Q1 2022 Offerpad Solutions Inc Earnings Call
This call management will refer to certain non-GAAP financial measures. These metrics exclude certain items discussed in our earnings release under the heading non-GAAP financial measures. The reconciliations of <unk> non-GAAP measures to the comparable GAAP measures are available in the financial tables of the first quarter earnings release on offer.
<unk> web site.
I'll now turn the call over to Brian .
Thank you Stephanie I'm excited you could all join US today. This is our third earnings call since going public and we keep building upon our track record of delivering exceptional results today I will share details about our progress in 2022 future plans and market trends.
Nick will cover our first quarter 2022 financial results and second quarter 2022 expectations.
I'll start with a few highlights before we dive into details I'm proud to share that Q1 was our best quarter in <unk> history, We set a new company record with $41 million of net income in Q1.
Our topline revenue increased $1 1 billion year over year, and we refuse to grow for our products with 115% increase in request volume year over year.
In the first quarter of this year companies face labor challenges supply constraints.
Rising interest rates and inflation the housing industry saw mortgage rate navigated effectively and achieved exceptional results. We continued to prove we can grow at a robust pace profitably.
These accomplishments are possible.
Because we built offer Pat to address the toughest pain point in real estate the transaction.
Finding an agent isn't hard the transaction is at offer pads instead of providing customers with a list of options for different companies. They can use to complete each part.
Part of their transaction agents renovation companies mortgage companies moving companies title companies et cetera, we take care of all of these things provided the list of options has been the norm completing the transaction for the customer on their timeline is what we do best.
To facilitate the transaction with the most control uncertainty, allowing for the best customer experience, we own the asset the core of the transaction we own the home. So not only does this provide a seamless service for customers. There's also limit offer past exposure to underwriting risk by supporting a highly efficient logistics business when.
When we can control the majority of the transaction components, we can better control the timing and financial outcome.
The power of owning the home also allows us to build a larger suite of high margin low risk services that logically attach and simplify the homeownership experience for the consumer even more.
These qualities controlling the transaction and building out additional services directly support our ability to meet our long term goals.
We have a clear mission disciplined strategy vast expertise and an abundant drive to re imagine the real estate landscape. We are proud to lead this transformation by offering customers a simpler solution.
To drill down into the details for the first quarter in Q1, we made meaningful progress in all three of our focus areas market penetration market expansion and ancillary services. We added 600, new ZIP codes, increasing our service territory by nearly 15%. This includes 75, new ZIP codes in Austin, Texas.
Expanding that territory by 50% and all three of our new California markets are up and running.
Importantly, with each new market, we completed a post launch review our culture values of continuous improvement mentality that encourages our team to keep learning innovating and building upon our existing strengths.
We look for ways to enhance our internal processes reduce risks and optimize our core business tasks. We then incorporate our learnings into future launches.
For example, when we entered California, we added a soft launched two weeks prior to our official opening date as a process improvement identified from prior experience we.
We employ experts with decades of experience you still push to learn and improve everyday that mentality fuels our ability to succeed.
Looking forward, we plan to expand our services to five additional markets. This year, we expect our next market launch in Fort Myers, Florida will be up and running during the second quarter, our plans for the remainder of the year, including expanding the Cincinnati, Ohio, Fort Wayne, Indiana, Fort Collins, Colorado in Colorado Springs, Colorado.
Our growth is also visible in the expansion of our ancillary services. We are now licensed to provide offer fast home loans in South Carolina in Ohio, bringing the service to a total of nine states. This growth in the service can also be measured by the increase of our loan volume in the first quarter of 2022, our load volume increased 29% compared to the fourth.
Quarter of 2021.
A key driver supporting our real estate logistics and growth is the innovative proprietary technology. We utilize in fact technology has captured as one of our three strategic priorities. These priorities include maintaining best in class operational execution growing in a disciplined and responsible manner and utilizing innovative technology.
