OPEN - Earnings call transcript Q1 2022 | Opendoor Technologies Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Opendoor First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I'd now like to hand the conference over to your host today, Elise Wang, Head of Investor Relations.

Elise Wang

Thank you, and good afternoon. section results release management can and on Investor our in are be of at the earnings website our shareholder Relations details and commentary additional available found investor.opendoor.com. Full our of letter, which Please on Investor note corporate Relations webcast company's the the that will of simultaneously call website. this be section

Opendoor's I securities to forward-looking regarding remind start, the meaning condition, laws, within to, statements but financial of that limited the we performance, Before federal financial you strategy objectives may and and statements promises would and to like the here. plans, market including, not that contains opportunity from guarantees business following actual cause anticipated and are for discussion expansion management materially involve nor uncertainties discussed differ These future and results risks operations. those neither statements

that XX-K Any XX, on Risk of Factors measurements can measures otherwise, law. responses useful results from a to management's Additional to cause no call, today are them, as as of update conference evaluate are annual and developments financial and measures. as company's result to the section Form current non-GAAP operational to except certain the these The December by made or for financial or to actual year the your of including believes assumes to differ assumptions required following non-GAAP whether discussion new financial references revise based XXXX. report be performance. questions, and in obligation Opendoor contains supplemental information forward-looking company The forward-looking could statements on in found this recent expectations Opendoor's most statements ended investors

Executive of investor.opendoor.com. to of GAAP please the Opendoor. now the I each see Cofounder, Chief of our Officer over non-GAAP these reconciliation to comparable at financial metric, Wu, and call most will turn Chairman website Eric directly a measures For

Eric Wu

afternoon. Good

Low, and On Financial the our Wheeler, me Andrew is our with Officer; call President. Carrie Chief

at experience is what we here do of customer Our point Opendoor. the focal

from hearing recent the call want start customers, I to always, one as Blasingame of family. this by So [Presentation] our

Eric Wu

we XXX,XXX Blasingames, a will alongside than The the transform more digital why off-line into happy are broken seamless experience. the know we reason customers process

reshape but a As building This growth that margin also consumer a improvements also rapid means cycles. experience, grow durable in company. economic sustainable only enable not are our cost driving and and we profitable generational to reduction us be structure across the we

testament Our $XXX to of revenue of surpassed results this expectations We profit million. contribution a million our first are delivering $X.X effort. quarter $XXX billion, gross and of record profit

pricing with net These demonstrated also our million past million. We profitability our are durable us platform engine income margin we flywheel. investments progress scale. deliver hard and key improvements adjusted our adjusted against improvements automation, consumer Alongside X of EBITDA years financial enabling cost of $XX of to on to our continue and make and $XXX technology meters, as also we in structure, work

For accelerate, threefold conversion maintain home reengagement And growth. and sellers, versus north NPS Most fueling we've to with offer requests XX. up at strategy real is adoption XX% continues successfully to year. able over seller encouragingly, of also been our prior

all York markets, of Bay we steps including and in Opendoor continue coming highs us offering, market serve Jersey, some app partner all-time products, adding that as Lower.com also New offers we by including demonstrate launch broader San flexibility that our home Area, progress door more weeks. for our hit of take we we digital purchase strategic and and buyers, adoption fulfillment in the driven across our will We recently Opendoor-backed to financing can seller to and of U.S. of the the offer every Francisco Complete. customers goal on open servicing towards home For country. continue and financing And entered our operate offers, finally, as New which a to we homebuyer enable in major suite footprint largest markets a make the continued We've to across

over Before housing. impacting I medium-term Carrie, wanted short- call on outlook some turn the the of the I to base to for to macro dynamics touch

