Q2 2023 Opendoor Technologies Inc Earnings Call
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Good day and thank you for standing by welcome to the open door second quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.
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I would now like to turn the conference over to your speaker today.
Whitney Coca Investor Relations with Blue shirt group. Please go ahead.
Thank you and good afternoon details of our results and additional management commentary are available in our earnings release and shareholder letter, which can be found on the Investor Relations section of our website at investors that open door dotcom.
Please note that this call will simultaneously be webcast on the Investor Relations section of the Companys corporate website.
Before we start I would like to remind you that the following discussion contains forward looking statements within the meaning of the federal Securities law.
All statements other than statements of historical fact are statements that could be deemed forward looking including but not limited to statements regarding open direct financial condition anticipated financial performance business strategy and plans market opportunity and expansion and management objectives for future.
Yep.
These statements are neither promises nor guarantees and undue reliance should not be placed on them such forward looking statements involve risks and uncertainties that may cause actual results to differ materially from those discussed here.
Additional information that could cause actual results to differ from forward looking statements can be found in the risk factors section of open doors. Most recent annual report on Form 10-K for the year ended December 31 2022.
Updated by our periodic reports filed after that 10-K.
Any forward looking statements made on this conference call, including responses to your questions are based on management's reasonable current expectations and assumptions as of today and the open door assumes no obligation to update or revise them, whether as a result of new information future events or otherwise except as required by law.
The following discussion contains references to certain non-GAAP financial measures.
The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurement to evaluate the company's financial performance.
For a reconciliation of each of these non-GAAP financial measure to the most directly comparable GAAP metric. Please see our web site at Investor Day open door Dot com.
I will now turn the call over to Kerry Wheeler, Chief Executive Officer of open door.
Good afternoon also on the call with me today is Christi Schwartz, our interim Chief Financial Officer, and Dr. Frazier President of capital and open exchange.
<unk> vision is to build the most trusted e-commerce platform for residential real estate, where homebuyers and sellers can transact with simplicity and certainty.
Regardless of the macro environment life and home transactions continue and we're committed to being the first and most trusted place that people look to and considering a move.
And navigating the current environment, we're leveraging the lessons, we've learned and focusing on what we can control we've made significant progress in strengthening our offering driving cost efficiencies and managing risk. We are building a healthy new book of inventory demonstrates our ability to generate positive unit economics, what continues to be an uncertain time.
In the U S housing market.
We remain focused on making investments in durable growth levers and our pricing and operations platforms that will benefit us for years to come we're doing what we've always done we're leading with the consumer experience as we innovate and adapt to open door to be over their product and the best option for millions of people, who want to buy or sell a home.
We have intentionally moderated our acquisition pace this year to manage risk we have maintained above average spreads, resulting in lower conversion and higher customer acquisition costs in our direct to consumer paid marketing channels.
We've leaned into our partnerships with homebuilders agents and online real estate platforms.
These channels have fixed customer acquisition cost and thus are highly efficient and represent durable long term partnerships for us.
In Q2 acquisition contracts and partnerships grew 78% sequentially and represented 40% of total acquisition contracts.
We expect these partnerships to continue to grow. However, we also plan to increase our paid marketing to drive additional direct to consumer volume as we see more market stabilization and reduce spreads.
Partnerships and paid marketing drive our top of funnel growth, bringing true sellers and registered sellers defined as those who have received an offer but have not yet sold their home to open door.
Not everyone is a true seller at the time they request an offer we treat everyone as a possible future seller.
Engaging our base of registered sellers until we decide to sell their home requires de minimis incremental costs three quarters of acquisition contracts in Q2 were from sellers, who didn't accept their initial offer but accepted a subsequent one.
We believe that growing our registered customer base, which gives us access to true sellers whenever they do choose to sell will continue to be an important source of growth.
Okay.
Direct to consumer paid marketing remains an important channel for us delivering 60% of our contracts in Q2.
Or given the higher spread environment, we have prioritized limited, but highly effective marketing investments such as creative AD campaigns brand media and consumer and agent Influencer programs.
Despite reducing marketing spend nearly 80% year over year in Q2, our aided brand awareness remained flat in the quarter.
As we think about durably, reducing spreads and re accelerating growth much is within our control, but we need to be nimble and reactive to what we're seeing in the broader housing market. The housing macro has improved since the beginning of the year, but sitting here today, we're looking for signals of further market stabilization, including a more certain outlook.
