Earnings call transcript Q1 2023

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Operator

Good afternoon. Thank you for attending today's Offerpad First Quarter 2023 Earnings Call. My name is Bethany, and I will be the moderator for today's call. [Operator Instructions]

I'd now like to pass the conference over to our host Stefanie Layton, Senior Vice President of Investor Relations and ESG at Offerpad. Stefanie?

Stefanie Layton

afternoon, call. to good quarter Solutions' and earnings XXXX you, everyone. Offerpad Welcome first Thank

and Executive me Chairman Mike Our Chief Burnett, Financial and are Officer, Chief here with today. Officer, Brian Bair;

will During the the Securities Reform Litigation forward-looking as of defined Private XXXX. make Act call in statements management today,

significantly by filings company's risks, statements other uncertainties required statements, Forward-looking as differ law, Except result Commission. factors inherently Exchange and with business Please update expectations. or relating and uncertain, forward-looking Securities management's are the not described does alter and of events to our whether applicable in intend future U.S. refer the Offerpad could to events a from otherwise. to new the or information, as

non-GAAP items heading Offerpad's exclude on financial measures. quarter Offerpad's On website. tables GAAP call, reconciliation measures. the today's These release comparable of discussed on the under are the our measures certain certain earnings non-GAAP release financial measures to of The available management will non-GAAP to earnings financial in metrics the first refer

turn Brian. now the to call I'll over

Brian Bair

Hi, joining everyone. you us Appreciate today. Stephanie. Thanks,

a in priorities, year the XXXX our QX financial resulting quarter on volume and market extraordinary operational updates. quarter and top XXXX trends following our impact plans, on last XXXX, Mike first sales will results cover the I'll execute second fourth The the the home first values outlook. adjust required quarter focused our to interest we and and us In rates share increase our and priorities. summary, revise near-term and decisively. quarter objectives

acquired homes prior selling September to last and renovating year. of First,

on go-forward contract to homes those to plans. of sold sell. focus XX% under us week, are last of As This allows our entirely have

market. markets our at positive pace to to and uncertain acquisitions new acquiring new achieve a in cautious this Second, improve homes returns on ability test

achieved X, under after exceeded markets we our homes as fact, largely have even been stress. targets return September on In normalized many or acquired have

cost last Fourth, reductions balance and are market costs adjust to million to our our capital Third, annual operating equity dynamics. $XX expected to by year. to Cumulative increase raising today's compared reducing to other sheet. headcount strengthen costs XXXX in

quarter to year-end. forward to are expect adjusted and Now the produce EBITDA in we executing XXXX third we positive plan a that by the second quarter, looking of

Importantly, ability achieve home dependent price to we our believe is that not and profitability execute appreciation. on

We are prepared plenty through is of this transaction of broader There period to market upside if perform residential depressed this accelerates. volumes. resale

However, our dependent not plan market is acceleration. on

priorities. Our plan three targets the following top

cost markets. while optimizing our higher with targeted on down First, market doubling reductions footprint performing

targeted from Second, of increasing acquisitions a time to close acquisition XXX with days to or approximately month less. XXX per

market expanding cash knowledge partners. of ways leveraging fee-based to precisely Third, also our deep that execute serve and our innovating while business customers and increase to the core offerings operational can service capabilities and number we offer our

we what we focused to We know agile on an are to do, enthusiasm. We and execute continuing organization. remain and need innovate with

would first our point quarter Turning results. low our reported and line QX represent would reflect income net top we expectations. exceeded We call, our goals anticipated QX quarter-over-quarter quarter the our our fourth bottom XXXX bottom improvement. of to that line and On line met

sales. of offset us loss inventory, inventory new sale was of losses of associated QX Reduced In the the margins adjusted legacy costs two-thirds the sale positive was EBITDA still half QX, and helped our our of prior with on quarter. which

anticipated are initiated their market Accordingly, cost in substantially challenges compared lower we volumes choosing will current general With mortgage transaction estate market and in XXXX. volumes. the affordability current business consumers this that to this month for additional broader right-size expectations reductions holder many rates, to remain year real the to stay and

per adjusted spend year-end. higher month EBITDA These through changes to markets. to XXX combination resources plan support our recalibrating performing and includes and positive EXPRESS by reduction acquisitions sales cash our affordable directs offers internal and marketing a more achieve our support at of This approximately