While we monitor ability in our waiting factors very cycles. interest targets our affordability and closely, rates are confident rising across financial hit we're to

have the aiming to along periods the recessions XX since our every our cost inventory our volatility, and very market very last, to estate real the we summary, we another and of by aside been price made of improvements, and time, First, services journey inventory structural hold combination industry. quarter the via our marked our forecasts duration safety historically short of XXX Setting have in margin we driven short that navigating slow. for gives healthy in makes turbulence step liquid days. and driving significant turn XXX fact us unit sale-ready points second, reduction our to progress this if basis necessary In data, manageable. margins, the incorporate risk which improvements housing of cost transform study attach margins And highly homes structural economics; XXXX,

show for proud and excellence. consumer discuss to While enable delivered delight I'm drive sustainable on turn now combining company products And as our to a financial in financial with experience, changes We of services our the us culture, to most I X more these encouraged will delivering come. results. to focused team, focused that we am on system-level last, We the operational how ensuring that performance, we building Carrie and I on performance up by focused margin customers on decades it detail. that innovating will over we best technology improvements.

Carrie Wheeler

Thanks, Eric.

QX results, I our our Before updated presentation. I annual we've investor that note wanted to discuss

refer Investor for on shareholder XX-Q And quarter. to our our Relations and our upcoming can that letter as details find the always, website. of You full please

on highlights. Moving now key to some

we all-time profit, we and growth saw quarterly in EBITDA. outperformed As quarter We and Eric mentioned, another contribution our expectations significantly revenue, our delivered where profitability. record highs on gross profit

expect income, and year-over-year strong cash to we to testament XXXX. the in margin for expectations net in scale, $XXX growing and growth to structure improvements. addition, a our us continue cost focus the housing our namely exceptional momentum ongoing adjusted across we're like is margin on for now free proxy to the seeing million quarters. good the which In rest sustainability today's a we flow sustainability on topical and are I'd Based a environment, how for drive nearly operating that will of our few coming areas through over business, trend generated

respect to home and of environments and impact to First, slowdown. of typical high housing There's that, that what this to our X% consistent conservative. of it's for daily macro housing misunderstood to to annual views our the are that able we've holding of our our X% been is in seeing what pricing with across volatility, our market same conservative valuations deliver can on time, to is margin against that our to on having light certainty our account in in model be expectation us reiterate drivers this And and we've and targets cycles. custom-built To designed end, to for be frankly what contribution durable of greater a sale-ready to to operational our and input basis a is gives more we're more as of have uncertainty. designed a environment, the And to That's baseline home those we pricing, and to dynamically adjusting across seen models to systems the the homes half confidence the housing updated But slowing gradual be we've underlying forecasted be Combining changing adjust our beginning conditions. our of notwithstanding the say liquid be seasonal is pricing from industry systems And environments. is home conversion. HPA. in are in level begin of a stronger should not important our different reasonable transaction to with the core are reflected not inclusive second business conservative, trends, offers. and That's may business, and pricing margin experience be beyond Housing the that to our we're continue be which immune. going pace year, structure most macro give with in and volumes acquisition in HPA been to in chance on longer. that us we what's to normal a continue dynamics understanding key the at an deep that

macro underpinned is by the side. Our viewpoint what's supply happening on

well subsequent in well was high last X GFC. are resulted observed rates of high debt though to willingness that in We the recovery. increases rates under rates led contrast, downturn, global to multiyear demand-driven those the resulted predominant today supply even saw low operate led GFC during behavior, was a to high to of we that and that the This which on supply At increasing. the as forced levels household assets GFC financial delevering, time, as dynamic In formation This crisis. housing at a savings what to and very post during all selling conditions leverage been differentiates and lower and bubble, years. consumer housing debt-to-income higher last continue in from driver significant the ratios take prior the have delevering has current market, home which of the over historically price inventory the

sharp unlikely Notwithstanding, X% And decline of of given in is declines XXXX, HPA currently the waned of the the GFC, X%. Outside or around declines. since selling years, during been modest prices single of balance the at increasing have there a there our have XXX market sheets. of While strength in quarters down affordability a price downturn largest move to estate further the GFC, real all housing out view. was less. quarter tended slowly prices over has consumer with sustained This X X risk even renders last very little forced in only

