Offerpad Solutions Inc. Price & Performance (OPAD)

Thank you, Courtney, and thank you all for joining today. In the fourth quarter, we exceeded the midpoint of our revenue guidance. Driven by a well balanced mix of Offerpad. Our cash offer program performed well alongside our asset light services. Including the B2B renovate business the Direct Plus buyer program, and the Agent Partnership program. This success came despite broader market challenges like historically low residential resale volumes down almost 40% Affordability constraints and shifting industry commission structures. Through these conditions, remain focused on delivering real estate solutions for consumers and partners. While making meaningful progress towards building a sustainable long term business. Some key highlights from the quarter include continued growth in the asset light services, which are becoming an increasingly important revenue stream, The expansion of our agent partnership program driving agent engagement and increasing transaction volume while helping improve CAC by over 45% year over year, and improved operating efficiency leading to cost savings and supporting contribution margins. These trends are positioned us well to achieve adjusted EBITDA profitability while ensuring financial sustainability across different market conditions. Our efforts remain centered on expanding high margin revenue streams optimizing operations and managing resources effectively to support growth.

Meanwhile, enhancements in our product and processes have increased efficiency and have us poised to quickly scale the business as the market recovers. Over the past two years, and specifically in recent quarters, returning to positive earnings and cash flow has been our key objective. Given the market's trajectory, we adjusted our approach by one, diversifying revenue beyond our core cash offer business it creates stability across all market cycles. Two, refining acquisition strategies to ensure disciplined inventory management with strong return objectives, and finally, by optimizing our cost structure to leverage operational efficiencies and strengthen profitability. These strategic approaches have made Offerpad a more agile and efficient organization. By moderating acquisition volumes, we maintained a high quality inventory portfolio while exciting our asset light services. Which have delivered stable contribution margins beyond our foundational business, As a result, we improved unit economics, reduced overhead costs and positioned ourselves to scale profitably even in lower transaction volume environment. Looking ahead, are strategically expanding our buy box criteria to capture increased market activity focusing on acquiring high potential homes in specific areas. We are ramping towards 1,000 acquisitions per quarter optimizing our portfolio while improving margins. To further support our growth and maximize opportunities, we are actively exploring options to raise additional capital.

This will enhance our financial flexibility, allowing us to scale acquisitions and other business line transactions as the market strengthens. And to position ourselves for long term success. As mentioned in the previous quarter, we've enhanced how we deliver offers and engage with sellers. This advancement is powered by OperaPad's citrus value pricing technology. Which leverages years of real estate data, market trends and machine learning to generate offers. By analyzing hundreds of thousands of home price related data points, and real time market conditions, Citrus value enables us to provide customers with an estimated offer range within minutes. And the ability to schedule a home inspection immediately. The momentum from our Q4 launch increasing customer engagement and conversion rates. In January alone, we are in nearly 1,200 living rooms an increase of almost 40% from our rollout in November. Supported by more effective advertising we are seeing steady request volume and maintaining a strong 95% customer satisfaction. This streamlined approach reduces touch points and gives sellers greater control over timing and decision making. Alongside these improvements, our agent partnership program continues to exceed expectations. Further strengthening our acquisition strategy and lowering CAC, The pro tier allows agents to earn up to 4% on a successful acquisition and listings, has been a key driver of growth.

Leading to a 46% increase in quarterly requests year over year. As a result, acquisitions to the program now account for 45% of our total acquisitions. Reinforcing its positive impact on our business. In addition, our B2B renovate business remains a strong revenue driver benefiting from our experienced teams and refined processes. Despite some renovate partners operating at reduced levels, we delivered another strong quarter completing 187 projects, and generating over $4,000,000 in revenue. For the full year, Opera Pad Renovate generated $18,000,000 in revenue up 49% year over year. Notably, our average revenue per renovation increased from $11,000 to over $22,000 reflecting our expanded service offerings and new plan onboarding, As we scale, continue to add partners of all sizes and types from institutional investors to local operators.

Overall, remain focused on our strategic priorities and are optimizing the business by diversifying our revenue mix and improving operational efficiency. With that, I'll turn the call over to Peter. Thank you, Brian. Over the past few months, we have concentrated on business improvements including cost efficiencies, and process enhancements. Our refined offer process has accelerated response times, driving higher customer engagement [indiscernible] These efforts align with our ongoing focus on optimizing margins and cost structures to ensure financial resilience in varying market conditions. At the end of the fourth quarter, we had six seventy seven homes in inventory with 22% owned for over one hundred and eighty days and not under contract for resale. Our strategy of acquiring fewer homes at higher margins remained in place, aligning with seasonal trends and market dynamics. During Q4, we acquired three eighty four homes, a 9% decline compared to Q3. In line with our approach to inventory management. However, driven by our process improvements on our cash offer product, we increased acquisition activity toward the quarter's end to prepare for anticipated demand in 2025. While the cash offer business remains a key driver of contribution margin, asset light services including Renovate, Direct Plus and our agent partnership program contributed over 33% of total contribution profit after interest in 2024, We anticipate continued momentum in these areas moving into 2025.

