Earnings call transcript Q1 2023

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Operator

Good day, and thank you for standing by. Welcome to the Opendoor Technologies First Quarter 2023 Earnings Conference Call. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Elise Wang, Vice President, Investor Relations. Please go ahead.

Elise Wang

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

fact I securities to forward-looking historical remind could start, conditions, business that the meaning and Opendoor plans, laws. not within for forward-looking, limited statements statements to, but statements are of that statements than objectives the we Before opportunity be federal you would like the All other contains including, following anticipated discussion future deemed statements market operations. expansion management regarding strategy ncial and performance, financial and of

neither not here. nor reliance may forward-looking promises them. Such cause undue and materially be discussed differ involve to on from are risks uncertainties should statements guarantees those actual These and that placed statements results

results information statements actual Additional that annual from found XXXX after the most Form Opendoor's section report could our be year the recent on forward-looking by XX reports XX-K periodic can that Risk as and December of XX-K. filed for Factors cause to ended differ updated in

call, including revise company's measurements The financial to required them, based as whether forward-looking useful made this and non-GAAP the law. measures. supplemental measures obligation update these or except following believes certain to and today contains company financial otherwise, no or to new on investors evaluate by Any financial events management's future operational The references and discussion information, your as questions, of to non-GAAP performance. to are statements result are reasonable as responses conference on assumptions expectations current Opendoor of assumes a

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

of I to turn Wheeler, will Opendoor. Chief Executive call the Carrie now Officer over

Carrie Wheeler

Capital Markets the our Officer; business. Dod and Schwartz, of on Interim me our today call and Also Fraser, afternoon. Financial Chief President Enterprise Good with is Christy

our $X vision selling to today time-consuming, the stressful is complicated of and most estate, platform a build history a trusted remains trillion process Opendoor, static offline. e-commerce real and remains The At that buying home for residential and broken.

consumers and this between We are status homes so with the move of buy, confidence. sell forefront simplicity transforming quo, can and at

X and Over the last that developed magical years, a we've sellers product home need. want

These Our that performance on spread homes adjusted conversion buyers expectations of of unique differentiate past and things one and largest country. sellers the rates basis. particularly become we've to the exceed continue in uncertainty. us, capabilities operations and and are our pricing to times built of the in a macro

housing what sellers we our the clearance sidelines. step seeing XX% quarter, buy XX uncertain. this While in continue is supply, almost of down outlook The the new Market were home following transition listings be are year. versus to but some trending to the lack of higher be in in prior as box been is of for than expected prices stabilization within on first has continues result number home years, the a

that imperative with to we backdrop, continue caution of light In it's and this discipline. macro operate

for our meets to that inventory margin of targets. XXXX and grow maintain the new spreads book we we expect Specifically, as double-digit comfortably rest a of

platforms builders we are sellers. Given expanding partnership agents will to on home continue the more to impact have low-cost online channels, attract and this conversion, including our focused estate on real

we country also another homes speed with agents their ease. partnered us to for cost-effective and the highly channels reach allow homebuilders homes, across to and customers a clients' of existing build and with from move them of enabling give sell facilitate toolkit seamless with to their customers the a in We've scalable option be simple where to We in We've thousands new trade-in a over XX expect partnered these way. more home.

agent We service the their contracts of offering. via a Over business XX% with us. number an from past Opendoor are of XX of sourced agents make part regular in who previously done relationship seeing a agents came had growing months

partnerships and We agent our sellers that program to directly access these offering are improved introduce incentivizes agents referral repeat a through to to us. rewards deepen continuing utilize that transactions

finally, And country, visitor partnerships we have online and with in the platforms Realtor.com. X top estate traffic the Redfin now by real Zillow,

the to grow to homeowners visit millions of we these parity get every us volumes to expect We time, month. market as portals that via these reach platforms enabling hundreds over acquisition of

of pilot are exclusives. of enroll who Furthermore, Amongst iterate Plano, in XX% sellers, market MLS. tapping category to pitched at are those on QX on we we on serious. continuing selling calling interested almost commit price, semi to agreed some home are we're offering, yet They are but these not our listing depending the in point we're customers sellers of their In to a ready Opendoor exclusives. marketplace our to into into

with are customers current cash serve these believe incremental our to the largely we We offering.