between stated to rates front, to margin remain increases navigate housing and we're to market noting to the translated at two, deliver only to us around that on become [indiscernible] compared market, confident X.X% What's again, and rate rather upside it than On valuable we gradually goals. worth listing rates, relative the certainty share homeowners the consumers, a changing will of Furthermore, and the gainer a to First, the and average flow rise have cycles. X.X%. real higher and we our to demand, average have to mortgage interest to as for conditions our in in that applications expect the rate the changing respond real offer as mortgage a gradual expectations to relationship be the sharp process today reasonable would of industry suggest pre-pandemic Based rates pre-GFC traditional more rates housing all speed allowing ability simplicity, this? across X% Fed on downturn. a it's while of long-term softening

for guidance our to QX. now Turning

year-on-year the $X.X We substantial to expected $X.X billion to revenue $X.X billion, prior of the at to This to continue billion billion. our for expectations representing expect first be to to billion growth deliver for between Revenue growth. $X.X amounts year $X midpoint. this versus XXX% of half is over

million, quarter. to to $XXX expected range. to of in increase the EBITDA Adjusted XXX% and We operating are and between expect sequentially increase increase midpoint contribution margins over the which million adjusted by and million represents also of be approximately are of an year-over-year EBITDA expected $XXX second a margin the at sequentially $XX X.X% expenses

continuing contribution to baseline of X%. annual X% against range a to are our We business manage margin

and market and be conditions However, when are additional case to QX. expect time are from that we time capture dynamic opportunistic going to in the be choose we margin strong, to exceptionally to

the with generational questions, achieve for Thanks. to customers continue open teammates for building to at I of I I'm of all up delighting thank call that the will durable our questions. company. all Before want call our together proud And that, I with in a we open Opendoor. now

Operator

Instructions]. [Operator

Our Jason Helfstein Oppenheimer. with question first from comes

Charles Larkin

one more how you the This the implied bit about half follow-up. give gross on strength should And the drove I further in what then color of think improvement on And the margin XQ? Could in Jason. then And we is Chad for year? have quarter? little then assumingly back the in a

Carrie Wheeler

Chad, I'll take it's Carrie. that.

we being more quarter constraints a saw quarter prior about I in what to the results where relative operational to think saw had. QX the we respect in we with So would QX, what normal [indiscernible] we

really tick normalized into what we letter, were that we in in of volatility. increasing late commented increasing to been in our leaning it And since spread last shareholder by be we're then sequential and light our QX our fall as into show and driven in QX in calling a margin, we you'll foresee up numbers. market see So fact margins the margins, trending have that for up QX

Charles Larkin

And of Great. half? through through should the the the think year? how then that building Okay. kind rest we back of Is about still inventory

Carrie Wheeler

for mark expect No, for said the the that balance through the that the inventory grow low Yes. of QX we year, point inventory $X.X we and to billion, should year.

Operator

question comes with from Wedbush. Our next Arounian Ygal

Ygal Arounian

there First XQ? guess. slowing commentary inventory. transactions the on market relative housing had a purchased, transactions I the number [indiscernible] slowing anything a follow-up to into to of and Is about HPA in the expectations and read you here of and what the you

Carrie Wheeler

a comments Yes. I make. mean, couple of I'll

all, inventory QX, for demand for elevated base of a about of prior we us that up first we the cadence housing. very really of So we already quarter. really fact healthy in little the the with and strong quarters showed talked bit met a But the and QX,

we we guided and expected than we to really even high more did probably but have We see sold rates homes to. for inventory sell-through

bit In that. in would it of We have pulling a million than addition, fallen little have pull into people see we $XXX we demand of those what some saw at QX. of function sized a of from and saw QX otherwise expected, closing into would QX, through to was of faster homes we we homes what around expected

driver that the major a So but results, not certainly, of of bit a a one. was

also question speaks think of the to year I respect we your for proposing rest are housing. like to with what the

half comments, we of through against what what cool is light of seeing value is gradual volumes the and as grow year, increasing slowing pressures rates we're of said, affordability. and in expect be or in housing our HPA we're will proposition a our to rising we in at -- seeing But interest the also market shows in the assumption managing there that offer We said market. the we think this with least towards on that. certainty kind we up right an will As now we're what of back

Ygal Arounian

Right.

