Offerpad Solutions (OPAD) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for Q3 2024 was at the top of guidance, driven by a mix of products including cash offers, B2B Renovate, Direct Plus, and the Agent Partnership Program [6] - Gross margin was 8.2%, with gross profit at $17.1 million, down 29% YoY and 22% QoQ [36] - Adjusted EBITDA loss improved by 53% YoY to$ 6.2 million, with a slight decrease of $1.8 million QoQ, including a one-time restructuring cost of$ 700,000 [39] - The company ended Q3 with $49 million in unrestricted cash and over$ 90 million in total liquidity [40] Business Line Performance - Asset-light services now make up 30% of total contribution margin after interest, with continued expansion of the Agent Partnership Program and technology enhancements [9] - Offerpad Renovate completed 227 projects in Q3, generating over $4 million in revenue, bringing the 2024 total to$ 14 million, surpassing the 2023 total of $12 million [24] - The Agent Partnership Program's Pro tier grew quarterly requests and acquisitions to 26% and 33% of total, respectively [22] - Direct Plus partners showed increased buying activity, signaling early signs of market recovery [16] Market Performance - The company expects a 15% to 20% increase in resale market transaction volume in 2025, reaching 4.3 million to 4.5 million transactions [16] - Markets in Texas, Atlanta, and the Carolinas have shown resilience, despite the impact of hurricanes in Florida and the Carolinas [65] - The company anticipates a busier spring selling season in 2025, driven by rate relief, easing inflation, and pent-up demand [15] Strategic Direction and Industry Competition - The company is focused on diversifying revenue, adjusting the buy box, and managing acquisition pace to address market uncertainty [11] - Offerpad is strategically expanding its buy box and raising acquisition volume, targeting a return to a run rate of approximately 1,000 acquisitions per quarter by Q1 2025 [19] - The company has introduced significant improvements to the customer journey, including providing an estimated offer range within minutes and scheduling inspections instantly [20] Management Commentary on Operating Environment and Future Outlook - Management remains optimistic about the market transition expected in the coming quarters, with a shift anticipated as the Fed enters a rate-cutting cycle [14] - The company expects mortgage rate volatility to continue through Q4 2024, stabilizing in 2025 [15] - Offerpad is focused on achieving positive EBITDA and cash flow in any real estate environment, with a strong emphasis on cost efficiency and operational improvements [31][38] Other Important Information - The impact of Hurricane Helene and Milton on East Coast markets was minimal, with no material damage to the portfolio [17] - Customer satisfaction remained strong, with a 91% satisfaction score and steady monthly request volume [18] - The company has achieved significant cost reductions, with annual operating expenses lowered by nearly$ 70 million in 2023 and an additional $45 million in savings expected in 2024 [38] Q&A Session Summary Question: Assumptions for 2025 Outlook - The company expects pent-up demand from buyers and sellers, with mortgage rates stabilizing in 2025 after volatility in 2024 [46][47] - Offerpad anticipates a modest increase in transaction volumes to 4.2 million to 4.4 million in 2025, driven by a loosening of the spring selling season [49] Question: Path to Profitability - The company is focused on cost reductions and increasing acquisition volumes to achieve adjusted EBITDA profitability and positive free cash flow [51][52] - Offerpad targets a return to 1,000 acquisitions per quarter, which, combined with cost efficiencies, is expected to drive profitability [52] Question: Impact of NAR Settlement on Commissions - The NAR settlement has led to some reduction in commissions, with early signs of a 50 basis point decrease on the buy side [61] - Offerpad has maintained original underwritten commissions but will continue to monitor the impact of the settlement [62] Question: Market Resiliency - Markets in Texas, Atlanta, and the Carolinas have shown resilience, while areas with the highest home price appreciation have taken longer to stabilize [65][66] Question: Adjusting to Moderating Home Price Appreciation - The company remains focused on margins rather than volume, targeting specific types of properties that are expected to perform well [69] Question: Capital Raising Strategy - Offerpad is focused on cost reductions and increasing acquisition volumes before considering capital markets opportunities for further growth [72]