Opendoor (OPEN) 5 Aug 222022 Q2 Earnings call transcript

Good day. Thank you for standing by. Welcome to the Opendoor Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please be advised that today’s conference is being recorded. hand Head over of to today, your like Wang, Elise Investor now the to conference speaker I'd Relations. Please go ahead.

company's Thank section of that will on our of our are afternoon. this found on Full call additional can at of Relations letter, good Investor corporate earnings the commentary section Investor shareholder our available website. you, management webcast in investor.opendoor.com. be be and which website the simultaneously the results Relations and and release details Please note

for Before the we anticipated like condition, and These statements nor results discussed would strategy including, to remind neither promises risks are involve discussion to future contains to, you following those operations. financial start, may and I the financial laws, that opportunity differ management performance, plans, market cause guarantees statements here. forward-looking meaning securities uncertainties limited Opendoor's and and the that expansion from statements actual federal business not within materially but objectives and regarding of

operational non-GAAP of evaluate useful or Opendoor certain company obligation investors development information from following for update the found financial XXst, this based forward-looking whether to results expectations your result Factors on financial to report statements to year recent and forward-looking contained XX-K December The Any And are a that to or in made supplemental by the to call performance. statements references conference measures. including no non-GAAP today. differ company’s assumes on them section responses annual ended assumptions of are be The the as Risk except new discussions Form in actual XXXX. can as law. believes could measurement this questions and Additional Opendoor's as as financial otherwise of most required cause to current management’s revise

to most I’ll to Eric GAAP For turn the these see financial directly over @investor.opendoor.com. website of of call now Chairman Executive Opendoor. and the a each Chief of our measures non-GAAP Officer please Wu, Co-Founder, comparable reconciliation metric,

Good afternoon.

Chief house. time of just a looking in forward on to the looking a sell that story up found On with of lot build to it Financial Opendoor the I able a hang and new I'm call When I customer customers our Ah Low I Andrew end, we and Wheeler; start our To to of I At recent was lot home for of baggage I a to empower and was make house moves. and that Kee, my stuff to Officer in to a And like really pick to my my only was Opendoor. in I our go. really to Damavandi, ours. Henderson, strive was with be new felt all call me emotional new fresh is live Julie I my past had life start. changing Julie to out that a move in I sold Carrie that and Damavandi, do home I was to years, move, to XX our was excited Nevada, let President. that.

home my people new in the to don't sign home, when builder, the fixes. end, then made take Opendoor that started to of house we're have I price and night we have process. do So there Within of new home refinance contract days don't This house. went don't to method have had a free. was actually the so a kind But and I unbelievably I'm doing and or me my of put which was a have and it's money that new right have I to traipsing whole okay, salesperson Opendoor. about contract door it this, them. to that in things for possible front easy try I so I was heard pay like, three just I to it many stress good away, on out my lockbox it might recommended me. agreement the not these through and with

feeling customers fresh Before felt I then of how burden that the have our market more product there whole is ever. moved, was weight. could our the macro I I didn't speed fly backdrop had now me. But I the I Julie was moved a I like was than sandbags and certainty for once made didn't like the once Against I me. uncertainty, on of heavy Opendoor and big and needed have on that sale start housing like because through, this literally possible. that really out simplicity, delivers freedom,

net such profits helped revenue million. quarter, income delivered $X.X year-on-year EBITDA and of XX,XXX of we've move with and the adjusted $XXX second $XXX adjusted record contribution $XXX of As mind of over homeowners over peace growing of million in with billion million, a XXX%

markets, we total of a financial our our nearly XX% cover transactions. to XX to We capabilities home In our to building performance, home underwriting servicing and entered expanding important our footprint experience. home nationwide, buying XX bringing took sellers towards addition goal steps of better US markets,

request of together instantly ability just It's leaders sell that their sell multiyear to a partnership have announced Opendoor millions people partnership market will We this to home. rare buy believe we and of vision. And and come also with change the and give our on monthly how an hundreds two fundamentally online. offer Zillow home aligned their visitors a

than pre-qualified went new our XX in homebuyers, enabling to seconds. For live we financing app California, Opendoor in with our less customers get

a shopping felt home on like In was Quote, recent pre-market I purchase and we suggests live. that The of seamless marketplace Opendoor Opendoor home exclusive via was Ecommerce of kind going we've finally, uncomplicated, customer. adoption Exclusives, and end a experience. quote. first within homebuyers I process the of like lets the its for And words months financing few officially will just of a launched attach Amazon. that highest achieve our With an

and we've momentum Exclusives. tremendous that So positive seen it's Opendoor of feedback no surprise already