For HPA.
We've taken prescriptive action on the things, we can control as we navigate ongoing uncertainty.
We're focused on investments to improve our pricing accuracy inventory management and overall cost structure. These actions are intended to durably reduce spreads charge to customers, while still achieving our target contribution margin.
An example is our continued investment into home condition, which relies on computer vision.
AI based condition modeling and interior assessments.
Of which give us more structured data to improve our overall data insights, which in turn informs home level pricing and pricing model accuracy.
We remain steadfast in our mission to power lifes progress one move at a time the actions we're taking today reflect our commitment to returning the business to adjusted net income positive.
And will allow us to emerge from this cycle more resilient and positioned for market leadership.
So much to do and we're heads down as we continue to build a generational company that will transform home transactions for many years to come.
With that I'm going to turn the call over to Christine to review guidance and financial results.
Thank you Carey, our second quarter results reflect progress on selling through our longest held homes, while continuing to build into a new book of inventory, we remain focused on delivering healthy risk adjusted contribution margins and preserving capital through disciplined cost management.
We delivered $2 billion of revenue in the second quarter that exceeded the high end of our revenue guidance by 7% driven by strong market clearance rates and the sell through of our longer dated homes, notably 99% of the Q2 cohort which is homes. We made offers on between March and June of last year was sold or under retail contract.
Quarter end.
On the acquisition front, we purchased 2000 and 680 homes in the quarter down 81% versus Q2 of 2022.
The decline versus the prior year comes primarily as a result of elevated spreads embedded in our offers since June of last year, coupled with sellers remaining on the sidelines.
New listings in our buy box declined 21% year over year in the first quarter of 2023 and continued to decline to 31% year over year in the second quarter.
We reduced the average spread offered between the first and second quarter of 2023 to reflect pricing model improvements related to home conditions reduced holding and selling costs due to shorter expected holding times and a modest improvement in our view on home prices.
Even though spreads are still at elevated levels. The reduction translated to a 53% increase in acquisition volumes from Q1 to Q2 2023.
Our Q2 contribution margin was negative four 6% versus positive 10, 1% in Q2 of 2022 and negative seven 7% in Q1 of 2023.
These results were driven by the negative contribution margin performance of the old book of inventory, which represented 57% of our retail mix.
Our new book of homes continues to show strong margin performance with this cohort generating gross margins of 14, 4% and contribution margins of 10, 6% in the second quarter we.
We expect this group of homes to perform in line with our revised contribution margin target of 5% to 7% once fully sold through.
We expect contribution margin to return to positive in the third quarter and the new book of inventory composes a majority of retail.
Adjusted EBITDA loss was $168 million in the second quarter inclusive of our previously recorded inventory valuation adjustments of negative $156 million.
Beat the high end of our guidance range of an adjusted EBITDA loss of $180 million and is an improvement from an adjusted EBITDA loss of $341 million in Q1 of 2023.
Adjusted operating expenses, which we define as the delta between contribution margin and adjusted EBITDA was $78 million in Q2 down from $100 million in Q1 of 2023 and $204 million in Q2 of 2022, driven by reduced marketing spend operational capacity and fixed expenses beginning in the.
Second half of last year.
We expect adjusted operating expenses to be approximately $100 million in the third quarter of 2023, the sequential increase from the second to third quarter reflects our expectation that began rebuilding inventory at a modest pace in the third quarter.
Turning to our balance sheet, we ended the second quarter with $1 1 billion in total shareholders' equity, which is an increase of $50 million from the first quarter of 2023. This was partially driven by our convertible note repurchase in May which was done at a substantial discount to face value combined with the repurchase we completed in March this reduced our.
Convertible note obligation by 50% from $978 million to $510 million.
We ended the second quarter with $1 6 billion and total capital, which includes $1 2 billion in unrestricted cash cash equivalents in marketable securities and $269 million of equity invested in homes and related assets net inventory evaluation adjustments.
At quarter end, we had $10 1 billion nonrecourse asset backed borrowing capacity.
Price of $5 4 billion of senior revolving credit facilities, and $4 7 billion of senior and mezzanine term debt facilities of which total committed borrowing capacity was $4 3 billion.