To build upon our foundation of real estate expertise ultimately these priorities help us create the best products to serve the most customers.
On our last earnings call, we highlighted our 2020 to focus on buyer engagement as you know we have a flex listing offering available to customers. In addition to our express cash offer service.
Through flex we have in house real estate agents that can lift a customer's home on the open market, while allowing the customer to keep our cash offer it as a backup.
Our flex agents also help customers looking to buy a home in the first quarter of 2022, we improved our homebuyer services by adding a new buyer expert role on our team. These agents focused solely on engaging with prospective homebuyers.
Trading was revamped and offer pad University provided our agents with enhanced knowledge around our growing suite of solutions and the ever changing landscape of the real estate industry.
We also enhanced the whole buying page on our website, adding new search capabilities and tour scheduling.
We are seeing significant increase in customers using our flex product our flex team completed 20% more transactions in Q1 over last quarter and more than double the number of transactions year over year. This includes a 100% increase in homebuyer closings compared to the first quarter of 2021, I believe our ability to meet the customer at the beginning.
The real estate journey will help increase our total transaction volume reduced cost for the company and the customer and provide a better one stop experience for customers I am excited about our flex products growth and we're just getting started.
To further support our focus on providing the best solutions for homebuyers, we plan to initiate a soft launch of our buyer boost program in the second quarter of 2022 through this program buyers will have the advantage of making an offer pad cashback offer increasing their ability to compete in an intense sellers market.
Turning now to the broader real estate market trends, we are still seeing significant strength in our markets. We continue to see high demand and low supply.
As the real estate market changes different opportunities will present themselves.
We can adapt by leveraging the variety of services, we provide and leaning into the advantage of being both a home buyer and seller.
Currently consumers have easy access to liquidity by selling their homes quickly and a strong seller's market.
As the market adjust consumers' ability to access liquidity in their home on their timeline, we will become more challenging our ability to solve this challenge will offer even more value to our customers.
Remember too that I find is less than 2% of our total market, meaning offer Pat can continue to grow even if the broader market is slowing offer pats on increase in market share from Q3 to Q4 last year. Following the <unk> exit from eye buying Additionally, seven markets reached 8% or higher <unk> penetration in the fourth quarter lag.
Year, highlighting the increasing consumer awareness and adoption.
Our top of funnel request increase as well in the first quarter, we hit a record high request volume companywide.
According to similar webs analysis of U S real estate websites with over 100000 visitors offer pads website ranked in the top 10 for the largest year over year growth in total website visitors from 2020 to 2021. This strength in website traffic mirrors, the increase and request volume we saw importantly, even with our significant growth we are.
Proud that the quality of our service remains a strength with 94% customer satisfaction rating in Q1, I don't think anyone can argue that consumers are unsatisfied with the old way of real estate with the lack of certainty and control and selling their home we are solving that everyday at offer pad.
We had a fantastic first quarter living our values proved once again to deliver results exceeding expectations importantly, the success of our company allows us to serve more customers and communities.
To learn about ways optimized engaging with the communities. We serve please visit our newly published ESG page on our Investor Relations website. There are so many great things, we're already doing and so much more we aspire to do in the future.
On that note I'll turn the call over to Mike.
Thanks, Brian .
Today I will cover our first quarter 2022 financial results discuss the impacts from current market conditions review some of our risk mitigation strategies and also provide our outlook for the second quarter.
As Brian mentioned, our first quarter. This year was the strongest quarter in our company's history, and we again exceeded the high end of our Q1 guidance ranges.
Revenue increased by over $1 billion.
Or 384% year over year, and also increased 58% sequentially.
Our revenue in the first quarter of 2022 at 137 billion exceeded the revenue reported in the first three quarters of last year combined through the powerful combination of higher average sales prices and increases in volume from both organic growth in existing markets and new market expansions.
Importantly, our robust topline growth was not just growth for growth's sake, it was profitable growth.