Our progress homes, in improving In particularly most homes, our and and multiple more conditions certain are longer affordable QX markets, markets. listed many we offers price of across sentiment seeing areas. was by reappearing on significant supported cuts in are no

normalized As to price more historic volatility ranges, allowed has to on competitively has targeted more it price homes. us

of does volume. home pricing most model home pricing challenges. direction Our more competitive believe whether the price not in appreciation caused will changes succeed, us to accelerate rapid the We either prices that in increasing require trend acquisition it's help that

we create reduce addition, in-house our position utilize to to risk continue value, renovation to In expertise inventory sell. and our

a operational business customers capabilities opportunity help source and efficient and to outside revenue brand we and leads. our created additional Our core cash established top-of-funnel have Added EXPRESS to further business. of core generate and strong of a of powerful deep offer our lot

for listing the Flex core that the is operations. cash to I update you in services to three our EXPRESS Turning following our and business. partners and investor services. homes addition will on are our Renovate, Direct which products acquiring Plus, offer

Last are for quarter, new our our expand fee-based rental our a offerings. believe companies, not volumes does plan offerings to rely and Plus of business these with year plans services great many we our on business We provide proposition value but shared as on the Direct single-family to these now. significant sidelines this investors renovate for

Offerpad these of are believe renovation time. Through renovate, our services providing multifamily an and we can non- on services part homes. we business single important be Nonetheless, over

started new XXX we this approximately During the model. under first quarter, business and completed using projects multiple renovation our services, businesses

markets. is in program first Plus sellers connects buy taking partners the several with Direct we shape. Our quarter, In onboarded investors boxes investor diverse new that target with

from two we addition, offering expanded to markets. In eight Offerpad this

family current every short-term FLEX also of also our services. referral as from and Plus companies, an partners can a service benefit to Growing supports single provide Direct solution agent our utilizing goal, such renovate potential for Importantly, rental customer. listing our the and network many

more team than experts looking local cash an a agents, offer. to our those With of XXX provide a for alternative

that we a receives the agent closes through percentage program. serve, that an an customers have don't referral market. network currently agent Offerpad connect we of any markets we transaction commission For customers referral where and for our in with

list on our solution expanding way our with professional. manage fits services and are more be volume. and our To team connected of best top funnel and otherwise individuals, local to our capitalizing match we Offerpad's we another working with customer able partners, needs estate of of Customers, automatically each analytics data solution request is meeting real to This that the enhanced their needs. could assist technology by not the a

for FLEX listing offer partners A of behalf cash Direct on our Offerpad services. agent partner Plus their

analytics This deliver estate propositions, Offerpad our contacts each helps who goal the for software best one of value update simpler, maintain less experience. to and Our stressful with solution a primary person their is needs. real

experience and and market build As more an conditions, demonstrating perform We ability operational shift We abrupt adapted navigated financial through XXXX, current better, thrived we during our improving the hot and in even the in we diverse during shift used results. this last with business. year, XXXX. we buyers' to market the market to time the market are under

customer focused EXPRESS price sell the to the market capabilities to be operational our data, For expertise cash while right it business, and homes buying, and more offer great local underwrite, target experience. ever core the submarkets. laser in to is important homes and maintaining right deep leverage renovate At our on technology our applying right a expert than

way cost have I and estate real In remain change offering to to a excited right home. way products the believe, right right any financing, sell opportunity buy our closing, the customers, their We succeed environment transacts. we best structure, in by about and our to