During the quarter, we wound down the last of our two dedicated Q2 offer cohort financing facilities given the substantial progress we've made on selling through these homes.
Turning to guidance, we expect third quarter revenue to be between $950 million and 1 billion and adjusted EBITDA loss to be between 60 and $70 million. We expect the second quarter to Mark the last quarter of negative contribution margin with positive contribution margin levels beginning in Q3, when our fresh book of inventory.
Rises the majority of our resales.
We expect to perform within our 5% to 7% contribution margin target beginning in Q4 of 2023.
We are managing our business to return to positive adjusted net income, which is our best proxy for operating cash flow and we believe we have the cost structure and balance sheet in place to do so.
We expect to reach breakeven at steady state annual revenue of $10 billion or approximately 2200 acquisitions and re sales per month at our target contribution margin range of 5% to 7%.
While the overall state of the housing market has improved relative to our expectations at the beginning of the year and we anticipate opportunistically, making modest spread reductions in the back half of 2023, we are continuing to operate with elevated spreads to account for ongoing home price uncertainty.
We expect to return to revenue growth in 2024.
While getting to anti breakeven as an important destination. It is not the end of the journey.
Given the inherent lag in our business between home acquisition and resale the period in which we reach the Eni breakeven inflection point will be impacted by the pace at which we lean into growth.
If our acquisition pace exceeds our resale case, we would recognize certain acquisition and inventory holding costs, such as marketing financing and variable SG&A costs.
We're realizing the corresponding revenue.
The second half of 2023, we'll showcase our continued investments in our pricing and operations platforms durable growth levers in improving our overall cost structure via efficiency and automation I'd like to thank our opened our team members for their pursuit of these initiatives and their dedication to serving our customers.
With our reduced cost structure healthy book of inventory and strong capital position. We are very encouraged by the go forward outlook.
I'd now like to turn the call over to the operator to open up the line for Q&A.
Thank you.
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We ask that you please limit yourself to one question and one follow up please.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Dae Lee with Jpmorgan. Your line is now open.
Great. Thanks for taking the questions I have.
So first one on the partnership side.
If I just look pretty.
A core component to your second half expectations.
California, four I mean, it looks like it grew from about a third last quarter to 40%.
Could you help us.
What drove that drove that growth.
And as you look ahead, how should we think about the mix of the partnership.
Overall volume and then secondly.
On the adjusted Opex something on a quarter over quarter I think you talked about.
Inventory.
Drivers looking.
But of course on those sound like an incremental cost to actually correlate more above ground or do you need more headcount to drive.
Thank you.
Hey, James carry I'm happy to take the partnership question and I'll hand over to your question. If you could talk about adjusted Opex.
I missed a little bit on that first question, but I think I got suggested that's what I Miss something.
Please jump in on the on the partnership side.
Just as a reminder, partnerships include homebuilders includes agents and includes the online real estate platforms. That's for US is below reorder and redfin and wed like to channels variety of reasons one of them being that they are still from a customer acquisition cost standpoint, so they are agnostic to spread.
And durable kind of in all environments.
It was a it was a really nice growth driver of contracts worth in the quarter was 40% of our overall contract mix, we grew almost 80% in total quarter on quarter.
Break out the various parts of what makes up partnerships, but I would say if you think about the evolution of those over time, we've been in business with them for a long time and have a great channel for us that would be trading customer with a natural use of the open door product agents also.
Group that we've been working with for a long time, but as we we moved into an elevated spread environment. We really recognize the power of that partnership with agents and have leaned into that channel and driven incremental growth from them over the last year, plus and we continue to expect to do so and then the last part of that is online real estate, which for us is <unk>.
<unk> of the three.
And we are.
Ramping really the Zillow relationship for example, $5 25 markets in the last quarter and that's just starting to grow really nicely. So.
Probably in that order in terms of growth without giving any specifics on what your actual mix.
Christine do you want to talk about the Opex piece, yes.
Yes, absolutely so I'll start by saying that we're still very focused on optimizing cost and we are making progress throughout the P&L in that effort as a reminder, adjusted Opex as the Delta between contribution profit and adjusted EBITDA and so the debt and adjusted Opex that you saw in the second quarter is a reflection of the relationship between.
Tributes and profit and adjusted Opex when inventory is growing adjusted Opex will bear additional costs related to that growth. Conversely, when inventory is contracting as it did in Q Q adjusted Opex will benefit from the movement of some of these costs, specifically holding costs related to the resale cohort to contribution margin.