Q1, gross profit increased 294% from the prior year and we reported positive adjusted EBITDA for the sixth consecutive quarter.
Adjusted EBITDA was $54 million the highest in company history.
And after reporting positive net income for the full year of 2021, we continue that trend as we set a new company record with GAAP net income of $41 million for the quarter.
Excluding a $5 $7 million credit some mark to market the value of our warrant liability adjusted net income was $35 3 million.
Gross profit this quarter was $132 $1 million at a gross margin of nine 6% compared to eight 1% in the fourth quarter of 2021.
This represents the seventh consecutive quarter gross profit has increased.
The first quarter has historically been a strong sales quarter with later acquisitions, reflecting the seasonality of the real estate market.
And four out of the last five years sales have exceeded acquisitions in the first quarter.
The outsized revenue growth this quarter was driven by a record 3602 homes sold.
So we expected to show strong volume increases in the first quarter, we exceeded the top end of our guidance range by nearly 15%.
This was the result of a couple of factors.
The previously discussed longer renovation times that we experienced in late 2021 due to supply chain issues began to improve and by Q1. This extra inventory that was ready to list.
Second market conditions for residential home sales were extremely favorable in Q1 recovering from US. We also saw some favorable impact in the quarter from a pull forward of sales from the second quarter and mortgage rates on the new home ahead of the impending rate increases.
On the acquisition side, we acquired over 2850 homes in the fourth.
The lowest quarter for acquisitions due to seasonality and we are seeing the normal increase month over month.
Tears setting a record for the most homes, we've ever bought in a single month.
We are expecting our acquisition momentum for March and April to continue in Q2 and to drive sequential revenue.
The increases in Q3 and Q4 of this year.
Our results this quarter once again proved our ability to achieve both strong top line growth and enhanced bottom line profitability.
Okay.
Our operational execution and focus on efficiency were key drivers in continuing to effectively leverage our cost structure as our total operating costs improve.
Grew to six 4% of revenue compared to seven 7% in the fourth quarter of 2021, and 11, 3% in the first quarter of 2021.
Our strong revenue growth is allowing us to continue to invest in the business, while still reducing our overhead cost as a percentage of revenue.
After completing a remarkable year in 2021, we started 2022 on an even stronger footing as.
As interest rates have increased and are expected to rise further we have made the proper adjustments to our applicable input variables in our underwriting and do not anticipate changes in our cost of capital to have a material impact on our business.
While increasing mortgage rates will have an impact on the real estate market. We continue to see the limited supply and outsized demand for housing as the primary drivers for the current market conditions.
Housing supply remained at historic lows with the National supply of housing in March at two months and the average supply and offered as markets at 0.6 months.
We saw this supply and demand imbalance once again support increasing home prices with our average sales price, reaching $381000 in Q1 compared to 357000 in the fourth quarter last year.
The majority of our growth however is driven by our increasing market penetration and market expansion for.
For perspective in the first quarter, approximately $720 million or two thirds of the $1 $1 billion increase in revenue was driven by the increase in market penetration within our existing markets and new market expansion. The remaining $370 million increase in revenue is attributable to the increase in average sales price.
Similar to our model adjustments accounting for increasing interest and mortgage rates, we regularly review and adjust our risk management strategies to account for other anticipated changes in the real estate market conditions.
For mitigating factors reduce our exposure when market changes occur.
These factors include the limited time in which we own a home.
Our contribution margin after interest that can comfortably allow for decreasing home prices over our average holding period.
Geographic diversification and product diversification.
We have a strong track record of owning our inventory for less than 100 days from purchase to sale.
Of that time period, the home is typically under contract to sell for roughly 30 days, thus our average exposure to fluctuations in the real estate market is typically limited to a short window of approximately 70 days or less.
Even during the most aggressive historical declines during 2008 through 2012 National U S home prices declined on average less than 1% per month.
