwide; home driving to three, our goal many focused on; Our one-stop-shop market

First, in we coverage In offer us conversion exceed zip price, our and increasing type. our ability existing range address record expand box home ability in our confidence to our plus buy of and historical increasing plus to to high we a give improvements, box markets. wider XX%, sellers expanded QX, share level. requests, continue the buy by code market These

footprint to XX to plan market year XX. from our this Second, we double

scale with our markets well technology platform underpinned been transaction. the profitably and Our XX% than by market operational that nationwide and in are homes recently the and systems, including on pricing automates San Thus, models over a six to we have a at our in and positioned plan and large Ashville launching QX, servicing are and and more playbooks announced Diego. expand XXX we Long-term, rapidly tested in centralizes of way being live on U.S. we the are

buyers. know in Finally, We’ve be making progress that minutes on goal already and online also mortgage Yes, sellers we tech-enabled will and to services. digital provide escrow to we our sell title two-thirds of insurance, are move. homeowners these few to enabled a build one-stop-shops

tap buying a So, we experience. building are one

be based seasoned and which are sell are offer flex and closing an shoppers chances on the a light to speed. pricing relentlessly backed and want coupled frictionless all and team pace home sellers innovate know focused come, So and operations. to buy it millions on competitive. enable preferred recently seeing We know for platform, dream their to certainty setter digital buyers technology moves. is more delightful focus, our that, It the home to want our in online up the customers market date their and closing, feature, With and cash to launched operational This is expertise their over nationwide. will We Carrie. we what home and In improve with Accordingly, hand us of cash by for our and and getting we Opendoor, we’ve enable experience an experience homeowners their technology, can seamlessly. deliver this submit I’ll buyers, consumers. in of offers leverage market that to demonstrate for ability we scale building know quickly

Carrie Wheeler

Thanks, Eric.

we solid just million of exceeding went we and adjusted of loss an Eric for pleased into going discussed, full fall and EBITDA loss public. XXXX. momentum approximately we had the adjusted financial XXXX $XX revenue million QX $X.X We and with EBITDA and the billion $XX last are the provided As targets we of $XXX a for of an revenue year reported million

inventory the and sheet beginning onset second we our a the majority to COVID. constant XXXX of that safety discussed, We with surely we’ve unprecedented almost were resale of acquisitions in manage vast fiscal results to billion margins our the by pause of homes balance over and As quarters. uncertainty demonstrating and and third and resiliency our of systems. time in impacted sold at concerns The agility pandemic down sell caused owned $X March actively us for some

QX given and which We of balance. that purchased been have on out fuel the impacted strong resale However, a processes. that, million we September’s X,XXX exceed XXXX mark more market revenue demand inventory our the acquisition reflected is sell throughout quarter. Declines that strength top-line by which over is for in QX. for in aggressively put down we representing up than the that since and year. QX revenue We strong housing did was inventory, notwithstanding, the homes $XXX point inventory with for expectations for revenue in QX, our the year performance low ended homes, driven homes we Xx our time. ramp acquiring

strong $XX,XXX, front, quarter. XXXX, up from were of year contribution XXX points margins for per basis for per profit from year. points were contribution fourth strong generated gross XXX for XXXX. XXXX, up home-adjusted we adjusted Contribution a gross of home and per and home margins X.X particularly on were X.X% approximately home in for X.X% basis, And $XX,XXX. the On the profit full profit basis gross the prior profit Adjusted margin

a pandemic. per cost profit some approximately profit, contribution and $XX,XXX, year. appreciation of saw we million the result adjusted of expense to a loss reductions markets. inventory quarter but home having QX, saw These strong home weighted an in EBITDA, driven higher the of margins recently mix perspective, healthy a increase From in in had $XX price profit also of well homes, by undertook for EBITDA were the For adjusted the per by the gross as We largely $XX,XXX. our response and loss million adjusted gains primarily controls $XX as in acquired as of we for driven to contribution home we

XX% down adjusted delta million comprise XX% which the year, a expenses, $XX contribution respectively. QX, for operating and between Our million in and and EBITDA $XXX full were

declined, operations resumed our While in the to grow and we as of revenue product guidance. accelerated sales the spend absolute year-over-year, sequentially periods investment our note the I’d in leveraging QX XXXX given now all and OpEx the across low was support that both marketing, I’ll base. growth OpEx it quarterly did objectives. to markets see also operations down development turn we and XX%

now are annual guidance. We providing updated

However, will the I about the talked outlook this be with are that back previous year. as to meaning previously year XXXX. of we our half comfortable follow top-line the our say for we to rebuild revenue expect coming cadence our can’t our inventory, for weighted we We’ve also

million. negative EBITDA $XX million from we QX, to revenue to expect Adjusted expected $XXX to million. of losses For $XX range $XXX negative are

the On increasing due acquisition top side, trends pace, we funnel of to by and demand. business in are our revenue both increasing encouraged volume our

it to throughout positively should addition, we expect economics, strong considered revenue margin performance to margin this continue HPA we beginning unit strong to year price QX. while In improve, or in moderate do we into the to QX, the persist home realized respect QX expect impact With quarter. in market tailwinds next appreciation will the be will