encouraged customer in and are iterate liquidity hone signals, we'll We market. on experience year drive early the that product these this by this to continue and to offering

is and evolved area of unit assessment focus process we data. over QX, In home and platforms the home in-person that efficiencies Another feature time. gather deliver can for operating our economics pricing so condition higher to we additional us strengthening our greater in XXXX home

that capture sources better on home an collect we ownership technology across our the to throughout feedback condition implemented home also for cycle. We multiple action

for homes at better enable both pre-acquisition owned home these per Together, pricing resale and a home to us level. optimize condition, understand acquisition and improvements and

selective to X,XXX of which has quarter renovations. process last investments, improvements We have than us year, the of homes, we allowed and almost faster sell-through turn to on in renovation home our planned. these longest our us also repair fourth platform applied condition expanded targeted held Beginning in rates homes in drive through capabilities perform and enabling

to operating next workforce we finally, XX% April, year, G&A our a we against improvement primarily with groups. just target X% margin reduction incremental least to and are market current platform of roles overall X%. points XXX the volume-based our approximately improvements employees, of the capacity rightsized And decline of delivering examples announced pace operations, and goal acquisitions. further at executing volumes have focused to across annual These transactions contribution we some are range of basis XXX of reduced transaction reflect in our on In or of

We expect expenses. to approximately $XX million this deliver savings in of annualized

While a and come. was to this that to can necessary ensure vision our years long-term to it deliver customers difficult decision, on for was continue serve we

right ever to as and As we the know as best forward capital we unique capabilities, the but quarter generational durable beyond, the and more a this the and on and We only resilient team weather stronger building improving we focused than look customers been. ever lives company. of next not we've emerge remain cycle, products, have and

With I'll our to over to pass that, discuss highlights. financial call Christy the

Christina Schwartz

Thank you, Carrie.

volumes value delivered book guidance overall which book listing limited a of Our our book our exceeded building focus new first reflect we've quarter the new market our to into home decline healthy revenue, results We and sell-through billion continued the as old our a $X.X of in significant of our reduction selling and in while therefore, capital inventory, preservation. outperformed structure supply. progress and expectations rates on due through of made cost

particular, completing between pull homes condition us we is which These in or quarter allowed XX% our of the targeted offers in success on improvements June March macro is contract of cohort, last to sales sold as dynamics, of with made forward homes. old home and coupled QX In year of book end.

On homes first front, in down quarter the of XX% XXXX. the we versus purchased acquisition X,XXX quarter, the first

an been by has decline by in acquisitions we market observed First, driven in a listings reduction The in primary new XX% March. X with January a year, versus a decline last increasing in sellers holding to from pattern, factors: decline XX%

in year-over-year. saw due seller through to contract offered a spreads decline conversion we Second, higher

March is prior noting that as it to XX% into reduction back Although spending of XX% first improved X to on versus modest we XX% a year. as conversion in has these a spreads. from by response result the quarter marketing pulled worth In approximately factors, going of

our reflection book homes quarter. These In book X.X% comprised lower-margin resale generated first our which X.X% of contribution old margin contribution negative in our a new inventory. a of sales Our was XX% is margin the quarter. longer-dated the in the performance from the in of retails of of contrast, quarter, of homes

margins once fully X% expect We cohorts of newer to these to target through. acquisition deliver excess our in annual to continue sold X% contribution of margin

Adjusted inventory recorded was quarter, the $XXX first valuation adjustments in on homes previously EBITDA million loss inclusive million the which period. of $XXX sold in of is

capacity, months, X purchasing environment As slowdown been a in operational spend expenses the we've the macro last response and our activity. in our to intentional and fixed marketing the over reducing reminder,

down quarter, or quarter and XXXX. loss adjusted operating from delta expenses, the between of the in in million which our million EBITDA second peak we the for such, define of totaled $XXX adjusted of the quarter $XXX and profit As million $XXX XXXX a first as contribution

We sheet. with balance equivalents quarter our to cash ended equity unrestricted our in securities invested of $XXX and and Turning in million marketable cash, $X.X the homes. billion

nonrecourse had facilities. also billion We $XX.X in asset-backed

at future to our of $XXX total discount, March, million substantial we repurchase invested million convertible outstanding in $XXX a Additionally, our notes debt reducing obligations.

home macro environment. discipline, continue Looking management approach the and cautious given pricing, near-term ahead, operate to expense with plan uncertainty we capital via a the to of

the remain the seasonality, to Given of typical throughout housing we year. elevated remainder spreads expect relatively

to Turning guidance.

with OpEx we QX Consistent inventory $X.XX the billion between last loss in be with contribution majority margin. and of $XXX billion quarter from resales. savings EBITDA expect our levels QX our the million. the April and mark positive Adjusted be of our fresh reflects reduction to to million be quarter guidance, contribution margin book million, negative $XX is in of expected around to the beginning this comprises when force. second which expect We $XXX revenue between $X.XX and to adjusted generally

call With that, I open will now questions. the for

Operator

[Operator Instructions].

line comes with Our question JMP Securities. of from the Jones Nick first

Nicholas Jones

outlook. around just one Maybe

through XQ, well? of As improve XQ contribution guess, from results remainder of sequentially step I after we does kind of a kind up good of that us down XQ guide to year? Because profit there's as then, it kind EBITDA pretty EBITDA. improved the And of trickle should to like on expect looks the

kind guess, about of we So how the 'XX? that, should as think to we rest get of I