pleased and risk rigorous overall were requiring these highly the is health. current we market be dynamic While and results, inventory to managing volatility with us and

you of are by housing a years. spike velocity at rates caused transaction speed have quarter. market home rapidly We subsequently over has in we most and in experienced from the moved in price steep home second interest all-time XX rates As mortgage highs, slowdown in saw a change the appreciation aware a and a not

housing expectations. our these had our meet to which than have acquisition macro to slowdown substantially As position navigate shifts had since increased a market we a movement, May, result, this spreads cohorts faster To forecasted. our in led margin or exceed we

health our at inventory with existing reductions which price data that prioritizing are is are in inventory and market with we line the selling moving. Second, the speed

in the half these lead this actions year, will While of the period. performance contribution lower to will that are transition second this margins strong enable discipline sequentially beyond financial

balance management better Opendoor and as investments, transformational and short-term Exclusives consumer risk than out that our partnership, there. anyone long-term experience We continue such with to build else needs the will Zillow addresses

this detail. will discuss over to we strengthen our position systems, as know financial in is I more buy the the to best our turn a to our improve home. call Carrie marketplace sell opportunity now to Importantly, our and performance emerge and

for margin, revenue, Eric. double contribution was in operating We cash Thanks, adjusted QX of $X.X outstanding another net $XXX free billion million and best digit quarter. income, flow. delivered proxy our

fortress sheet ended balance We $X.X with in with quarter billion a the also cash.

greater over we homes, of and invested financing a earnings of equity anticipation half completed as additional in strong of in second in of million These in record year. market $XXX billion into an results Another the and capture macro half exceptionally $XX the first capacity. XXXX leaned housing volatility

quarter second waning the the This market and of shift with largest change long led resulting record affordability we've homebuyers. over aggressive years. in seasonal to and levels. ahead, rates transaction had HPA quarter-on-quarter We and XX the looking macro in environment marked anticipated volumes Fed to curb response a a sidelined in Eric mentioned, evolve increase many faster QX, in momentum, in from seen the typical a slowdown an from Moving as the as rapidly inflation course mortgage the housing

faster than anticipated. which However, the pace occurred with this was

transactions are level the selling, with at in seen QX. and QX levels. rates a absolute early lower, high and XXXX record has than in pace moved slower the remains and XXXX it still XXXX of and sell-through but In homes While words, above the XXXX line other

month throughout In there's third half usually HPA, course mid-February, in terms in of one May in changes price XXX in mid-July. HPA consistent typical expectation accelerates year. around XXX resulting no contrast, the and which quarter, HPA sharply of peak basis during and to of first declines. of was second moves levels the the HPA negative with gradually points the in zero than QX speed a HPA early early from the home year. price from move low the of seasonal then seasonal as saw faster basis end points than We pattern moves to a to our In sharper approximately the the quarter at to rolling home month-over-month peaks

change for out line to with may continue in the month-over-month HPA the of We HPA in are beginning patterns see a observe trend seasonal and flattening of to year. of the normal remainder

the year housing the beyond transition velocity, normal holding this Our lower longer lower half in HPA seasonal and second for the market reflect trends. will to performance of times transaction

home homes line to we've take As taken continuing actions decisive in perform discussed letter, to and new expectations. with pricing target acquisition market to shareholder expeditiously in enable pricing and our to two, conditions reflect those sell are adjust to and and our swift adjust one, cohorts

risk in on focus pricing informed management we decisions quarter. Our a inventory health, three key made and

in substantially we beginning First, May. spreads acquisition increased our offers in embedded

increased, the come. during specific critical close between reprice offer those our a on acquisition cancel However, investment is of closes. saw and lag offer homes a years and to or that We close believe time spreads We dividends when versus making for an between that we an that quickly decision spreads gap given the homes and not will how time to for brand We cohorts the pay to this quarter. contracts. have made

inventory listed prices adjusted the we Second, to have in with drive on market stay sell-through. line to our down

second While the these impact margin price seasonality. in reductions of contribution will impact the beyond our half