This is an important factor to note as we turnover our inventory every three to four months and replace it with newly underwritten homes with updated assumptions and data points, reflecting current and anticipated market conditions.
We therefore mitigate our overall exposure to the effects of the severe or prolonged downturn.
Second our contribution margin after interest over the past five quarters ranged from 5% to 10% exceeding the exposure from decreasing home prices.
Our model is built to sustained periods of market fluctuations even in a more normalized market with contribution margins after interest of 3% to 6%.
Third it is unusual for the real estate market in all cities and states to move in tandem.
This is why we have methodically expanded our geographic footprint across the U S to 'twenty four markets spanning 16 states and serving over 700 cities and towns.
While we did experience more consistent movement of markets over the past two years historically markets across the country have operated at different points in the real estate cycle.
This geographic diversification provides us another source of risk mitigation.
Lastly, rest cash offer and our flex listing service.
The two services each of them.
Few days.
Okay.
Mers and have advantages in different market conditions the offering.
We can increase.
Or decrease our focus on each offerings.
A great example of this was the increase in demand we saw for our express cash off of social distancing and increased usage.
So technology during that period.
For perspective, our ability to complete the <unk>.
Great renovations efficiently and our ability to minimize aged inventory exposure.
Our renovation efficiency improved in the first quarter of 2022 compared to the fourth quarter.
Reflecting in part our ability to effectively navigate around supply chain constraints.
The average duration and renovation was 23 days in the first quarter compared to 24 days in Q4 over 180 days as of March 31 was below 5%, which is significantly lower than our target of less than 10%.
Turning to our outlook for this.
The second quarter, our expectations for a strong start to 2020 to materialize and we anticipate continuing that momentum into the second quarter.
Specific leaders in 3100 homes.
Generating revenue of $1 1 billion to $1, one 5 billion or nearly a 200% increase over Q2 of 2021 at the midpoint.
We also expect to extend our track records.
The seven consecutive quarters of positive adjusted EBITDA.
Estimated to be between $27 million and $37 million in short, we expect to produce another strong quarter of profitable growth.
In conclusion, we are.
Executing our strategy and our model is driving our model has proven adaptable in a dynamic environment our strategy of balancing robust growth with sustainable profitability has proved to be a successful combination as we once again demonstrated our ability to generate positive net income supporting the long term health and value.
<unk> of our company we.
We'll continue to execute our ground game paired with our innovative technology and expect to deliver on our commitments to our customers and our shareholders.
I will now turn the call over to the operator to begin the question and answer session.
Thank you. Thank you would like to ask a question. Please press star followed by one of your telephone keypad.
Any reason you would like to remove a question. Please press star followed by.
Again to ask a question please press star one.
Linda.
Please remember to pick up your handset before asking your question, we will pause briefly ask questions are registering.
Our first question comes from the line of Mike.
<unk> with Goldman Sachs. Please go ahead.
Hey, good afternoon, and thank you very much for the question.
I have two just first on purchases I was wondering if you could give a little bit more color.
About.
How we should think about purchases for QQ.
Is that going to be similar to <unk> levels and how are you balancing.
Increasing purchases with being price disciplined.
And then on the second question I was just wondering if you could talk a little bit more about.
Renovations.
Is that beginning to contribute to.
Gross margins in the form of home price appreciation. Thank you very much.
Great. Thanks, Mike for your question.
For the first one in terms of acquisitions for Q2, as we talked about Q1 is traditionally a seasonally low.
Quarter for acquisitions, and so our expectations that Q2 will show that seasonal ramp up and so our acquisitions are generally strong strongest in Q2 and Q3. So we would expect that pattern to play out and I don't see anything different.
On the landscape that would drive.
Variations that are request volume has still continued to be strong and support that view. So I think we're in good shape there in terms of.
The renovations. We've also we've made really good progress on that we spent some time in prior calls.