Christina Schwartz

it's you question. here. And the Nick, Christy thank for

be homes. contribution positive those still them said, QX. out, is old book you see to you right margins. and we know And we're now margin, There clear expect as For But tail. we a in slight in through starting selling of once QX, improved as will the

be sold the to QX, sell a will little expect in the drag end contribution or QX on be and are in ones margin. contract through a mostly that by in of but of contract We bit

for will in flow correct the down you it's second to it then EBITDA. think of And half the think about I year. as So that increasing to

our the note contains of we impairment to our that EBITDA periods. release that recorded adjustments important also prior It's valuation adjustments, in inventory

inventory valuation the old those sell-through, won't those in have as see that so adjustments which anymore. And inventory, you those homes EBITDA book of is

Nicholas Jones

sense. Got sheet. it. the Makes And one on then balance maybe

kind As come relatively down, you us between position restricted cash inventories Can restricted remained cash of the dynamic the and high. the has inventory position? remind

Dod Fraser

the they don't The so up. increase right, majority our term has revolve. relates restricted to restricted facilities, You're cash cash of debt gone the

they're asset-backed debt. cash, And collateralized restricted So those good But by either interest XX-Q, or there's they're earn just our entities. cash. on In that that shows do by the it's a really we inventory income. breakdown collateralized collateralizing

So interest income you the think earning cash that interest about to as excess can expense. offset

Operator

line question with next JPMorgan. comes of the Dae from Our Lee

Dae Lee

that I to missed should I follow half? the your your as Or how forward? do think remark, going normal apologize, expect back to acquisition recurred seasonality? going pace on if that about but see the I home you're accelerate we Like should And you this

Carrie Wheeler

about we indicate Yes. guide One remarks Thanks that's part our the as remarks, our at for pace Sitting things. what is our of spreads conversion come to expect month. for we we've good pace under this a in of and balance a right you about the our half. able And be conversion of for Carrie. for to we is per increase year. into the us back first around followed, pretty of assumption do level here acquisitions. year have the i.e., to of half I improved, the would I much from the a couple that's has in the to and X,XXX has today, spreads acquisitions I being -- of our pretty meaningfully we baseline now to this mean it's down tried at indicated been think seen year question. the And back that, I think would

Dae Lee

I follow-up. what see higher? Got you it. guess would phase to And the need for to a mean pick acquisition I up

Carrie Wheeler

And the spreads do I looking mean, acquisition for stabilization are a for for we're drives baking where really the we for now, in volatility us. said we a another what less right conversion of lot has or half lot us is modest for our to us, in because spreads, home pace of to is spreads in that with decrease a amount we're need year. price back system. Implicit way, in appreciation the

lead continue us we given the will and So spreads pretty to for of the mortgage that play to think compress we're We stabilization QX, stabilization little around how lead on to to want a year, that rates can volume that of allow hold will in balance to pricing just turn, out, more going to But brands. the QX uncertainty range high. stabilize.

Operator

Instructions]. [Operator

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

Ryan Tomasello

of rate the savings. $XX It is the Just what the quarter about you're of sounds expense efficiency. million on a OpEx of expense million run in thinking as like the full $XX

And to can you modeling piece. breakeven feel like marketing do the with that investment some volume billion achieve as that OpEx? to that additional level, overhead be $XX of support Or should in then clarify into to just the increase? wanted ramp you in level same general XXXX we volumes you Just spend

Christina Schwartz

is this Christy. the you question. Ryan, for Thank

for million the think expense, had just force that reduction $XX in I operating in April. contemplate we that the does On

forward. so in in first increase of To is good relatively And probably model start. some safe marketing, a year. that place a more would I to billion, the to But $XX amount expect that's yes, to the get half

Carrie Wheeler

around that early low-cost the partnerships try a to channels fact of our for our want We're We're enthusiastic we us. a partnership. the highly I to that heavily fact in time. and now online have mean the the Ryan, leaning more Again, very have into of in optimism to our are going number is other of low-cost agent the play how provide right letter, we Yes. color we're estate, channel over are lot days across I and also of for point we low-cost, we're you a it's a to those we little and markets ala thing channels, all out Redfin about Realtor.com, what channel out Zillow now. seeing very scalable with real

seeing lots X is on where as home the XX-plus part homebuilder we're And category. of side, with ones, partnering the of new activity right And a now homebuilders. of you the we're active builds big know, XX pretty

to very you're and going $XX are bit Christy, come totally we get on us leaning So these to marketing. back are CAC them. little money we economics -- well, channels to into again, also But we're right, more attached with million, think spend to attractive a that scalable quite to