Let you me tell why. but

mix year. up First, our inventory homes course of this as we build the will balance, of our resale throughout normalize

underwriting, our that sold very pricing QX housing strong QX, responsive and and terms saw for early the our we homes while we realize in models upside did relevant to we QX. particularly macro QX, to in homes of in underwrote Second, in were we

the approximately throughout we Going expect in wanted recent stock-based public $XXX million, in significant due and compensation employees, expense which is historical larger additional equity move I as for note in expect us grants. to forward, a that is quarter as will grant our non-cash that at The typical to well related to performance-based see we also estimated QX, increase a expense we our margins as moderate do to year. much to is equity offering. for primarily

continue to recognize additional remaining forward expect time-based stock-based to territories going over We the vesting compensation warrant. expense

the balance Now sheet. to turning

offering had securities. approximately the another of The billion. end marketable bringing of $XXX approximately cash us and added we QX, million, $X.X follow-on $X.X billion to of As that

market certainly year presented are well wrapped are our proud see accelerate have and capitalized at to our we firepower our roadmap. In substantial to and products we a while XXXX and we opportunities expansion with managed business We how many difficult invest how team up in pleased of QX. very challenges, we are conclusion, through and

Thank operator course are encouraged online. you coming growth we record we going please propelled real of We’ll build drive posting would lines track And some you. of the Q&A? we addition, economics the by over the QX as up positive to In the with undeniable estate unit to shift open the that, are continue year. for into by this product momentum seeing from in offline

Operator

our Suisse. from Yoni And Instructions] question the with first comes line of [Operator Credit Yadgaran

Yoni Yadgaran

for question. Hey the Thanks guys.

two me. So, from

particular is kind services That’s first getting main as impact when the out et cetera year, kind expanding incremental factor might factors kind home the appreciating investing prices? a of, market the is quarterly the partners’ just gross anything puts that you of of on go your, throughout into the are around the getting your with a how of and versus that about loans, new maybe of look licenses cadence that homes into in in potentially How takes of as what margins cadence you initial in versus between Secondarily, maybe or around, your thinking might home outs and roll particularly and of to side comments are market? much of rollout you What the well to The et the factors back respect kind that cetera. on are footprint services? for within and services when that the you that. historically engineering new else involved kind new roll how be go Thanks. price

Eric Wu

Thanks, Yoni. Eric. is Hey, this

then, address first So, your I’ll and let the the address I’ll part question question. of your of second part Carrie

three are As focus we in mentioned here I investing remarks, on areas. just big really the in

and our penetration expand So to existing is the deepen our first market in cities.

of third one-stop-shop. the expand that, seamless nationwide buying is and cities year. this be The the sellers vector are And their we we is, house want QX that and second launching to of is and and at also to online are we the six aiming in two-thirds big XX digital. know to by building are make end extremely We transaction

we staff three have driving In going are be to terms resources, invest all improvements all three the year. of the down capabilities in we to additional this and added and vectors

Carrie Wheeler

the second can I around Okay. of question, asked. just expectations take And I the if you the over XXXX the margins of think part cadence for of question was course that

main will the Really think of newly a two drivers margins homes, of was, was in very that entirely QX acquired almost you fresh one. year. help all happen If us about what for of consisting to about one first inventory, of having talk book coming what’s going drove margins,

margin trends QX home today, driver are a combination acquisitions. in Second the of the we timing market was of seeing around coupled with of underlying

drove the we sold that offered in than just gap realize early in so gains. in and that So, a QX actually in anticipated we homes as reminder, and that we HPA QX QX, timing on and homes acquired are better we

our to the year really in balance there to in of look just addition acquire comments margins. the conservative margins to course COVID fact last seeing those as will rate seeing and homes the We reflects call we we late to XXXX, Both the my that. that, this that Certainly, to in given environment reflects just why is adjusted persist volatility are You same caution are And normal. feel we are in seeing moved which that underwriting benefit our the of expect very that are HPA weren’t market it not about now underwriting of year, Today, market. are the for reasons. in in will of throughout that drivers more and underwriting terms in at more the the distribution inventory over we’ve due aging right what the our and good the we homes of to other we moderate today intentionally drivers was year.