Last year in that last couple of quarters with some supply chain issues that slowed us down a little bit that really.
That that bottleneck unleashed really in the first quarter here and the guys did a fantastic job of getting back on track.
I would say we're in a much more normalized position on that front too.
To the point, where yes.
Does come back to be.
A part of the equation for the margins as we go forward, we're still seeing inflation, we're still seeing price increases.
Labor is tight so it hasnt gotten easier.
And we think thats going to continue for the second half but.
We do have the process in pretty good shape as we're going forward, yes. The one thing I would add on renovation is that renovation is going to become more important what we've seen over the last couple of years with with supply and demand of the product that we put on there we still want to have a really nice offer path product that we're proud of that we put out there.
But because of the demand we've been able to we don't have to put all the bells and whistles on every home that we own as the market changes and we start seeing more supply. This is where we can really flex our renovation muscle.
We actually as you're competing against more homes for a buyer to buy having having nice renovation in those homes becomes more important and so.
That's something that we're that we're focused on as well.
Great. Thank you very much for the thoughts Brian and Mike.
Thank you.
Thank you.
Our next question comes from the line.
Lee with Jpmorgan. Please go ahead.
Sure.
If there is any particular market.
I'm going to hold back growth.
Different kind of among that Keith talked about prior two years.
Yes, you are seeing any changes to that.
And then just on consumer behavior.
And then looking at your Q2 volumes will still likely.
Philosophy.
Curious if you can double click on that a little bit more on explaining how much of that is due to pull forward.
And to <unk> and if there's been any change to your strategy.
Yes.
Hey, Thanks for the question I'll jump in just.
Markets, if not all of our markets.
With with a lot of the challenging times has been over the last the last year or so, but as we kind of really good.
The playbook when executing new markets when rolling out a new market and one there is there are some things we are getting them.
<unk> as we opened a new market.
More and more people understand our model and what we're doing.
As more real estate as a service and so we're executing well and just from consumer brand awareness when we get into new markets.
And then second in the sector acquisition director and General manager just across the board knowing what.
The market has been really important to so we're.
We've been very consistent in our markets and so I wouldn't.
I wouldn't say that one.
<unk> market is really carrying this I think were pretty consistent.
We are in all markets, but not a totally agree with that and some of the comments about the geographic diversification as we built out our market footprint. The other piece that benefits us in there is that there's less concentration in the individual market. So years ago as we were starting the company we're much more heavily.
Concentrated in Phoenix that now that's still our number one market.
But we don't have really a single market.
20% or more.
The entire business. So the concentration in each of these markets is nicely dispersed as well and we've got good strong markets that we've been in for a while and the Charlotte Atlanta.
The Phoenix is.
Even Tampa very strong and recently as well and then as the new markets. We brought on are coming they're getting up to speed, we're getting them up and functioning on a faster pace than we ever have so.
Good results there.
Second question on on the velocity.
I don't see it really really slowing down at the business isn't linear so if you take a look at.
Q4 was a little bit slower due to some macro conditions in terms of sales so a little bit by some of the supply chain issues and it really <unk>.
Q2 so.
I would say Q4 might have been a little bit lighter than it would be under normal.
Make that up.
Very strongly in the first quarter here and we did it.
Wouldn't say, that's a real big piece.
The puzzles, so really as we begin to accelerate again on on the acquisitions, we had a really good acquisition month.
In March that has continued into April so we will get that seasonal pickup again and kind of rebuild the inventory is down as I said earlier in the prepared remarks.
Remarks that we would expect.
Sequential growth our revenue wise in Q3, and Q4 as we round out the year.
Got it thank you.
Thank you.
Our next question.
Question comes from the line of Andrew Boone with JMP Securities. Please go ahead.
I apologize sorry, I was on mute.
Okay.
Sorry.
Thanks for taking the questions and concerns of a delay there.
Okay.
As we go from <unk>.