As we began rebuilding inventory at a modest pace in the third quarter, we expect $100 million per quarter to be an appropriate estimate.
Alright, thank you.
Thank you. Our next question comes from the line of Jason <unk> with Oppenheimer. Your line is now open.
Hi, Thanks. This is Chad on for Jason So I mean, now that it sounds like you're starting to at least weighing back a little bit into growth with kind.
Kind of housing market prices stabilizing on a sequential basis.
How should we think kind of taking a step back about the normalized growth of the business with the Banco work on in the housing market.
And then I've got one.
Thanks.
He is Kerry, let me talk a little bit about that.
Normalized growth rate.
You made some commentary just given what we'd rather than last couple of years, which has put a lot of growth and then obviously weathering the cycle I'd say right now just as a reminder, we expect to be seeing for the back half of this year is a pretty steady pace of around a thousand acquisitions per month or 3000 homes per quarter.
And as we lead into the back half of the year like into Q4, when seasonality become tailwind right now its a headwind we will start to reduce spreads that'll allow us to drive more volume. It allows us to increase our paid marketing spend and a more efficient way and obviously, we'll continue to lean into the partnership channels, you're talking about those and continue to grow.
And that will drive more volume into next year. So that's really the near term growth outlook.
The next market for us is to double volume and that's what we're marching juice in the middle of next year will be back to kind of that steady state breakeven adjusted net income target, we have 1200 contracts per acquisition.
Okay. Thanks, that's helpful and then any update on open door exclusives. It sounds like you're just kind of still in testing phase there.
Yeah, we knew we're continuing to focus on perfecting the consumer experience as we've talked about the last couple of quarters, we're sitting in Plano and surrounding markets.
We're focused on making sure we could really prove product market share.
So no significant update from where we were what I would say that you know consumer propensity to put their offer to the marketplace remains really high.
Around two thirds of people say, yes, so give me a cash offer from open door and give us some amount of time to come back to your particular competitor that with an offer from although thats, an institution or another buyer wherever the market.
So we are encouraged by somebody really signs, we see but I would just caution it's still early.
And here, we mean small, but we continue to be optimistic about the long term prospects for exclusive intra.
The.
Continued evolution of our business to be more capital light and serve more home sellers overtime.
Thank you.
Our next question comes from the line of Yigal <unk> with Citigroup. Your line is now open.
Hey, good afternoon, guys I want to follow up on <unk> question actually.
On the exclusive piece.
Yes.
So it doesn't sound like that strategy is changing around being a little bit more capital.
It doesn't feel like it's being pushed out or or rolled out a little bit more slowly.
Is that a fair characterization I think we were kind of targeting.
And those markets being at 30%.
End of the year, if I remember correctly I think were were still ways off from that so maybe just help us kind of like bridge from where we are today to where we are.
Where do you want the goals.
Sure I'm happy to address that so what we said is in the markets in which we have exclusives.
We want to be at 30% of our volumes in those markets running through the marketplace, we actually hit that last quarter.
Although it is the market waxes and wanes.
Our volumes too so we.
I think this is more for US right now about again protecting the consumer experience of being slit each one would be.
What percentage of volumes.
But we're still focused on meeting those metrics by the end of the year. So we'll.
We'll see how it plays out.
Okay.
That's helpful and then.
On the inventory acquisition strategy.
Reducing the spreads later in the year.
Maybe kind of similarly on the bridge.
So 2024, and as you think about scaling back to where you.
You guys have been historically.
Before we kind of slowed things down here.
And what's proving to be still low inventory environment.
Lot of reluctance see from.
Homeowners to sell still.
Which can tend to drag on from here.
Hum.
Can you just expand on the strategy.
To purchase more.
Do you think about what level of spread you might need to entice people more to get out of their homes I know, there's always going to be a certain amount of people.
Need to move in your product deliveries a lot of value for that but.
But if we're getting back to real revenue growth next year and starting to scale the business back up.
I feel like inventory levels and People's willingness to move it needs to go up or.
You have to kind of push push the needle for people who are a little bit if that makes sense. Thanks.
Yes, absolutely.
On the sort of macro layer of that question and then we can move on from there.
I think when we think about what stability in the housing market looks like.