Mike. to call over the I'll now turn

Michael Burnett

Brian. Thanks,

our We line encouraging improvement bottom to had an start financial beginning quarter-over-quarter the results. with year in macro to conditions, stabilize and

our to in have substantially financial with year, financial Importantly, this support schedule, to continued and This improvement our goal, under our in accomplished performance we homes sell this critical to prior stated we line or purchased all was shift. market and expectations. the accomplished contract on our

the we our quarter, generated end of revenue million XX%. of first the $XXX exceeding by range guidance QX During top

revenue quarter net supported an reflects of improvement of guidance also which of selling range million the over our The QX XX% homes Our average the of $XX.X by XXXX. loss at end in was a, $XXX,XXX. sale price the first top exceeded X,XXX

negative XX% Our a adjusted year. sequential a fourth on more This EBITDA margins quarterly The quarter-over-quarter. last quarter negative $XXX.X compared in improvement for adjusted the million $XX.X in to million in profit to homes. reflects increase due improved the million gross quarter improvement EBITDA acquired the $XX in decline inventory as by significant a was recently supported well as adjustment valuation was

consistent Our the with quarter by X.X% partially gross inventory September of the XXXX. is acquired of after underwritten homes from market performance margin disposition the points improved QX. shift, to XXX prior of the in This to loss offset positive fourth basis to

fourth year, and during expect were margins homes quarter, Early show or margins, trend the homes this to quarter the upward returns two-thirds September. X,XXX underwritten, sold the our the first we quarters. last the Of first contribution results of nearly homes range, target to and acquired before in above year and coming for in of gross at continue quarter

X% cost Total general reduction and decreased measures. prior quarter, the headcount operating to reductions, other expenses due announced previously from

that early reduce we the mentioned, reduction of additional million in in All nine and to Brian $XX are, over cost by additional As expect expected told, also savings. months measures initiated XXXX. May, we've to actions result in approximately cost annualized reductions million last approximately the costs implemented those $X

of to our business QX XXX shift. holding compared XXX our expectation operational at cash in of to QX QX, seasonality consistent a the Turning to in the homes in of number market as XXXX. This holding given period a prior as was acquired well to selling or longer days significant metrics, our with for time period days peaked our

cohorts Here days more performance an were again, that to average XXX demonstrating homes homes. recent after cash sold September our time of of in the last QX, had acquired of

days in cash through of and April we normalize improvement decline an holding time expect year. time, will end seen of QX and around the in to already have XXX We in this our the QX,

half last significantly year, since. of As have strategy acquisition. home in in been we mitigation year, January hit monthly month level of our of reduced lowest prudently risk part pace our acquisitions We the this second increasing and the of of each

the in to in double nearly We we first the the expect acquisition volumes that quarter. quarter acquired homes XXX second

From $X.X first debt unrestricted and sheet. million, end. increased million to at from cash at year $XXX over quarter, Inventory $XXX to end balance the of $XX continue a we million in perspective, declined balance derisk year the repaid sheet balance our of billion as we end QX from the

end debt had $X.X XX, capacity, committed. borrowing and as we was March of was which balance million QX, total $XXX of million of $XXX Our the billion of

through along dislocations a significant in facilities to diversified blue work has the decades. us them the lenders of with and enabled of have estate strong our collectively real We structure with relationships chip most and base one our of credit sudden

achieving, ample our to a place materialize. Importantly, business to with of, favorable only have additional we per our continue we acquisitions plan. our levels committed and with At XXXX conditions XXX capacity million in capacity of warehouse month, uncommitted acquisitions terms XX% the leaving should up consistent rate $XXX more lines ramp rebuild about market to inventory run would an utilize debt

therefore, quarter, release sheet. and included at back inventory equity In cash, expect our usual sold levels levels. Additionally, those the temporary leverage of QX is our are second use more end from our metrics to in of approximately this reversal homes balance in QX, a liquidity $XX revert due a million leverage the as than perspective of of to higher prior embedded reductions that their cash to which we

slightly second positive growing our quarter With we at the our adjusted than Continuing of flow, for the the began of improvements less at cash sequential leading that in cash QX, end the only despite QX expect anticipate on cash QX. this to EBITDA balance be gross continue margin, metrics, balance key the inventory. we trend the thoughts net quarter, to and second loss of our end performance

higher two and We a in the due for to cash creating revenue. improvements volume, increases margin Revenue is interest. acquisition us, as translating one sale the holding also to and well inventory, more delay, of quarter after increases to between acquisition a quarter-over-quarter first contribution to expect time as into between metric and QX lagging reflect, in acquisitions, period

revenue and to point represent quarter-over-quarter increase to Accordingly, our second we the there. anticipate cycle, in the quarter low from