So you come will of that see will that the margins the today. where down year course from over are we

Yoni Yadgaran

Got it. Appreciated. Thanks guys.

Carrie Wheeler

Thanks.

Operator

with the Helfstein our question you. Thank line from And Oppenheimer. comes next Jason of

Jason Helfstein

apologize I the for questions. Two And advance comparison with Thanks. in Zillow.

right absolute world stock should You – living the very be market. in are be in But or we analyzing compared relative now an should on you a basis.

first So, your And this just do experience And to when Zillow, we see quarter you as when versus very a Could your I should you margins? similar over second, consumers be guess, thinking we about about you better about Zillow, And are growth you thinking think differences than know, giving – revenue I are your the extended guidance, generally, down about And think if have then, duopoly? how you today? push obviously the previous you if margins faster years? just or are you losses grow margins two guidance. Zillow. much I next versus

how So are Thank balance maybe between you. give about you those us color the two? thinking just some

Eric Wu

do when and a net the X% I’ll less are Jason. by raising conversion when now. of start categories that reminding Maybe, awareness great right Yes. are benefit, see consumer we better question, much Appreciate product is really than performing online the transactions especially is and

to again, gainer positioned online, transactions the very prophecies is given platform that, feel personal to-date be share a the we’ve built what my best built view as building and our to in So, compete consumer in we’ve and our competition, do more view we our to regard confident well just market and more very with over time, where you we in are sure. experience focused compete. Carrie, With about to need the we the and on But margin? speak want to years. coming ability

Carrie Wheeler

Yes, invest we on market margin. Jason, want of maximizing growth question enormous the one And that front at high your of What and is growth level is a have number No. the advantage Yes. and focus objective. behind foremost, right really a us to opportunity. first growth is, trade-offs we and about I That’s would in between to the say, objective. take aggressively our

just going we us. fact continuing But XXXX. are in to As point evidence do disciplined to to we a are sustainable double recently as that, be to building were we going we the historically economics I’d to into unit we announced of that a the to with This be markets have continues business. important to durable approach

am same a for light and growth to always us margin at making again one, our to I the little number question a is So, in are time. of objective the bit that question but on sure answer going achieve say, your and disciplined we

Jason Helfstein

Thank you.

Operator

our you. from Securities. Thank Arounian And Wedbush Ygal comes next line question with the of

Ygal Arounian

wanted guys. the afternoon, of I think for taking a stronger improving ask, comments that kind being Good about And Eric, now has Hey. sense. Conversion than Thanks there. lot of conversion. historically and on been questions. your it to I question makes

So normally above maybe a the it quicker And homes and kind driving price. they on expect much and go we would. what’s sell home war sellers sell about asking it to more bit we little could bidding than and can where the like, talk see of that their

there And been of has paused love commentary some maybe for market to from the we’d that second, some about mid-December. then, just the your month mid-November in you comments there. got So, hear dynamics listings a on, to

if insights just that why made to Thanks. So, just some that? is, And any is decisions? you accuracy maybe into happened those what there

Eric Wu

Appreciate it. question. the Got

factors are experience and there for your I’ll we things. I’ll a already The first move. a mentioned second demand what’s desire second just mentioned But two contactless is, the let part and some seeing more doing talk about macro was, as a strong things and are conversion, there we is on to why speak macro from in digital of question. some actually our So, what are on There really with then bit side. factors also Carrie is your to is question I I driving

that go site you in an our can have the we other to increase thing, organic are demand are coming we if sellers we and and into grown So reduce and as experience the But, in friction seeing those seeing I from nicely. can forward mentioned, partnership strength move. channels the

in We listing we are continue conditions and to are the two market the if necessarily you our would timing lowering when products even and confident things; behavior Opendoor and for markets. again, list going increase you to that one things flexible; on hot about market, is fees think to another sellers that, is on I waste itself, seller selling at improvements still have the And those seller home, buy And highlight can in to put your open conversion. why our experience two-thirds the and make capital the and of piece and a of versus that, driving have second it’s of repairs, be houses not time are the home.

to ready next be to notice. need they so, at home moment’s a move on And the

having So the gives pocket Opendoor in their buy offer home back to next line. on flexibility their time them an

in two And increase are so, the into those conversion. driving factors the

Carrie Wheeler

the that we just short experiment what some be that in specifics, in nothing that I what it we took. last of took mean, with in can a doing homes we we list. the getting would that it’s. say is, late to But seasonality. frankly when once the given Part time cadence with our Short of opportunity terms term into over owned and of and times and expect the I some could rotate two you is to how And respect to just took your that think experiment year. us list actually without on of good that, I of question, that. time we We the I pause around listing listing at did while

Ygal Arounian

Thanks so much.