Our the us gives decision in take earnings flexibility such half to first to actions. prioritize

higher Finally, in standard acquisitions combination usually are of will our at continuing longer levels sustained marketing spread pace. margin. for the shift lower operate to turn mix our acquisition with to quarter higher new resale lower and that in dated homes reduce we spreads making. we're This coming are these will the The

acquisition resume Our stabilizes. pace plan housing as is the market to a higher

as contemplates the actions, guidance a what well impact arise has could guidance provided in market given wider QX of than Therefore as conditions. this Our range broader quarters. range was a of past that uncertain outcomes

acquisition lower to a in impacts the EBITDA and taking well $X.X price pace, of The sold homes for not inventory billion to volumes. of pace reflects the revenue billion, subsequently million impact given is in Our that as $XXX outlook negative revenue reductions quarter, reflects negative resale fewer a $X.X million to $XXX anticipated expectations on for our which to slower as cancel we're clear decision this guidance of QX, range. mix. resale resale impact offers

expenses $XXX on reductions QX versus by We ramping at third spent driven are our be operating channels. and down adjusted capacity approximately efficient primarily into QX. will built for marketing Expense our party most managing million operations focusing down

low continue Finally, and the operational be In the margin X.X% fluid will our summary, conditions of to we nimble structure. year, and in midpoint will that of pricing, range. half a second responsive. dynamic we our to guide expertise Leveraging implies recognize of the contribution at approximately continue cost market our be

We our now by resources remain $XX profitable of transition navigate positioned Thank you. and capacity. pursuit very billion in cash steadfast to I $X.X the sheet in successfully securities open And this we of up balance call we goal and have are Clearly, totaling company. billion a financing for building housing long-term will of the marketable and design, well have the with markets. and our a mission strong questions. generational

[Operator Helfstein first Instructions] Jason Oppenheimer. Our comes with question from

Thanks.

bigger predictable. so like forecast given out you numbers, guess on play but I it's a thought, business So it just seems near-term quarterly basis, one, over is volatility, more out hard to this few the that this as

when guess think slow marketing. pretty to on what base is don't, with the maybe And into guidance. annual quarter, then shifting you I you don't one, obviously, potentially as So save obviously partnership a fixed need you two, could would cover cover you you're being That this second you down said, significant to there's and about cost you Zillow when got it that.

sales maybe on fast can the that and what opine can you Thank as that like a So savings for And get running. up side. if to can mean you. and marketing magnitude maybe you how of think

the in with you a that embedding for been of line know, been year take we're as over been to I'll Carrie, that's we increases different spreads as mean, in had and our first mortgage hard we in and I we've it's part that slowdown other to a ultimately single forecast a I Jason, ability really had those has a time quarter-to-quarter. housing a would is of navigating long anticipation to past single building what be is .in And expectations, we move large XX I challenge XX scenario. Hey, But mean what's quarter. moving forecast year rates that. forecast think navigating a very fast rates and is and very what an one a what was this, at saw in been a opposed this type quarter. slowdowns. Again, here. macro mean, I what very

that, a adjusting what to to market new doing been and responding very, think designed do, is so we've navigating which been Outside steeper systems our quickly, raising very slope. they're acquisitions. and are And spreads of I much exactly we've prices

And customers to then, potential and the Andrew. us respect more midterm, the Jason, team's, putting to work meaningfully coming the announced hard together we We to that the we are over has be about Zillow expect in live what's there. ahead given we're that help excited months. do it’s the it it think partnership, the serve today deal just at With

leading For potential solution, over in and move audience offers. the milestone our excited Opendoor us, on, XXX category uniques journeys We're it's homeowner of we're an country about our and that have million combining start and a platform their every Zillow’s with monthly offer. the with leading major of

And from Truist. our line next the question Robert with comes of Zeller

question. Robert from the for taking Naved for on Khan This thanks Zeller Hi, Truist.

first So the XQ starting if month-over-month you I in comparing environment the think just spreads, your think changes volatility flattening HPA. in mentioned started of today letter XXXX, guys widening we're the I of to versus see you when out you're and

rate mean, volatility So behind then to and would be sticking mortgage we've or year highest forecast down it the think HPA with XXXX? levels now inventory the rates, changes, half you the might starting seen us is come likely period say I into recently. into back to you heading of And easier them

back So that the in could tailwind XXXX? do to back homebuyer catalyst half of you to provide the or that or year a think starting early Thanks. demand come

with managing we're continue spread what quickly. conservatism risk back mentioned, moved back half for be to But the we we up we of because that fluid. that all respect the part of the want those And And you And in increases, we substantial we increasing moved to take we're on levels saw continues been the moving appropriately again, today as been I'll starting we Robert, Hey, in make housing going operate building to as to up mortgage the up of well. spreads, them I rates, the materially. sustained of spreads year. have mean, record levels to and all sure market the higher heels was if really quite over fall. way to and changes them May, last

substantially will what again, we your more very the management would down? now second that's And management into acquire the operating question inventory. with a in we're risk to what about macro on mortgage outlook frankly, would fresher to we're be coming about expectations. in seeing this is The with Again, And homes, ability our I as that I higher rates, we with new that forecast good decision. spreads and line right clearance, we're part now risk unload I want cohorts they doing embed, negative do of build focused think new moment. And than But say very I a feel would create our that spreads. perform

from comes with And question our next of Lee J.P. line Dae the Morgan.