Need stable home pricing, so we can reduce our spreads and so if you look at where we sit today. It's just a much wider distribution of outcomes, which we have reflected in higher spreads and so its that pricing stability, which really will allow us to reduce our spreads.
We do not need market volumes to fully recover if you kind of zoom out for a minute. We're talking about a two trillion dollar market with RF Tam being $650 billion.
So we need a slightly bigger slice of a very big market. Despite the lower volumes that were in today.
So what we're focused on is what we can control.
Can't reduce spread through improving our cost structure, which improves conversion and unlocks marketing spend.
<unk> focused on deepening our partnership channel for long term growth drivers. So really all of those actions, we're taking drive incremental acquisition volumes and will allow us to reaccelerate those volumes as we've discussed in 2024.
Got it thanks, so much.
Alright.
Thank you. Our next question comes from the line of Nick Jones with JMP Securities. Your line is now open.
Great. Thanks for taking the questions I guess first with kind of the.
The success Youre, having acquiring through partnership channels.
Is it fair to assume there is maybe some wiggle room to continue to take sales marketing and operations costs down as you maybe pull back your own kind of.
Direct to consumer spend and then on top of that through those channels.
Is it opened are able to build kind of strong brand awareness or does the kind of partner brands supersede.
Your ability to kind of generate brand through those channels.
Do you think it's karri.
You would imagine that a fixed cash channels continue to grow potentially in outstrip some of the direct to consumer channels that we may be driving with paid marketing, we should be able to leverage our overall marketing costs over time.
We wanted to make.
Cost effective paid marketing investments so long as our springs allows us to do so that's another driver of volumes, but we're not going to invest those dollars if it's not.
High return, so we'll see how it evolves over time that.
Long term objectives for sure should continue to leverage our marketing spend and we've been able to do that and keep growing scale before in a weird to have been able to market nationally and one of the things we called out in our most recent shareholder letter is that as we've reduced our paid spend we have leaned into we think has been some pretty good creative around the brand side and even though we.
Marketing expenses down 80%.
Brand awareness rapid and sustained static which is great.
Thank you.
Customers are continuing to know about turnkey mobile at the door.
So.
More to come.
Great and then any comments on that kind of 2024 objectives is there any change in kind of cadence or timing.
Some of the positive adjusted EBITDA net income and $10 billion annualized run rate.
Are those kind of.
Coal is still intact.
Yes. This is Christy here happy to take that question, we absolutely remain committed to returning to Eni breakeven point next year and assuming some.
Level of market stabilization that would come at a steady state of $10 billion annualized revenue. It requires us to take volumes from where they are today to 'twenty 200, which carry talk to you a little bit earlier, and we absolutely believe that we have the balance sheet, the fixed rate capital structure and the cost structure to return there.
Great. Thanks for taking my questions.
Thank you.
Next question comes from the line of Ryan Tomasello with <unk>. Your line is now open.
Hi, good morning, Thanks for taking the questions just unpacking, the opex commentary, but further here.
Is the $100 million quarterly run rate enough to support the $10 billion breakeven target just trying to understand how we should think about.
Any investment needs.
Balancing the efficiencies youre getting on the partnership side.
Making sure models are irrational here. Thanks.
Hi, Ryan Thanks for the question, Christy and yes, the $10 billion breakeven target. There's three basic components. There is the contribution margin targets, the adjusted Opex and interest expense.
For breakeven, we need to be at the higher end of our increased contribution margin target range of 5% to 7%.
We expect to be in 4% to 5% per adjusted Opex and 2% to 3% for interest expense.
Okay. That's really helpful. And then I guess just more of a.
A nuanced question in terms of acquisition funnels curious if youre seeing any uptick in the amount of homes you are buying from the institutional side <unk> rates.
Or even the short term rental players given that those platforms seem to be calling their portfolios. There is that is that an attractive way to kind of supplement the acquisition pipeline here.
So obviously, we've been engaged with those partners for our entire existence. So we're very close to all of them.
I certainly can't comment on specific individual partners, but I do think we are in the same way that were useful for consumers to provide that simplicity and certainty. We can do the same thing for institutions.
So we are actively talking to them both about their disposition strategies and our acquisition strategies, because obviously that we can help solve for both of those.
Okay. Thanks for taking the questions.