Fourth quarter revenue totaled $174,000,000 landing in the upper half of our guidance range, with five zero three homes sold Year over year revenue declined 28% and homes sold decreased 29% primarily due to a strategic reduction in acquisition pace earlier in the year. Net loss for the quarter was 17,300,000.0 a decrease of 12% year over year. For the full year, revenue was $919,000,000 reflecting a 30% decrease from 2023. Net loss totaled $62,000,000 representing a 47% or $55,000,000 improvement compared to the previous year.

These improvements resulted from business performance enhancements and cost management initiatives. Sold in Q4 at an average time to cash of one hundred and forty two days consistent with expectations owing acquisition adjustments in the second half of the year. We anticipated a temporary increase in this metric in Q1 before decreasing in Q2 as acquisition and sales cycles normalize.

Gross margin for the quarter was 6.1% with gross profit at $10,600,000 For the full year, gross margin was 7.9% a 47% improvement from the prior year. Operating expenses excluding property related costs, totaled 18,200,000.0 reflecting a $1,100,000 sequential improvement and a $2,900,000 year over year reduction supported by improved advertising efficiencies agent partnership program expansion and cost management [indiscernible] Through our relentless focus on cost efficiencies, we're taking big steps towards profitability. After lowering annual operating expenses by nearly $70,000,000 in 2023, we continue to make excellent progress in 2024 removing $44,000,000 of additional costs. You should expect the cost improvement to continue into 2025, as we maintain focus on cost and process efficiencies. Adjusted EBITDA loss for Q4 was $11,500,000 decreasing $5,300,000 sequentially. For the full year, adjusted EBITDA loss was $29,200,000 a $53,000,000 or 65% improvement over 2023. As of the quarter's end, unrestricted cash totaled $43,000,000 with total liquidity exceeding 85,000,000 and incorporating the net value of our carried inventory, As acquisition volumes rise, we expect to increase leverage using our asset backed facilities while maintaining a strong financial position. Additionally, to potentially enhance our capital position, and market opportunities, we've begun to engage in capital market discussions beyond our core asset backed facilities partnerships.

Looking ahead, we expect first quarter revenue to be in the range of $150,000,000 to 170,000,000 with four fifty to 500 homes sold.

We also anticipate achieving slightly better adjusted EBITDA as we continue focusing on operating leverage, As we enter 2025, we remain focused on increasing acquisition activity maintaining cost discipline and positioning Offerpad for long term stability [indiscernible] Thank you. We will now open the call for questions.

Our first question comes from John Kamatore with with the company Jefferies. John, your line is now open.

So much for taking my questions. Maybe starting with expanding the buyback buybacks. Can you provide more detail on how you're adjusting the buybacks? And the systems and talk a little bit to the systems and processes that you've instituted that help give you confidence that you can grow faster while also contributing continuing to build on improved unit economics? And second, you spoke to to make it more seamless for consumers to receive offers and schedule inspections. Maybe you can just provide a little bit more context into what exactly you're going to be doing there? Sure. Awesome. So I'll start with the first question. And hey, John.

The As far as expanding the buy box, what we're doing is basically moving up in price and price point, price range. Obviously very market specific. What's interesting about this market and the dynamics where we first when we saw the transition happen, we were in the median home price or lower really focused on that. What's interesting is it's really difficult for first time home buyers right now to get into a home and because of the affordability And so what we've done is we moved the buy box up and really expanded it where we were really focused around the two to maybe 500 price point. Now we're really into the two fifty to maybe 600 to 700 price point on the market. Basically, that allows us to find buyers that are coming out of another and moving their equity from one house to another. So that's been really important. And the other question you asked actually really ties into the first one. So what we've done is really enhanced the cash offer process So with the new process now, when customers get into our website, they tell us about their home, they'll get a price range, within minutes.

And then they can schedule their inspection instantly So what that also does is as they schedule their inspection, we'll get out to their house within just few days also gives us more visibility to exactly what we were buying which allows us to even go up more to a higher price point. Which really helps as well. But also it allows us face to face in the living room to talk to the customer about our other products. And so if a cash offer doesn't work for them for whatever reason, we can give them options to list their home as well. And so customer engagement so far has been really strong.

Really finding the seller where they are in the process. Thanks so much. Our next question comes from Nick Jones with the company JMP.

Nick, your line is now open.

Hi, this is Luke on for Nick. Thanks for taking our questions.