Operator

with KeyBanc next our And Instructions] Capital comes of [Operator Edward Markets. you. from Thank question the Yruma line

Edward Yruma

any comprehensive a see you. behavior what guess, of have you commentary that forward the and do Thank close? uptake services in on Hey. update kind going roadmap the roadmap? rising you in in for kind Good and change are taking you that Any kind to I afternoon out. questions. guys of rates any just maybe even with been Thanks change people adding changes behavior seeing in services any pretty rushing first, has for more Second, broader terms a building of question, that in and know any I of guys.

Eric Wu

repeat Edward, the part the breaking You up can of little question? bit. you first were a

Edward Yruma

rate seen the based Yes, moving I kind to on was asking, behavior changes you based close funnel just any on rates environment, have this of of or rising consumer either of kind in top the moving? quickly in

Eric Wu

part the And is it. Got second services question of the about roadmap?

Edward Yruma

That’s right.

Eric Wu

it. Got Yes.

we’ve consumers me, a more want geographic rates the been three think home of knew changing, people so, healthy one services, XX% to to margins with and we stronger and part factor lost I’ll and from on demonstrated the well. in question of equation. To giving policy again, feel the track of close. escrow. desire years mobility. rates got see record your the move lock let is the work comment, digital and business as both certainly that then a this, and in macro Carrie, it very the in in But But the XXXX way it So that integrate We title now, strong free moving we is around I and that’s address with desire

us. single multiple do, more talk see opportunity. that we seamless every a want want consumers often that against know product integrated across fact, We in day when lines. from executed our this the services to And customers. so, pretty experience We They we additional well

in Offers line And and home a just Opendoor. product we as so, And invest mentioned, feature continue we With called that new Cash Opendoor we in then, investing year. to I heavily launched this year Buy pretty are within this loans

Carrie Wheeler

we part got you. uptake that I question. repeat Thank you to you have question And second yes, are seeing the wanted of services? address your Can in a – the

Edward Yruma

around of wanted uptake just could in rate, in know I anything color attach quantitative was terms the kind if services. there provide of Yes. you to

Carrie Wheeler

than we which nothing most filed we our today Probably of the a offering of attaching filings service in escrow, around north and our – more title always XX%. is which were offering public have is we mature are

Edward Yruma

you. Okay. Thank

Operator

Thank Oppenheimer. you. the with Jason And we from have line a Helfstein question of follow-up

Jason Helfstein

in Opendoor? Thanks Any are to do you List housekeeping close? I one sheet update the until then not And they balance that. a homes or Thanks. more. contract With color share? on a Any capture you for on have want that question, that

Eric Wu

you second repeat that the Can of Sorry. part question?

Jason Helfstein

Do the on balance in not or you close? contracts capture homes they that until are sheet a

Carrie Wheeler

I own them close. Jason, one balance can the do homes we to until the for us, capture which is, don’t on sheet their we easy

be would So, you in the point homes what we are to I is show that own, what’s you the under XX-K inventory contract towards filing, – if look purchased. that at do

You can track that.

homes we those. had So, about XXXX in inventory. own We

close We majority of vast will. have about XXXX will but homes, I rough numbers, under contract those and to be the purchased

more as of numbers two or those less of this. think out can you So

Jason Helfstein

Great.

Eric Wu

place on there, care the about to customers’ be of we we a List are to do And color just things one, thinking home to to We to regards With we some want an want about the give maybe online. and with the couple products And you holistically. be a Opendoor best sell update side. is, I how the

Point of one. decision. number two informed is we ensure is that it’s to So that number the kind do point making want customer a

convenience helped what so, they is want the options the choices And that’s them determine to them to and maximize market, certainty, sell on and do best to want list to and of for or have situation. informed to we range sure options, us their are they option giving their the by make whether

that’s so, kind And of the product thesis.

of But, to With is us selling to us. We most. they line that sell that’s are offering, as core chosen that’s List seeing continue the the invest strong our in as Opendoor still will an we alternative to such progress, in which convergence we product to kind

Jason Helfstein

Thank you.

Operator

turn call any to remarks. closing for Thank over would you. back Wu CEO, Eric the now I like to

Eric Wu

for I their I Great. day. this you call you. every do people And support to our buy end their and want home persistence our transform for and want online. to earnings first thank mission a sell servicing and just how to by shareholders thank also Thank saying in customers my our passion teammates to

Operator

Ladies now and Thank you And conference concludes participating. call. may gentlemen, this disconnect. today’s you for

Opendoor (OPEN) 5 Mar 212020 Q4 Earnings call transcript