Opendoor reported $1.2 billion in revenue for Q1 2024, exceeding expectations with a 36% sequential increase.
Acquisition volumes nearly doubled year-over-year in Q1, with 3,458 homes purchased.
Contribution margin for Q1 was 4.8%, improving sequentially by over 100 basis points.
Adjusted operating expenses were $107 million for the quarter, up from $99 million in Q4 2023.
Adjusted EBITDA loss improved to $50 million from a loss of $69 million in Q4 2023.
Ended the quarter with $1.3 billion in total capital, including $1 billion in unrestricted cash and marketable securities.
Strategic Developments
Opendoor emphasizes focus, execution, and results as key operating principles for 2024.
The company remains on track to ramp acquisitions year-on-year each quarter in 2024, aiming for a contribution margin of 5% to 7%.
Partnership expansion, notably with eXp Realty, is expected to bolster acquisition volume growth.
The National Association of Realtors settlement is viewed as a neutral to positive development for Opendoor, potentially leading to lower transaction costs and more direct consumer transactions.
Market and Operational Strategy
Opendoor’s business model focuses on offering cash for homes, aiming for sustainable and profitable growth.
The company has established an at-the-market (ATM) program to sell up to $200 million in equity, enhancing financial flexibility for future growth.
For Q2 2024, Opendoor forecasts revenue between $1.4 billion to $1.5 billion, with a projected contribution margin of 5.4% to 5.7%.
Adjusted operating expenses for Q2 are anticipated to be around $110 million, with an adjusted EBITDA loss projected between $35 million to $25 million.
Acquisition contracts have increased due to heightened marketing efforts, with over 4,500 home purchases expected in Q2.
Future Outlook
Opendoor aims to maintain year-over-year acquisition growth each quarter in 2024 and achieve its target annual contribution margin.
The company seeks to reduce adjusted net income losses throughout the year through efficient operations and strategic growth initiatives.
Question and Answer
Impact of Macro Conditions on Clearance Rate and Acquisition Strategy
Question
How have macro conditions and recent mortgage rate increases impacted the company’s expectations for the clearance rate and its acquisition strategy?
Answer
The company’s primary focus is on continued price stability, which is the key input for setting spreads and managing growth and margins.
A balance of supply and demand is expected to lead to increased market transaction volumes, even with potential rate increases in the back half of the year.
The company is observing new listing volumes and has not seen a meaningful change in response to recent rate increases, which are a key driver of acquisition targets.
Marketing and Hiring Strategy
Question
How has the marketing ramp progressed, and what factors influenced the more moderate hiring in the first quarter?
Answer
Marketing spend increased by $10 million sequentially, and the company does not anticipate significant further increases for the remainder of the year.
The more moderate hiring was due to the company’s disciplined approach to volume growth and its confidence in its ability to achieve objectives with the current team size.
Acquisition Strategy and Recent Rate Spike
Question
How is the recent rate spike impacting the company’s acquisition strategy, and what is the current market and buy box expansion strategy?
Answer
The company is closely monitoring market signals, including clearance rates and pricing trends, and making adjustments to spreads as needed.
Despite potential headwinds from recent rate increases, the company is focused on what it can control, such as share gains and acquisition momentum.
The buy box expansion strategy remains dynamic, with a focus on areas that offer the best opportunities for growth and efficiency.
ATM Equity Offering
Question
Can you provide more details on the ATM equity offering, including how it works, the rationale for its implementation, and the company’s plans for its use?
Answer
The ATM equity offering provides the company with the ability to opportunistically raise equity over the next three years at a lower fee and at market prices.
This program is part of the company’s toolkit for funding future growth and is common in capital-intensive industries.
The company currently has a strong balance sheet with over $1 billion in cash and $8 billion in debt capacity and does not plan to utilize the ATM immediately.
Path to Positive Adjusted EBITDA and Industry Structure
Question
As we think about the path to positive adjusted EBITDA, can you provide more clarity on the quarterly cadence and the potential timeline for achieving this milestone?
Answer
The company is on a path of increasing acquisitions year-over-year for every quarter in 2024 and is confident in delivering within its 5% to 7% contribution margin target.
While specific guidance on EBITDA is not provided, the company is optimistic about substantially improving the bottom line of the business.
NAR Settlement and Industry Structure
Question
With the NAR settlement and potential changes to the industry structure, do you believe this could lead to a long-term secular tailwind for Opendoor as the dominance of NAR and MLS potentially wanes?
Answer
The company views the NAR settlement as a net positive for consumers and believes it will provide more choice, transparency, and agency to homebuyers.
Opendoor’s direct platform positions it well to take advantage of industry changes, as it is the only platform that enables direct home buying and selling with an e-commerce-like experience.
The company is supportive of the MLS and believes it is a valuable tool for homebuyers and sellers, but it emphasizes the importance of enabling consumers to go direct when they choose.
Seasonality of Purchase Volumes and eXp Partnership
Question
What factors are contributing to the seasonal cadence of purchase volumes, and can you provide more details on the eXp partnership and its potential impact?
Answer
The seasonal fluctuations in purchase volumes are driven by factors such as market volumes, marketing spend, and spreads.
The eXp partnership is still in its early stages, with steady growth since its launch in February.
The partnership with eXp Realty provides an opportunity to broaden Opendoor’s reach into the agent community and enhance brand awareness and product understanding.
Path to Positive Adjusted EBITDA and Industry Structure
Question
Can you clarify the apparent discrepancy between the company’s statements regarding the sequential increase in purchase volumes and the expectation for flat to modestly declining volumes in the third quarter? How should we think about fourth-quarter volumes with normal seasonality?
Answer
The discrepancy lies in the distinction between year-over-year and quarter-over-quarter trends.
While purchase volumes are expected to increase sequentially in every quarter on a year-over-year basis, they are projected to be flat to slightly down in the third quarter compared to the second quarter.
Fourth-quarter volumes are expected to be above the first quarter, with headwinds from market volumes and marketing spend but tailwinds from low spreads.
Potential Impact of NAR Settlement on Opendoor’s Value Proposition
Question
In a more extreme scenario where commission rates decline significantly, is there a clearing rate at which the Opendoor model may need to pivot its value proposition to remain competitive?
Answer
Opendoor’s value proposition of providing certainty, simplicity, and a frictionless experience is unique and cannot be replicated in traditional transactions.
The company is confident in its ability to adjust its pricing and value proposition in response to market dynamics, including potential fee compression.
Opendoor will closely monitor changes in seller listing fees and buyer broker commissions post-July and be prepared to adapt as needed.