I guess just with the 1,000 per month acquisition target, How should we think about that ramp throughout the year from a quarter to quarter standpoint? Particularly given industry conditions are still tough that we're experiencing? Thank you. Yes. Thank you, Luke.

So as we discussed, 1,000 continues to be our North Star, but I'd highlight that our other products and platform services are really important too. It's the mix across all those products with different types of margins that is important as we move through the year. And as we head towards adjusted EBITDA positive and then after that cash flow positive. So it really does depend on that mix a little bit, but we but 1,000 homes remained our North Star as we had identified last year.

We expect to we've given guidance for first quarter We're not going to be at 1,000 homes first quarter and we won't be for for second quarter either, but we're going to be moving sequentially towards that level as we get into the as we get into the year and and it is really two drivers around that from an operational perspective. One is the process improvements that we've done and the changes that we've done to the cash offer that are going to allow us to buy more homes and stay at wider margins. And then it's also the other products and the platform services agent partnership, [indiscernible] and Renovate.

So we were focused on executing to that. We're not ready to give guidance to exactly when we hit 1,000 homes, but but we expect to be in that neighborhood as we exit the year. And we also expect to be on a run rate basis adjusted EBITDA breakeven alongside that also as we exit the year. Appreciate it. Thank you.

Our next question comes from Ryan Tomacielo with the company KBW. Ryan, your line is now open.

Hi, everyone. Thanks for taking the questions.

Just a follow-up on the purchase volume target of 1,000 a quarter how much of that would you say is dependent on this pending capital raise that you're talking about And then regarding the capital raise, I mean, obviously, limited in what you can say, but is our best option at this point just to consider something similar to what you guys did last time you raised capital or anything else you can say around just the size and structure of what you're looking to do there? Thanks. Yes. So from a capital perspective, we first of all, we have a path either way We are looking at capital markets opportunities, but but we're in conversations and we haven't finalized something there. It's important, of course, that we get the right cost of capital, with the right structure, And it's still TBD. We probably will have more information on that next quarter, but we have I want to highlight first and foremost that we have a path either way regardless of whether do something different on the balance sheet now or we stay the same course with our asset backed partners, As we've highlighted before, we have very strong relationships with those banks and with those partners I'd also say that I'd also highlight that we have we just going back across the last couple of quarters, we ended third quarter with about $90,000,000 in liquidity between our Ash, and the net equity in our inventory And then that did moderate, but only a small So that's at the end of the year.

Some of that's the net equity in the homes and the rest of it we ended with $4,343,000,000 dollars in capital. So we're not in a we are looking at capital markets alternatives, but we're looking at looking at it from a strategic perspective as we move through there's three strategic pillars that we're focused on. One, cost outs, which is critical and enabling us to operate at lower volumes and still be profitable. The second is process improvements, which Brian talked to in his prepared remarks.

And then the last question, and then finally, the third pillar is really everything else investing in the business and deeper penetration into markets and products and developing out our agent partnership. Products and our platform services. So So we are looking at capital markets options. And we think it's important to highlight that. But it's for those operational purposes. The other thing that that I want to focus on is is enhancing our unrestricted cash and our liquidity, of course, it gives flexibility is something that we're looking at it for that reason. We're also looking at our cost of capital. So there's a couple of different reasons that we're looking at some some options. And we want to try to to get the best cost of capital as well alongside our cost out initiatives. Great. Thanks for all that, Peter. And then just another follow-up for Brian. I guess, you mentioned in your prepared remarks briefly just still digesting all the changes to organize real estate world and commission structures. Now that we have another quarter of that under our belt, just any update you can provide Brian on you're seeing in the market in terms of the impact you're seeing in the commissions, how Offerpad and mirror may not be evolving to take advantage of that?

Thanks.

Yes. I think overall, it's settled a bit. I still feel like we're seeing a little bit of confusion out there. On the commission structures. The benefit from I think that's where you're seeing some of the growth in our agent partner program We have more and more agents that are starting with us first. That's to submit an offer to us before they put the home on the market. To see what we can pay for it. So that continues to grow. As we talk about a lot, we want to be a solution center for everyone, not just sellers and buyers, but want to be a solution center for for agents and brokerages and builders and platforms and we feel we have an opportunity to do that. So think it's settled a little bit. There's definitely a significant, I think, pause when it all took place. But think things are getting settled in a little bit. But commission still sits I think, top of everyone's mind right now and I think that's helping us on our agent partnership program. [indiscernible] JPMorgan. Day, your line is now open. [indiscernible] On the first one, What was the biggest factor that drove how you guys are thinking about NyQuam acquisition heading into first Like I said, you guys have revised down I guess your target acquisition pace.