thanks for of question two, the the have questions taking up of prior my kind I on following demand. Great, one so first

the you flowing all markets you are demand, do temporary be for large your his that little then And And could And you Exclusives? product? think in pullback do you if across is this this seeing think could about it secondly, this again? do of pullback. as sell? percentage a how bit like get Opendoor What's vision a So demand this could home think is you of long-term more talk you what and your a

Andrew. It’s then, the can to And Eric, exclusives. take I first of part can that. speak

In trajectory and terms seeing market our footprint. of across seeing absolutely performance what markets, different we are we're across

are markets coast, perform to particularly and well, east in the our On the tending southeast Florida.

Our highlights a Broadly, Eric, having offers. And Phoenix, diversification and more that challenging. it XX notably and Vegas, bit footprint to are mixed. a are importance talk a markets, markets I exclusives? more Tucson central the to our of market western plus Sacramento, bit you the want geographic think

believe direct what to we Opendoor, around are to price price buy it's our which match vision then processes And how and it the a a issue for obviously, really is a the it's now providing And home few and to seamless are this know and that we're a we on customers multiple these funnel, Yes, Opendoor. price. Opendoor Ecommerce And make more actually fair this counterparties fees like can by an change positive it buy our peace appraisal for that regards provide they that significant A services paying homes a to drives really around and so it with direct we're customers Craigslist back experience attach. lastly, a through that. we price this say removes impact for buyer built one, guarantee, aggregate I can need long-term supply found bought exclusives, feels We home, negotiations because times, close And we going and increased that simple and lot with a gives uncertainty. using to removes win there's can win we going another there's really probably of magical. Amazon. the mind of demand. a and lot like audience a lower transaction have way We're you broken and unique is and and the and we experience. costs features forth, and the demand exclusively on us economics, launched of

wouldn't third an term I start as this the and opportunity the over we us. for a direct can medium to does this unlock question, that fundamental impact do work it important think get? can how why Opendoor, So I view with shift time. substantial be how say of and amount in big in of tremendous the party a buyers

next the our from comes of question with And Nick line Securities. JMP

for people funnel, guess just I a which to markets amount the you revisiting of, significant like going the thanks sounds that about volume. shall it's taking mean, fill? amount that the I with It versus I questions. new here? second of mean, guess, I change partnership. Zillow kind how attract does pace we I Hi, requesting do at from managing And upper think guess question quotes can you then Zillow that of enter Thanks. what is the is the

Sure.

about the excited are We potential volume.

capacity unique that one open the flexibility scale as that the things able think we're looking it. has system. take we've of over out been the We've of quarter platform we're embedded that to able up of we lower equally, obviously months. door about as we've in and third And -- I the to built the at significantly volumes, and last the flexible is XX some

there. that Zillow a our partner platform. to of things it's ability our support absolutely the so like And differentiates And is one meaningful

the we're In plus XX XX of launch, covering all terms markets in market across of XX% country markets, the transactions. pace of

that good we very the feel now opening market on But our we given dynamic existing focus, markets. that still about are we environment footprint the is has. really right So footprint, managing

Ages And our next question with comes of from the Justin line Berenberg.

taking Hi, for question. the thanks

you But, might a buyer volatility be looking the given of there I houses, an that right difficult guys time Just to opportunity the just for through ability kind not to [Inaudible] What the understand more have to as market, you answer. increasing them? buy? and because are at to this of ahead, and good this the transitioned market is to the see sell

and the sellers. course hey, believe becoming fundamentally tremendous eight of best-in-class Justin, years. also watching answer over resale experience And it’s And yes. good for amount top and that on We value servicing that. short we're And we've how experience is we're Eric. at understanding that. homes mean, improving that Yes, a providing to agents built for of for we're at buyers the buyers, I efficiently of that exclusives very and them

them. and homes. centered if for take marketplace make to step to delighting coming a and is want you have And and buyers sellers we to managing coming that so platform delighting around the have that the the back we Opendoor sure them, we platform And really

yes, And our grow so to we as your managing The opportunity this question, view spreads inventory? while growth that contribution we to risk. margin to managing we're is targets ensure do that answer with hit proper also

to invest those are play. we're continuing the so so we can at grow. And platform And our dynamics

the that. as then could. any similar. Can follow Great. around Thanks markets the homes how in the been up, And bouncing you a into is the if us where model There's early of maybe few returns markets? to Northeast insight aren't I questions translatable give for one

