Opendoor(OPEN) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q4 2022 revenue of $2.9 billion, a decrease of 25$15.6 billion, representing a 94% increase compared to 2021 [34] - Adjusted EBITDA loss for Q4 was $351 million, with adjusted operating expenses totaling$144 million [18] - The adjusted EBITDA loss for the full year was $168 million, compared to an adjusted EBITDA of$58 million in 2021 [18] Business Line Data and Key Metrics Changes - The company purchased 3,427 homes in Q4 2022, down 64% year-over-year, and acquired a total of 34,962 homes for the full year, a decrease of 5% compared to 2021 [35] - The gross profit margin was 2.5% in Q4, with a contribution margin of negative 7.2% [36] - The new book of homes delivered a 9.7% contribution margin in Q4, expected to align with the target of 4% to 6% once fully sold [42] Market Data and Key Metrics Changes - The company noted that transactions in the housing market were down 40% year-on-year, with new listings at their lowest since 2004 [60] - The company is experiencing a cautious stance due to the Fed's actions impacting the housing outlook, but early signs of stabilization have been observed [20] Company Strategy and Development Direction - The company aims to stabilize its core business and return to positive free cash flow, with a goal of achieving adjusted net income profitability by 2024 [6][38] - Key strategic areas for 2023 include enabling more sellers to choose Opendoor, realizing greater operational efficiencies, and building exclusives for a managed marketplace [16][27][29] - The company plans to scale its exclusive product offering in three phases, focusing on perfecting the consumer experience and building liquidity in selected markets [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenging housing environment and achieve long-term financial objectives [125] - The company anticipates returning to positive unit margins by the second half of 2023 as the mix of inventory shifts towards the new book [53] - Management remains cautious about the potential impact of rising mortgage rates on consumer demand and plans to adjust spreads accordingly [120] Other Important Information - The company ended 2022 with total capital of $2 billion, including$1.3 billion in unrestricted cash and $670 million in equity invested in homes [18] - The company has$12 billion in non-recourse asset-backed facilities, significantly exceeding current inventory levels [19] Q&A Session Summary Question: Can you unpack where efficiencies will show up in 2023? - Management indicated that efficiencies will be seen across the entire business, impacting contribution margin and operating expenses [45] Question: What are the expectations for contribution margins in the first half of 2023? - Management expects to return to positive unit margins by the second half of 2023, with a focus on selling the old book while preserving margins [53] Question: How does the company plan to achieve adjusted net income profitability at $10 billion of revenue? - Management outlined that achieving$10 billion in revenue is feasible based on historical performance and market expansion, with a focus on operational efficiencies [100][103] Question: What is the company's strategy if mortgage rates do not decrease? - Management stated that they will continue to adjust spreads and manage costs to mitigate losses while maintaining capital [120]