So I was curious like what's driving that and like what needs to happen for you guys to be more confident in acquiring more homes? And then secondly, could you clarify what Adjusted EBITDA guide for 1Q means five slightly better, is that quarter over quarter or is that year over year? And then does that assume contribution margin for your core cash business is still kind of at the lower end of your normal target range?

Let me jump in just operationally on the first part as far as home acquisitions. We've been going into 2025, we were expecting transaction volumes to increase year over year. Right now, it's early in the spring selling season, but we're we're anticipating it to be more flat, maybe a little bit of an increase, but more flat Getting through the election, obviously, the Fed came out with reducing they're not going to be as aggressive [indiscernible] We're cautiously optimistic about seeing maybe a slight increase from the year, but that's where with expanding our buy box, putting more services in place, also I think it's key and just a few of the questions that I'm hearing is that getting more and more opportunities of buying homes we really want to buy and being buying homes that we feel that we can buy, renovate and sell in the shortest period of time. And as buyer demand stays weaker than normal, want to make sure we're buying the right inventory. And so we've been focused on pockets in different area or different areas of different markets where we want to buy. And there's a lot of different things I can point to on that.

But high HOAs is one thing we're staying away from right now just because of the affordability. Townhomes is another one. Normally, they have high HOAs. Large homes on small lots. And all those different things as there's a little bit more to choose from out there for buyers, we want our homes to sell first and we can do that by buying the right type of homes And like I said, their process is we're able to see more of the homes and knowing exactly what we're going to buy before making an offer. Which has been great. The agent partnership program of getting more opportunities has been really good there as well. And that's where we think as far as the volume of what we can buy. We can buy the right homes with the right margins, but also getting the right opportunity.

Okay. And, Dave, I'll jump in on adjusted EBITDA. So adjusted EBITDA will improve sequentially across the year. That's what we're expecting and that's going to be in line with what with what we're doing from a cash offer perspective. And again, what we're also doing across the other products and platform [indiscernible] We've given guidance for for Q1, right? So you have that. We're given the timing of the 10 ks and the call, it's deeper into the quarter right? So we have a lot of visibility into in the second quarter already from a funnel perspective. And adjusted EBITDA will for for second quarter along with along with cash offer volume and then we'll do that using our anchored in our around our new process we're going to execute across that through the back half the year I'd stress again expense reductions that is part of reaching adjusted EBITDA breakeven and then positive. As you're as I think you're aware, we took out $70,000,000 from our effectively fixed cost in 2023. We did another roughly $45,000,000 in 2024 and we're not ready to guide to it but there will be some additional cost outs that will probably get to on the next earnings call.

And so all of that together and the confidence we're seeing from the top line and our our proven ability to reduce Got it. Operating expense is what's going to take us there.

I'll just say one other thing as we sit there and we leverage capital and the opportunities here. There's really four ways that we're looking at it.

Leveraging technology, that's one of the things with with the enhancements on our cash offer we're doing is giving the range offer within minutes There's a lot of headcount savings there on that end of it. It's actually a much better seller experience We're We're leveraging global talent integrating some global talent either near or off Resource optimization is obviously that we're looking at.

And then performance based compensation. So those four things are going to are things that we're looking at putting it into a category as we look at really every section of operations to get more operation efficiency. Next question comes from Michael Ng with the company Goldman Sachs.

Michael, your line is now open.

Hey, good afternoon. Thank you. I just have one for Brian. Brian, as a participant and observer of the industry, I was just wondering if you could provide your perspective on any potential changes to Clear cooperation and how Offerpad may respond to any of those changes, whether that's to have more exclusive off market inventory or anything like that? Thank you.

Right now, we're obviously seeing a lot of changes in happen especially over the last year. I think we'll continue to see changes. We're we are definitely so there's a couple of different ways look at it One of the commission that we pay, especially on the back end, that's our highest pass through cost that we do. And so we can there's two ways we can do it. We can either obviously have opportunities to leverage more of that and make and make more on the compensation side or basically not pay as much compensation. To leverage agents to help us drive and sell our homes. And so two different ways we look at it right now. We are definitely leveraging the agent community to sell homes, finding the buyers are fewer and far between out there. Definitely leverage the agent community on our commission side. So We'll take a look at this all the time as as we continue to grow and expand and as this thing settles in a little bit more, But I do think things are settling a little bit. You're seeing COBRA commissions and things anywhere from the 2% to 3% range. Agents getting more comfortable of reaching out and asking what the commission is.

We want to be in this environment, we want to lead and knowing agents, they know how to negotiate their commissions. When they reach out to Offerpad, they'll know what our commissions are. As we continue, like I said, we'll take a look at that at all time depending on market conditions. But as of right now, having agents both on the front end and back end is definitely we're leveraging that and it's helping. Great. Thank you, Brian.

That will conclude today's conference call. Thank you for your participation.

And enjoy the rest of your day.