$XXX the million to sell, in quarter we and $XXX Specifically between XXX of homes million. XXX second generating of between XXXX, and expect revenue

sequential year. which We adjusted our adjusted and EBITDA to quarter of expectation the positive bringing be million, negative million achieving meeting improvement, another between $XX EBITDA, closer also us significant this $XX fourth of in to negative represents expect

Our results momentum results. the throughout in first in in the expectation us first for quarter year, step accelerate this that will sequential reflect positioning our our improvements quarter-over-quarter

the number expertise foundational business more upon and solutions our We we customers have a of XXXX that clear to builds plan increase deliver serve.

yet and Our ability business-to-business grow. base facing to diversified our stream supporting into another services expansion is revenue customer

ahead and about more a what than We for path are on optimistic is Offerpad. ever unified before

turn now call I'll the the session. to operator the to over begin question-and-answer

Operator

with first from Our go question of the line Instructions] comes JMP. [Operator Nick Please ahead. Jones

Nick Jones

I for on Great. the Thanks provided was finer that point guess taking guys just, a outlook here. questions. some the maybe of

there a that to Just markets, to of great. kind Or like we month be expecting kind you going increased kind mean, a XXX As And guess should color and cadence kind how just really room to year acquisition November, to kind would hit linear? of it progressed sequentially. tie of of throughout additional I kind does through follow-up. then of be December? can hit And XQ is around comments the of this any this Is the velocity quick there early? more this year? accelerate be your higher I

Michael Burnett

Sure. as gone month-by-month current year. for already the Hi, Thanks the Mike. good we've it's question. We've Nick, through progress seen

for And completely month think at XXX standpoint so to it's point from to give point. on that acquisition fine to wouldn't be us of reasonable this it I an I get that pace put year-end, a a able to ahead

But good offer good We're currently. we've getting request We're there. levels out the in good volume. progress there seeing made market

year-end. earlier that then, hit we'll of EBITDA expectation achieving in adjusted think help I the turn, that at So and positive will enable

Brian Bair

to Yes. market, and it one there every I change underwrite one Nick, just hi Brian. And is would seen of makes just really most I'll of in say volatility -- saw last we the lot hard volatility definitely - that But year, markets. that our we've it's thing a and in one thing add

underwrite we going and really can The market or so under markets where down even staying And buy is any up the what homes steady. are conditions or hard. volatility going it's

we're that. so seeing And

underwriting so homes a much these markets. when we picture they're have And clearer in

to decent we're so acquiring able volumes. at again start And homes

Nick Jones

end And take XQ just a of the profitability? kind of November, December maybe a Should in quarter then full whole on positive. and the Great. year. shows it follow-up the isn't maybe we EBITDA as as EBITDA kind of Or profitability by that up maybe

Michael Burnett

on out see asked things we will mean bit that think that market that But little positive. we've a the bit tough here, it I little run of EBITDA from right XX I tell. to We've positioned the for got there focusing plan against there the fine that certainly now. we'll could that. us, be It's our execute think at Yes, I quarter reported be standpoint, for if rate. too. we point on way we're out we've got got you again, a markets active in a

getting a we our with -- don't there we but of out. headwinds there's what lift. it's XXX that's deal is day with, think current up in number footprint. there Obviously, out a to huge do and So day I that are

fourth quarter our So EBITDA. goal get be to is to the positive and to able report

Brian Bair

macro a why the as we environment realistic put to we from took do because reductions cost to the as point, in of significant And company very approach markets. volume out far as year and standpoint. that's of again we realistic Mike's the what a end we're take XX want to can this year, And a there,

month times, homes in to XX down what so long core month different in time of we've that means We're markets. that And to of those in even buying -- a some in buying to we hundreds been used a those a in we're XX markets. markets our homes that

by cost with the getting that. the we by it's take cutting now, year by EBITDA or And of And if the -- hitting for profitable changes, But the so focus market can year. definitely listen, numbers very this and end and end is advantage in realistic of expectations of the market. accelerates right

Nick Jones

Brian. Thanks, Thanks Great. Mike.