together -- trying but fully what So to view homes -- that purchases understand and there in -- adjust I a your think structurally buying agree guess you I I tying at with view. of are market because might as market, was, on at fundamental you plenty that with your you overall, transaction, the but the get you fewer your was views are There on pace than you positive your the -- based not do things you collapse. of

in if of a X you think kind next could market you little over maybe And bit a so take months? the of step back, headed we're that

Carrie Wheeler

hasn't I mean conversion have at QX. to what be expect acquisition in continue mean And of all. been to since No. growth. our we not I pace we But or increasing up been have doing either a we volumes. that last grow They'll a fall spreads. inhibited acquisition is

volumes. meet And targets, grow margin so long continue our that we acquisition our can will to we

this that greater with our and environment, I to this seen Back increasing think conversion in that's not of important impact time a takeaway the spreads volatility. should in only to times growing at really increase comment volumes. and prop acquisition real we've same market we've been a value

Eric Wu

consumers, that, consumers I'd they Eric. of we say value And is different which it that, I'll [indiscernible] to an if on we seen add seeing the capturing. is incredible we're the which is love conversion, value our deliver spreads, sign haven't delivering way, increased as again, to This convert. to a a impact we've material -- in is we're to top will

our through half excited can conversion margins through to held so improved, not of of that period, we've which gives to continue And lot see this confidence a the this only steady seen we're back that us grow year. have also we

Ygal Arounian

color into I Bay others? -- the And but markets the kind one those signs seeing far, how progressing so things New helpful. on any Area, different in York, are know other you're maybe really Anything Jersey. just the the moves Just way early, That's the Awesome. the New on or it's or same there? any then Okay. of as

Andrew Low

where added Area obviously, to be Andrew. I'd The really extend on that early, all in markets the the New and last it's as against very launched New Bay pleased the Those still York, our XX in Ygal, And will Jersey fact, over New XXXX, are the in of we indications, we it's execute them. launched and that strong. statement with to we're of pleased markets the New Jersey. York, XX playbook markets perform a way with also year. We're predictable continue course And year. early we

Operator

Our next with McKeveny question comes Ryan from Zelman.

Ryan McKeveny

the see definitely Congrats out guys it's uncertainty on that the helpful the is embedded and on appreciate micro results cost structure that business, and to there. given out the details you lay views, added the the

on a the to to couple and think I you dig sellers think quarters it's the marketplace buyers. wanted So last a being for local into I long-term into topic through. of got ecosystem And two-sided Eric, interesting

the this if the obviously So all-time demand, is think too supply buyers days more that to opportunity with of local buy of hear high. to an the kind we at But much aggregation aggregating local side there look offers sellers, with hit flywheel to you when starts purchase share flourish, of we still supply that important I a high-intent and that a it to threshold into as early to on side, should level guess it's of buy at as and get or of buyers share great the that that kind is certain that, on capturing broadly get is that? level about of market really to market

Eric Wu

if using be unique way we're mobile as Ryan, that about the experience going that building with we're it's mind a inventory, that we're experience on differentiated that our aggregate possible first in I it actually supply. inventory supply, we're supply, to it's just home top to able build buy with our it's a that question. device. The to build to a think is able case, of state valid to we And step. of to your that, really the peace And end [indiscernible] our

app that seeing supply, tips define every are try to to is to maybe really single good we're progress looking, and a on if do correlation and we we and not When buyers downloading supply, that using where that. that aggregating of experience In in term do we able good terms of and supply increase market we the that demand unique with market directly. signal but buyer see shop, with using build top have to differentiated that Opendoor we're certain, really actually are our

Ryan McKeveny

the risk or into riskier there. areas? think potentially offers underwriting, kind into a leaning and remained That's underwriting topic and Maybe on enough And helpful spread very the continuing really that geographies you the strong. we as geographies weakness But I even has guess acquisition obviously price at in the least your where weakness if Eric. comment pausing should maybe where and to think pulling we your the still approach about than some Or in of on maybe XX of market adoption all certain in it. that just hear one is there a price helpful, and that housing big of greater dictates balancing about conversion act on and period do markets out the but to risk see others, bake back locations? more Got of scenario geographic do have making is a how of market dynamic Carrie footprint or you kind commentary have