Can you just help parse that out right. It seems like there were a lot of good things going on in terms of bundling.
Can you help us think about the impact.
So how do we think about HPA in terms of.
<unk>.
And then secondly, great to hear 115% increase in terms of request volume in the quarter. That's that's brilliant.
The impressive can you just step back and more strategically talk about bringing greater awareness to the platform to offer but overall and where do you think consumers are just being aware of of high buying overall as an option. Thanks so much.
Yes, the one thing that debt.
I am extremely especially in our in our markets we've been in for a while I think we're very very our brand awareness.
The average home seller and buyer very familiar with our model, you take Phoenix, and Atlanta, and Tampa and Orlando markets. We've been in that now all the Texas markets I think people really understand we're going to do well.
But I am very excited about we talked about this in the last.
Last earnings call was one of the things.
Helping people not looking at only as an <unk>, where they can come and will buy their home on their timeframe, but also as a solution center, where they start looking at us for other products.
Whether they want it.
And we're having to find to help them find their next home.
From whether it's not for pattern not and so we're starting to make some headway on that with our brand and for market Youre going to see us on television.
With digital media channels, you would expect and so.
We attack a market.
Strategic as we move along.
This is good and we're starting to transition.
People looking at us as a as more of a one stop solution center.
We have a lot of work to do there.
And to be clear about that we're starting to we're starting to kind of break that threshold, a little bit which is great too.
Great again sure and back on the EBITDA question on the outlook, it's about 50 basis points to.
To the top end of the guidance.
Below where we were this quarter and Andrew I wouldn't really read a whole lot into that theres, nothing structurally I think that really changes quarter to quarter.
The business is solid and there werent really any one timers that moved that one way or the other so I think we still expect to continue that but it's also very sensitive I mean, if you moved $5 million on the EBITDA line, you're back up to the same percentage so.
There is some sensitivity.
There so.
The thing that we're necessarily signaling one way or the other on that.
HPA as far as that's concerned.
<unk> said now for the past three plus quarters that yes.
We're extremely strong times, and we would expect a pattern to kind of normalize through that time, we've had good success through the fourth quarter and the first part of this year.
And are pleased with our track record and the market conditions underlying that so I do expect that.
To rein in a little bit in the second half of the year.
We can't really put a number specifically to it but I think directionally your expectations that we do see.
Being less of a contributory factor in the second half.
Thanks, so much and I apologize for the delay.
No problem.
Thank you.
Our next question comes from the line of Ryan Tomasello with K B W. Please go ahead.
Good evening, everyone. Thanks for taking the question.
I think in this.
<unk>.
Space.
Housing market innovators like offer pad and peers. It seems like investors are really at this point I'm trying to understand the durability.
Nathan.
Models through.
Very volatile period of potentially decelerating or declining housing so.
Realize.
You touched on this in your prepared remarks, but I think it would be helpful to give you the opportunity to put a finer point around the checks and balances you have in place to identify and respond to <unk> market conditions, and maybe even past examples that you could point to in your operating history, if any that might help explain the business' ability to navigate.
Favorable market conditions.
And I would tell you. It's a great great question. Thanks for the question I would tell you that offer Pat is built for this I mean this is what we have with our real estate DNA.
The market conditions are always doing something obviously with what we're seeing out there right now a lot of it is highlighted in under the spotlight right now but.
Down to in a normal market down to a subdivision level Street by street level of how we are assessing our risk of every product in every home that we buy and how we are assessing that risk so everything that we do.
It's about the risk assessment of buying and renovating and selling a home at a 100 days until we assess that risk and as we build we build into that risk obviously to protect ourselves.
The best thing about our model will be one that home for very short period of time, and so but we have to be right during that period of time and so it comes down you know when we say a lot about logistics and execution, that's really important but as we underwrite homes. One of the biggest monitors that we look for is active supply. It's just 101 supply and demand and there's still differ.