Ryan Tomasello

test updates more Got Okay. volume Is any iterate XXXX. next ramp time achievable platform? talked it. about and there call, Just I targeting line around you last here that on your And markets. as you continuing expansion believe is still through exclusives beyond to material targets in year that to the initial continue think the potentially you then your the

Carrie Wheeler

Yes.

is we exclusives on seeing. update salient by encouraged can we're most that the the really early give think signs we're I right now

are it sell what want and but right list seamless. focusing into want way customers what some to a now, seeing We've We're That's number is it, they the doing about if customer is on a to that about to do right? love we're interesting this direct to which But to latent the And us offers, on be point want seller, segment of one. to tapping and the had incremental line iterating, what's that they we're easy, testing. side. market, to it they determined, at it's sales those time do the single learning think they called you this and is good don't incredibly which seller If some wants sell signal.

access category And we're two, of a supply that we we believe unearthing wouldn't otherwise.

driving So with that's share north quarter, getting short can't They're think, platform to, alone. in listing we're And then the a else. encouraging. they're now the anywhere they engage And within Plano on sitting homes, because of I period we're buyers MLS. time, get of seeing these X% in very

an So what's sure then the to to the stay coming basis, metric. growth experience. and buyers encouraging XXXX are small market seeing going well, sellers I numbers that we're absolute We're are making focused over on number But really the you want. look that's are to on of say, for platform. the and that know not perfecting And to drive that we're I'd customer expand it liquidity in going going we're the we the and to time.

Operator

Instructions]. [Operator

line question with Jay McCanless next Wedbush. the of Our comes from

Jay McCanless

had, Could I about the maybe how much those surprised like maybe the little hear you don't of come percentage, spreads hear to since to already. -- bring fall down one that first down talk to magnitude spreads The I 'XX? the you're you the of a have but know starting

Dod Fraser

Yes.

since they're So the fall, points. XXX basis approximately down

down So basis basically we're about XXX of off points. peak,

think of that house in prices. was this -- I seeing year. of we stabilization back part done on the the

So the bit about one that's the full quarter. price of but charts our favorite back We quarter, my of improvement appreciation. the shareholder a an is home there, through last month-over-month saw we this first in carried talked and letter that's

we slightly actually normal That the home basically in home half, first to in positive seasonality back saw So the prices prices. said, negative is flat quarter.

the given this for continued high time average of on we maintain above so year. uncertainty spreads have to rates, And

Jay McCanless

you a long when and above then maybe previously? field this to talked the guess And have you I homebuilding it, economics cetera. the et or offices that's quarter maybe And the in you what been know of Horton, sales Okay. all out what beyond channel, in we've can. Lennar's done time, about recently talk mean, I you have I seen for if

Dod Fraser

a but alluded channel specifically, is, low-cost economics the CAC to, for as us. So I can't that comment very on Carrie

the ours years the is now. really with to point, we for home of customers I marketing started it there the out every and customer. for seamless X team allow think for is field, sale largest, explain To new so sell to really in been the continue product product, an has trade-in that there a help and we your which product consultants staple that have and trade-in create on-the-ground makes that helping us the piece

Jay McCanless

Okay. question. reason been margin one then Why not from the after words the just of removed there, print disclosures? And the interesting other contribution some that's

Christina Schwartz

Christy. is this Jay, Yes,

be lot kind fully homes. not are right So we that's because we've we're really financing we that changed some has removed to utilized it quarter, have the A way term changed last items that now. loans, and of our and senior

current kind Dod, you want And so it to of reflects our structure. market capital anything? do add

Dod Fraser

Yes.

I think what I today example which that restricted we're interest because earlier, offset is where expense like other as to a balance facilities good positive we we alluded have have income senior cash and interest is carrying. of each term

so clean was contribution something allocating load that. to just to -- into that home a a not mapping was it's And -- it margin there's we not of -- could level

we So that's disclosure. did where remove that

in interest lending inventory and billion no attached are volatility. rate no I helpful things given are is facilities, think they're notable trying that now to LIBOR very from facilities. balances because rate is if fixed given interest Those are though, the fixed expense to that $X.X term where one of There's have we those fixed. you're cost, our understand perspective cash a the it,

Operator

turn over to I conference the back for Carrie Wheeler closing remarks. will now

Carrie Wheeler

moment. on continue ton and a Thanks. underscore discipline debt is convenance move the excellence that for us in online, today. that I no of real customers want focused certainty to product. I aside, Macro our there's extremely to operating just to And remain of that thank we with want want this to going estate joining everyone and

innovate, through that to the continue business. come profitable market resilience to a greater leadership make us building on this So with and path to we're investments focused to and position

all look out we Thank So this by the our every Opendoor forward with you day, happen to to you. teammates that's talking making it. way who are quarter. Shout next and

Operator

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

disconnect. may now You

Opendoor (OPEN) 4 May 232023 Q1 Earnings call transcript