Carrie Wheeler

Ryan, Carrie. it's

diversified of depending home on. that in markets, portfolio do can can One differently of against the can capital way. being across and going have really what's business make we types, allocate XX all that make We we we markets we duties really on trade-offs a across manage trade-offs the in is

positioned, I look if would year. really for is What though, say well we do the the of believe, we that are we was to today, half would back so So paramount.

the slowdown, been environments spreads, all For gradual operated we've I positioned to reason and HPA historically. we we've one, three, respond different can for we're two, said, that; increasing that; across

ability HPA thrive in that And comfortable moderate, to of we're our sort see environment. so as we of

Andrew Low

our context And more Ryan, top, think additional we The provide increase. spreads would obviously is, on some to to it volatility, add if about just there. there's way

that market spreads gainers and information, conversion result. we've that promising materially all as seen market the change can the be markets, it signal the volatility, we even perceives seeing share Now fluctuate. across as also that is With that may we're not a mean

Carrie Wheeler

market. it that. see us I just don't when can -- to I compare a for exit realistic don't is we don't and I price we a scenario

Operator

comes with question Malinowski [ph] of next David Bank Our America. from

Unidentified Analyst

earlier. going think for it to I guess for guess thinking a in I on Dave Curt. for affordability largest pricing I think was know decreasing how are interest should And mechanisms, up, modeling particularly follow-up your as It's we're I markets? year? wanted, forward, on about it's be velocity, principally might curious you quick modeling expense sustainable why about we just then commented if is about rates I going guess, the

Carrie Wheeler

changing to come how I think for year, the we One how that right. have rate respond two interest parts I if question. there's environment I'll do got we just is -- HPA the one. a back that to to of the balance

there's we made consistent time and being housing for that very make we're longer, prioritize are perform, we clear, in moment that may this fact expectations margin sure that to supply out there's have That comments for to a targets. there no margins scenario the good housing stronger [indiscernible] meeting We going given be going is just now. the to just with right structurally earlier our about be been said, our

good this ability our volumes, assuming really is slowing about we're to we respond so slowing And and that. gradual of feel gradual scenario to of HPA,

couple So around I question, to a rates, things. P&L, as rates say certainly relates forecast, rising modeling it We're into our which on -- of our understandably. the second half there's is I'd guess

be consistent quite last we the comments This to just but made quarter, should We it with parse our expect impact manageable. [indiscernible] overall to the P&L is through.

that turns how finance per that how basis we structure. expect XXX the we basis that the look our course net more of look to on a certainly, And cost if us today, pretty points, our If you of have. overall points perhaps The our combination we're different to facilities on the is based And about over loans of And and on and order senior to assume things, cost maybe increase, modest of homes, the points. exists to understand it's the that's we we'd pass at to our on to we forward that to importantly, customer basis basis based the extend you important which going year, manage home and XX [indiscernible] via to a today curve of through interest end increase we're that our neutral. of full the on interest in margin senior going cost objective mix the year. contribution after be XX is relative spreads, the to just

Operator

question comes KBW. next Ryan Tomasello with Our from

Ryan Tomasello

still on Just that seller And any starting curious that the conversion despite if to holding of -- strong see be nice benefit do around the a off. initial any XX% strong environment. plus in any signs normalized following you But conversion, rates I noticed to markets in do sellers that put you've targets may up go you already long-term could guess environment? go more metric? have in you conversion where internal think that to

Eric Wu

of we're gross it's margins like Eric. in we're we've contribution pleased reflective margins. increased with I it's Again, some Ryan, that seeing spreads, obviously, and early evidence quite as our mentioned, the

our is even the creating We the be subsequently, needed steady we're that half will means can going value don't And a what we in to there's the the could had when year. don't we're uncertainty. there's material back when when for the capture conversion that Opendoor we this creating least. view of that again, like this a company have any have most founded into And certainly most, -- the not damage actually value softening consumers. that the at seen we times on that most we're of rates look today very But uncertainty, which when I hypothesis a that optimistic we that's conversion back rates. through

increasing think year. spreads throughout the And again, so as we about

Ryan Tomasello

the having that of, drag And delta basis? you are new then and on the contribution markets, your look say maybe geographic in the margin assume, can it mature markets you a of that these your considering what on between if initially profit I consolidated at the terms business, expansion maybe way most continues, that's ramping level markets