And housing is that you'll assess a whole much different if there's 12 with the same model in the same subdivision then you would that thats, the only home, but they're in a one mile radius and so.
That's where so we're watching it's a really unique time in housing.
Most of our markets you have just a few weeks supply of homes.
We are watching that closely we meet on that weekly with checks and balances and recipe down to hey, there is a two storey two stories in Charlotte over $500000 price points.
Is this something in the market that we're seeing I mean, we will get down and through data and analytics through technology through our through our ground game, which is obviously really helpful with market dynamics with their ears to the ground of what the market conditions are all of those that has SaaS working with our acquisition teams our renovation teams our disposition teams.
And that's where the logistics that come into it but the one point that I will say is.
As we look at declining markets remember in real estate, there's opportunity on both ends of markets right now.
You look at our model.
You could argue this is the worst time to be ni buyer because some of it in the open market can sell their home easier than they have been able to do the last 20 years.
So acquiring the amount of homes have been really pleased with the volume of homes being able to buy and then once we own it we can sell it.
Other and which we've discussed but on a downturn in the market where there is more supply.
And that's something that.
We can really flex on because.
As homeowners have more trouble selling their home and it goes back to a normalized let's say three to four to five months selling period, using using youll coming to offer pad, where they can close and their schedules can be that much more valuable so theres opportunity there and we can assess and we can build the risk in into that as well and Thats why I was commenting before on renovation and some of those different things.
So our property sales first and so these are all these are all things that we've been through in that that we're prepared to do and listen right now what the market dynamics, we're watching that closely and no one has a crystal ball but.
And each market will be we'll be doing something a little bit differently over time.
So what we're watching we're watching that closely.
I appreciate all that color, Brian and I guess follow up on the same topic.
General Investor concerns that we're hearing.
Guarding your contribution margin targets.
3% to 6%.
<unk>.
Absent the potential impact on mortgage rates in terms of the fundamentals of the housing market. It seems like there are concerns around how.
Offer pads financing structure is built the stomach.
The rate outlook that we're staring at over the next few months with.
Aggressive rate hikes. So maybe you can discuss what levers you pull to date around mitigating that impact when you could still do and really what kind of the Max level. As you can stomach before you might need to evaluate changes to your funding sources and as a quick follow on.
That if I could squeeze one in would just be Mike.
How do you feel about.
The current cash position and overall liquidity position.
Sure. Thanks Ryan.
So on the contribution margin, we have ranged anywhere as I said from 5% to 10% over the last four quarters, we were at six 4% contribution margin after interest here.
Here.
Interest is as a component.
That but it's not the primary components, so as Brian talked about some of the different levers that we can use in the underwriting one of the factors that goes into that is our cost of capital and so we're cognizant of that it is it's part of the equation that we use to be able to give a good offer a strong off.
<unk> and.
The process and to date has not impeded us at all so we're not seeing that really is the gating item, we've got in our debt capital structure about 20%.
Is fixed and so it's something that we keep an eye on obviously with the news today.
The expectation of rate increases through the year, we're incorporating that into every home.
<unk>.
On all fronts. So.
I don't see that as an issue from a.
From a capacity standpoint, we've had great success in utilizing some very effective credit facilities. We've got great lenders that have been very supportive to the company and we've only continued to expand those and add that to the portfolio. So I like where we're at from a debt capital structure standpoint, and then lastly.
On the cash position, we ended the quarter in the first quarter at nearly $200 million of cash.
Been cash flow positive.
I'm comfortable with where we're at and our ability to execute.
Our business plan as always we'll be opportunistic with Washington capital markets. If there is opportunities to access markets in a reasonable value accretive manner, and we will certainly do that because this is a capital intensive business and we recognize that and we've got very good growth aspirations. So all of those pieces.
Together, and we're constantly monitoring that situation, but I'm quite comfortable where we're at today.
Okay.
Great. Thanks.