Brian Bair

Appreciate it.

Operator

Thank you.

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

Ryan Tomasello

for guys, Hi thanks taking the questions.

much breakeven of the to you to from economics that's Just Plus be Does for in mix costs you the in between do inclusive cash how was volume per and matter product at hoping breakeven those order your how unit financing EXPRESS EXPRESS terms products? flow Direct you differ all EBITDA through think capital homes intensive? month the to more still products. walk XXX And need the of two at be between at

Michael Burnett

Mike. it's Ryan, Hi Sure.

First, similar more a one, they margin. our of unit on model. EXPRESS They which gross through, the economics, contribute of come obviously, gross amounts basis, is on

So the full sales price of comes offsetting revenue, full the the through got acquisition you've home cost but then that.

On model, the Plus Direct service. a of more fee-based it's

coming really it's just basis. so a net And there on through

look similar pretty two. to is but there, the those margin to by are the economics revenue time your gross going between So you different line, get your

difference make a there. it amount So huge doesn't standpoint, of from that

becoming then really and lot on of to comes items adjusted have profitable, EBITDA. question cash And a between income your our or to there. down interest financing net we don't second costs It

past So the from when in standpoint. breakeven us got the we and an had it what profitability seen was EBITDA were you've -- from thereafter profitability, achieved adjusted getting moreover shortly

So those tightly pretty two are correlated.

that the to expectation achieved similar in we've what think the in shortly past I be be so position. should we that thereafter, would And

Ryan Tomasello

here then Got of your company's where facilities where to like the I the it does base is trying down probably capacity, terms $XXX the could for relative it. is in judge, committed that million or come a risk up capacity the year-end. Mike, of capacity equity by reflect you guess today as go relationship is what if true will funding capacity and that you the here financing the And to such think just partners is intact? come renewal your lending bit with feel this

Michael Burnett

feel from capacity. about I a financing we are really Ryan, where Yes. good

with will, the our we've four years, a partnership, last you lenders. strong up if Over built really

the was last reliable candidly, a that other standpoint. that facility. have within lenders it worked And partners banking there -- the we lenders got six-plus We've on But strong largest, in from We have most challenging been three months out utilize together. front. we've the of

our been of obviously, one very of of a dime, out was and working realistic recognizing approach company. the nobody They've supportive another. where we've I think with or on through taken And are them risks way And this. side, their

XXX committed, we feel about. the so good And very

And facility a got pretty basis. even there the historical into uncommitted committed going institutions uncommitted, we've a to a and back the between track good from that split and way of a perspective, on set the record position we've up, moving committed got timely the

teams of feel solid the we've amount time good there. and I there, and relationship got credit over with where both fair a But at. So about working teams a the we're

Brian Bair

Yes. Ryan, partners, push now. too, we on And the this have with and been forward communication again, way through to been excited one thing with just them XX% And of there, the I'll have did great the it down that is and the inventory has getting our lenders look and we're we they key. way

year Now and in we on to do to to can very the that. we're future realistic a focus going what this going and do need way do

great So great it's I the a job we've lenders think, done, -- with partners. they've been

Ryan Tomasello

Thanks Great. color. the for

Brian Bair

Thanks Ryan.

Operator

I you. turn Thank over call to CEO, the will has Chairman session Brian remarks. closing The Bair, and now for concluded. question-and-answer

Brian Bair

execution our and of managing focus, challenging our proud really team's in I'm times. some determination way through really

have our the ability opportunity real about operational I'm change I'm plan our goals. way transacts. and confident our hit team's in Going perform, to forward, achievable and to and we to estate a realistic financial excited

Thank you joining us all for today.

Operator

of concludes your day. great conference today's all I a you rest have That call. hope

lines. You disconnect your now may

Offerpad Solutions (OPAD) 3 May 232023 Q1 Earnings call transcript