Offerpad Solutions (US:OPAD)2025-05-05 21:06PART I. FINANCIAL INFORMATION Financial Statements The company reported an improved net loss for the quarter ended March 31, 2025, despite a decrease in total assets and a shift to negative operating cash flow Condensed Consolidated Balance Sheets Total assets decreased to $274.5 million as of March 31, 2025, from $313.1 million at year-end 2024, primarily due to lower cash and real estate inventory, alongside reduced liabilities and stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $30,826 | $43,018 | | Real estate inventory | $210,847 | $214,174 | | Total Assets | $274,478 | $313,053 | | Secured credit facilities and other debt, net | $210,967 | $237,239 | | Total Liabilities | $240,260 | $265,400 | | Total Stockholders' Equity | $34,218 | $47,653 | Condensed Consolidated Statements of Operations Revenue for Q1 2025 decreased by 43.7% to $160.7 million, leading to lower gross profit, but the net loss improved to $15.1 million due to significantly reduced operating expenses Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $160,698 | $285,358 | | Gross Profit | $10,507 | $22,595 | | Loss from Operations | ($11,537) | ($13,585) | | Net Loss | ($15,057) | ($17,515) | | Net Loss Per Share, basic & diluted | ($0.55) | ($0.64) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $10.2 million in Q1 2025, a reversal from the prior year, with increased cash used in financing activities leading to a $37.9 million decrease in total cash Q1 2025 vs Q1 2024 Cash Flows (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($10,176) | $2,386 | | Net cash used in investing activities | ($994) | ($323) | | Net cash used in financing activities | ($26,773) | ($3,464) | | Net change in cash, cash equivalents and restricted cash | ($37,943) | ($1,401) | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, including a $1.7 million real estate inventory adjustment, segment reporting with 'Cash Offer' as the primary segment, and $1.01 billion in total borrowing capacity - The company recorded a real estate inventory valuation adjustment of $1.7 million in Q1 2025, compared to $0.6 million in Q1 202439 - As of March 31, 2025, the company was under contract to purchase 245 homes for an aggregate price of $71.1 million119 - The company's operations are divided into four operating segments, with 'Cash Offer' being the only reportable segment. The 'Other' category includes B2B Renovate, Direct+ institutional buyer program, and the Agent Partnership Program126129 Segment Revenue and Gross Profit (in thousands) | Segment | Revenue Q1 2025 | Revenue Q1 2024 | Gross Profit Q1 2025 | Gross Profit Q1 2024 | | :--- | :--- | :--- | :--- | :--- | | Cash Offer | $153,833 | $277,845 | $8,098 | $20,195 | | Other | $6,865 | $7,513 | $2,409 | $2,400 | | Total | $160,698 | $285,358 | $10,507 | $22,595 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 43.7% revenue decline to reduced home sales amid challenging real estate conditions, with an improved net loss driven by significant operating expense reductions, while addressing NYSE non-compliance Current Economic Conditions and Health of the U.S. Residential Real Estate Industry Challenging real estate market conditions, including high mortgage rates, impacted Q1 2025 performance, leading the company to reduce home acquisitions and focus on cost reductions, while facing NYSE non-compliance - The average thirty-year fixed mortgage rate remained between the mid-6% and 7% range in Q1 2025, negatively impacting housing affordability and consumer demand140 - The company sold 460 homes in Q1 2025, generating $160.7 million in revenue and $10.5 million in gross profit141 - On April 10, 2025, Offerpad received a non-compliance notice from the NYSE regarding its market capitalization and stockholders' equity. The company intends to submit a plan to regain compliance within the 18-month cure period144145 Results of Operations Q1 2025 revenue decreased 43.7% year-over-year due to fewer homes sold, while gross profit margin declined, but significant 39.1% reductions in operating expenses led to a smaller loss from operations Q1 2025 vs Q1 2024 Results of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $160,698 | $285,358 | ($124,660) | (43.7)% | | Gross profit | $10,507 | $22,595 | ($12,088) | (53.5)% | | Total operating expenses | $22,044 | $36,180 | ($14,136) | (39.1)% | | Loss from operations | ($11,537) | ($13,585) | $2,048 | (15.1)% | | Net loss | ($15,057) | ($17,515) | $2,458 | (14.0)% | - The decrease in revenue was primarily due to selling 460 homes in Q1 2025 compared to 847 in Q1 2024, a 45.7% decrease187 - The decrease in gross profit margin was primarily due to an increase in the real estate inventory valuation adjustment to $1.7 million from $0.6 million in the prior year period190 Non-GAAP Financial Measures The company utilizes non-GAAP measures like Contribution Profit and Adjusted EBITDA, with Q1 2025 Contribution Profit at $6.1 million and Adjusted EBITDA showing a $7.8 million loss Reconciliation of Gross Profit to Contribution Profit After Interest (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Gross profit (GAAP) | $10,507 | $22,595 | | Adjusted gross profit | $11,461 | $24,242 | | Contribution profit | $6,144 | $16,657 | | Contribution profit after interest | $222 | $10,041 | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss (GAAP) | ($15,057) | ($17,515) | | Adjusted net loss | ($14,800) | ($17,859) | | Adjusted EBITDA | ($7,831) | ($7,129) | Liquidity and Capital Resources As of March 31, 2025, the company had $30.8 million in cash and $1.01 billion in total borrowing capacity, but acknowledges the need for additional financing due to market uncertainty - As of March 31, 2025, cash and cash equivalents were $30.8 million206 - The company has a total borrowing capacity of $1.01 billion under its credit facilities, with $813.6 million undrawn. Of the undrawn amount, $49.1 million is committed and $764.5 million is uncommitted206 - The company is seeking additional financing due to uncertain market conditions and acknowledges that volatility in credit markets may adversely affect its ability to obtain it208 Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risk exposure since the end of fiscal year 2024, with further details available in the 2024 Annual Report on Form 10-K - There have been no material changes to the company's exposure to market risk since December 31, 2024232 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level234 - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting235 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, including a class action lawsuit related to the 2021 merger where Offerpad-related defendants were dismissed without prejudice in February 2025 - The company is not currently a party to any legal proceedings that would have a material adverse effect on its financial condition237 - In a class action lawsuit related to the 2021 merger, the Offerpad Defendants were dismissed from the complaint without prejudice on February 24, 2025123 Risk Factors No material changes to the company's risk factors have occurred since the filing of its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes to the Company's risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended December 31, 2024240 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no sales of unregistered equity securities and no repurchases of its Class A common stock during the three months ended March 31, 2025 - There were no sales of unregistered equity securities in the quarter241 - The company did not repurchase any of its Class A common stock during the quarter242 Defaults Upon Senior Securities This item is not applicable Mine Safety Disclosures This item is not applicable Other Information The company reports no other material information, including no adoption or termination of Rule 10b5-1 trading arrangements by directors or officers during the quarter - During the three months ended March 31, 2025, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement245 Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents, an employment agreement, and certifications by the CEO and CFO