Yes, let me just start let me just throw one other on there as well just as another point to that so that's the one thing that it's really nice having two major main products that we have we have our express which is our cash offer and then we have our flex what you never want to do is buy homes when youre uncertain, what the market conditions are and obviously, we pride ourselves in with our real estate and knowing what the.
What those conditions are met.
So having another product so when there is uncertainty we have to build more risk into the cash offer side of it. We can help that we can help that customer I put them into a flat flex product.
Yes.
Very high margin low risk business for us as well and so having those different solutions on there and other products that they can use it really helps us navigate any uncertainty in the markets and then.
Of course, then then once we get we get comfort with what the market conditions are.
Then theres opportunity in those market conditions that I mentioned before so just wanted to point out that you don't have enough two products is in those two leverage is really helpful.
Thank you.
Yes.
And the last question comes from the line of.
Shannon with Cantor. Please go ahead.
Hey, guys. Thanks for taking my question.
I'm looking at the guidance for the home price in the quarter and Im seeing the midpoint 375000.
On the website and look at the inventory the average home it was the third.
About 409000.
Is there anything to read into that or.
About your expectations for the rest of the quarter or could this just be a function of the mix of lower priced homes on quicker.
Higher priced homes and any color would be appreciated.
Yes, I don't think Theres really anything to read into that we have seen a lot of price appreciation quarter to quarter here.
There is an expectation that that slows down a little bit there is some mix that goes into that as well.
A fair amount of the more recent new markets that we've opened have been Midwest markets those have been lower price point.
Communities that we're operating into so you do get a little bit of mix involved with that and a lot of those since we're new into the markets. We've just gone through an acquisition cycle and more of those are coming on.
On the market for us too. So I think it's really just a matter of we don't expect the.
Asps to continue to rise at the same rate.
That it has but I think we're in a good position with $375000 ASP.
Okay, Great and then maybe a follow up on kind of the new markets.
Presentation.
I believe it was from.
<unk> 21.
You showed us the kind of spread of the contribution margin after interest.
Older cohorts are older markets versus newer markets.
In a competitive environment like today.
Are those newer market openings kind of ramp up profitability quicker than they might have in 2020.
They do.
That's actually more of a function of the refinement of the model and how we are going at this I mean, one of the benefits that we've seen organizationally as we've grown as our ability to.
Retain really good regional general managers and general managers, who have got a good pipeline and building our structure and so we've been able to take.
Our model is we have gone into a new market.
Learn from the things that have not gone right capitalize on the things that we know work in each market and really get better. Each time, we are going in there. So I would tell you we are seeing.
<unk> profitability quicker and newer markets than we did years ago, and it's been quite successful, yes, and I'd just highlight given and I agree with that again. This all comes down to and I know Theres a lot of noise out there, but this all comes down to I don't think we have said anything different from for the last six years. This comes down to execution. This comes.
Down by paying the right price on the front end for the home to renovating it and the right timeframe and put it on the market and selling it in the 100 days in and if you can get that execution logistics.
Down.
It's a very very good model and customers and consumers love it.
And so that's where it comes out to is execution and our execution is getting better.
And better in the markets that we're in overall and we're getting just more consistent.
Across the board.
Okay, great. Thanks, guys congrats on a great quarter.
Yes, thank you very much.
Thank you.
A question and answer session has concluded I will now turn the call over to Brian Darren Chairman and CEO for closing remarks.
Thanks to everyone I am very proud that our revenue this quarter was over $1 billion higher than quarter, one last year, the phenomenal growth and execution resulted in another profitable quarter with a record $41 million of net income.
I wanted to give a massive shout out to our amazing employees. They live by our main core value results rule I would also like to thank each one of our investors for believing in our vision to make real estate better. Thanks.
Thanks, a lot everyone enjoy your day, thank you for joining us.
That concludes the answer Pat first quarter 'twenty earnings call.
Enjoy the rest of your day you may now disconnect your lines.