still early days We're markets. in in Northeast the

recently markets this relatively half All the year. launch the first of over of of those course

quality so early underwriting been our at that as we've every complex And of each more inventory. pace we're that looking against market playbook book our manage feel slowing on in launch markets, of good as macro and early about dynamic talking really we expect, the we're you'd is market. But our about, we proactively the very for days, we're and it's our focused sure and as making managing

question KBW. from of line with the Ryan next comes Tomasello Our

you you follow your color many your service the concentrated Can fee? Hi, if related stronger actually was that provide you homes How questions. of to around today, compel as and where the in impairment? service then and like question could you a fee service occupation fees if everyone, gas, up off And to that conversion Can higher thanks you for that you the in spreads. average those to specific on say take your feel taking expected some on look take mentioned, foot the stands markets? fee terms

that. Sure, Ryan. I'll Hey, take

cohort, to as outperform judge don't So I policies by things rapidly on the think while changing conversion, break meant then, our impairment, become, June to the out HPA the reflect would or an expectations question is continue a but to and pricing of as adjusted it conversion respect we time. opportunity to With say that we and we we talking since to second is at more fee, a what of have a about geography respond your our and seen to been it basis. expectations month XXth, by spreads, on frankly, reflect is higher notwithstanding that. around for and resale our spread Certainly have significant of macro one environment. I of And it's for late we've little

in move. So just what it's have all mortgage the value static particularly is we unpack the in provide the markets, And May customer. rate we to have have our on comment, X%, via heels of we your fee, that service a that's spread measurably increased manage we

it's importantly, adjusted two door us acquisition still back a into able grow our seeing stabilize, a time, will to the way spreads is fact we're quite we that over I'd spread see market to volumes. conversion as the we for expectation adjust we start to have and housing see now be start on So can basis. spreads And performing say increased, nicely that

one extent much pulling And to to the the continue Thanks. can if And in $XXX should room in in is that additional Thanks. million base. you're more expect I on to deteriorate. does and if guiding expense into more levers moderation quarter for the I relation sequential XQ, you're there an we expense for squeeze think the how efficiencies market to fourth the the

on run levers our costs. And digit $XXX The the managing that. to a level lower a referenced high it decrease. exit million rate pulling expect we is at three to We're quarter There's an main quarter-over-quarter aggressively than that down do you that. call single really we're even

our we leveraging The flexing aggressively down pretty We're third party capacity versus deliberate party first hiring. very about is as we're up. third scaled labor

example, for process half, nearly by third the party carried that in where our of were of XX% capacity operations home dialing So tasks labor, we're out first in back.

given the year. of our the marketing And finally, to spend high team then spread down focusing most scrubbing efficient channels, our has we're aspect over we the that really And come our environment. the on to of spending. return every Second, continue highest course expect

And line Jason Compass Weaver our comes next from question Point. the with

Hi, the question. good Thanks for evening. taking

trends. rising the what just seeing site to pertains average I it your as broad As offer consumer wonder a adoption uncertain are visitors. that you regarding of percentage rate request environment? Is given

as brand. we talked the so and time needle. ultimately we our certainly solution, In of awareness offers those think that seeing we obviously I move is We've QX, seeing investments, business about was record we investments over know our grow in And see. grow what which good to the we're made meaningful

one to clear to follow the prices if language questions, inventory out that just able up one you you've and with that off I about mark against stated can reduce be look may $XX million the of Okay, curious the some bridging prior I'm that of this to going more forward.

should marks third quarter? we in and to similar like So magnitude of expect see fourth valuation

the in and what continue at the in for you the of of But But work homes them we're time, have we homes, on here as going and we basis XXX how now, resale clearance know we can't dynamic give same to I value that'll we is, drive right of can where or go impairment. sit sit you place. given to terms for are where policies we based the we portfolio. entire impair going, and here forecast market policy mark And give based number a comment through and just a adjust resale and as was floor today the be to pricing XXX. across direction. again. My expectation that on will methodology I prices today we home a

I'm conference Wu no And for like I over any further the remarks. would showing you. to to questions. further Thank back Eric turn And

resources of that a close how And homes. things. to We've improve made want the with shifted and will world us long you the a platform. To and And underpin best-in-class vertically has a This of you. us our this the this and few to principle out, Thank We're attending. efficient for term. homes. focus the say we become to on making best and We incentive and homes system. on improving, means remind tremendous only I the I will company past do as capability we're now that bestselling buy years Thank best we this amount seller things. eight alignment in at the of integrated optimize want the becoming a focused buyer spent that

This Thank conference call. for today's participating. you concludes

disconnect You great may a everyone now day. have