Andrew Low

Yes. all our we like reality terms It's the positive actually Andrew they're small shared is of any than and our drag those even they're updated of actually here. investor the in profitability markets, looks cohort presentation, have. removing profiles actually in more the pretty and of in prior what quickly The some and of margin cohorts

Operator

Our question with next Justin from Berenberg. comes Ages

Justin Ages

into given wanted the follow-on up on you to Can York, of Francisco Jersey, after houses guys oversight New additional New Just follow any that those if uniqueness the about areas, you San into any? the then markets. talk entry take in that. account some the And of a

Andrew Low

testament New to of and platforms. first investment in I of years call think, a what Jersey our Look, actually the Sure. investment all, is I'd our Bay it's and X-plus Area York, enter pricing New out ability to San Francisco

underwrite [indiscernible] them And a launch. is with that at. fundamental our in what and the what markets, And we that is launch, apply after monitor sure closely. the we focus market those not And Our the we we we actually ability gating model is focus us those we after test our the is to And growth a look market. And enter shortly to on that's rigorously that's our performing making for it's we've playbook way item feel comfortable rigorously, launch risk far very, expect we so taking very go-to-market launch markets. to And that is every and on happens. begin once only very carefully actually market we're in to. we what seen that, before

Justin Ages

any bring those letter, on significantly management to but inventory to days, in reason the believe XXX attention of the the that that, numbers and I vendor And makes that there to XX sense. reduce you called times? That can system All improve the you mentioned lower in right. you is know improvement then kind system guys turnover? have holding seen or the

Andrew Low

is into in platforms rocks, down the work, is team for operational continue of a excellence. structure. I portion opportunities, process actually hard over think we to looking constantly cost. turning the drive to so into can been relentless saw at our drive cost basis period, a We're pursuit is embedding technology, one of our margin X-year over improvement. things And improvements that you of big of structural we've points And And XXX that able that

continuing yes, operations platform I'm will so to believe our our to -- that invest technology savings. operations do sorry, we continue and yield in cost and transaction And platform

Operator

Instructions]. [Operator

next Our with Crédit from comes Ju question Suisse. Stephen

Stephen Ju

rate an high the think of and wondering at where first. us -- So time I a I escrow those was there rolled uptake in ago least some can if on uptake were they services, the out I title of ancillary markets update give high was product you some pretty mean your for

mature any rolled So are where as a to ones? of original/older And are the below bit there structural terms Are XXX%, sort of markets some adoption. the those why newer of And out. believe still full most there in almost ceiling being similar reason be path are some products a these is should markets adoption were now? that you seeing

Andrew Low

new see as or particularly we different business, our enter strong we see to market do overall. continue attach different attach launch, rates rates to title Specific We as market states. we to

and particularly early is needed. things up One we're very that go capacity, we can of life cycle market's of, go can as have in we the conscious flexible a we down

level to profitability highest we're over so markets we in that time. because early attach actually just the flexibility ways think And prioritizing over system better some in that absolute leads

in a very of to we'll we don't title we We we, and think see attach XXX% say, markets. in pretty goes per all it indicator, but so think overall see our that se, is, business. is where it our good that And would I think strong

Operator

to like question-and-answer today's session. closing Eric back turn That Wu for the to I'd remarks. call concludes

Eric Wu

QX I'm Thank want Carrie to hours you. say [indiscernible] working that results. hours I the proud of as incredibly them. entire team customers our just on mentioned, for servicing delighting and And and

to market around going margin our volatility. We net And structure. more great deal upcoming and of are we're cost managing with believe business be we gainers share and importantly, any a discipline our from beneficiaries

you. trillion in are $XX a the real estate future we Thank superior Our very reshaping bright. is marketplace digital product entire far And a with market.

Operator

you Thank call. conference participating. today's for concludes This

disconnect. now may You

Opendoor (OPEN) 6 May 222022 Q1 Earnings call transcript