And how do you think just to add on one more point there I think the if.
If you look at aggregate industry volumes for single family rental those are obviously down quite a bit.
So that they are.
Sorry, a bit more patient with deployment of capital certainly versus where they were last year.
We're positioned well to capitalize on any increases as well as any sort of turnover and they do natural turnover they do in their portfolio.
Yeah.
Thank you as a reminder to ask a question at this time. Please press star one one Orient Huddlestone telephone.
Our next question comes from the line of Curtis Nagle with Bank of America. Your line is now open.
Good afternoon, thanks for taking the question.
It was just changing the topic just a little bit.
Curious if you guys.
To go back into the market to the converse you've done a couple of deals now where you bought it.
Pretty nice discounts.
Thanks.
Bonds are at lows, but still at a pretty nice.
This accounting.
So yes.
Just curious what youre thinking from a capital allocation.
The endpoints.
Or.
It can be reserving capital for an acceleration.
Inventory.
Next year.
Yes.
So obviously, we did do two of those over the course of the year end basically taken that principally on sound by almost half.
Christy alluded to earlier.
Happy with the execution of happy with the pricing happy with the equity change there.
Look at our shareholders' equity that actually in the last quarter by $50 million.
I think going forward, we don't comment on future transactions of that sort.
I think the balancing act for US always is having the right amount of liquidity and capital in the system for us too.
Whether all scenarios.
So very comfortable with the capital position we're in today.
But I won't comment on future transactions.
Okay.
<unk>.
Thank you.
Our next question comes from the line of Brian Kenney with Zelman and Associates. Your line is now open.
Hi, there thanks for taking the question.
It might be for Don on contribution margins.
So on the new book homes that were sold this quarter 10, 5% cm.
Up from $8 five last quarter. So I guess first question is just on that on that step up sequentially should we think of that as mostly a function of.
The increase in HPA generally that we've seen.
This year and then hoping you can maybe connect the.
The guidance for getting to the five to seven five.
Slide four Q, obviously on an overall basis that'll be good to get back to you, but I guess, maybe just help sort of bridge, where we're at on that new book margin today, and what's the path from there.
Two of the five to seven.
Assuming we also on quote unquote, new book homes, mostly.
In the fourth quarter, whether it's pricing seasonality spread dynamics, just kind of curious if you can help.
Those thoughts. Thank you yeah, I'll start and then Chris you can jump in on the on the fourth quarter. If you. So if you sort of look back at the first half of this year and look at market volumes. They were actually half where they were in 2014 2019. So it was a very tight supply.
And with paired with strong consumer demand to buy homes and so that resulted in home prices outperforming our expectations.
That plus the cost reductions we've executed allow us allowed us to reduce spreads which to your question resulted in both margin outperformance and as we highlighted plus 53% growth quarter over quarter in the second quarter.
Look forward to the second half of this year, we do still expect to see obviously negative month over month home price changes with our baked into our current spreads.
This goes back to the point I made earlier about there just been a much wider distribution of outcomes around home prices right now given the current market conditions.
As we talked about earlier, we do expect to reduce spreads in the fourth quarter.
Given both incremental cost savings and home price seasonality, which leads to increased conversion allows us to re rent paid marketing it will reaccelerate volumes in the first quarter.
So I think that's the sort of macro overlay hopefully that connects those dots and then Christi, if you want to tackle the margin PS margin progression.
Yeah, Hi, Ryan its Christy here so.
So the margin progression from Q3 to Q4 keep in mind that in Q3 about 1% of that 99% of the Q2 offer cohort is in contract. So those homes will close in Q3, plus we still have one more percent to sell so there's a bit of drag in Q3 from the old book in Q4 that is mostly.
And that is why we expect to be in our targeted range of 5% to 7% by Q4.
Got it that makes sense, thank you and.
Carrie you made a comment and generally over time, you've talked about like theres periods in the year that are kind of headwinds first tailwind.
And I think you mentioned that as you get to <unk> things shift from headwind tailwind is that commentary just sort of alluding to the seasonality of pricing like if you are buying homes in the fourth quarter, presumably they're homeless you might be selling and kind of <unk> next year, when generally pricing is a bit stronger.
Curious if you can.
Yes, sorry go ahead Karen.
Exactly that.
The analogy nutshell prices tend to be softer in the second half stronger than the first half.
Volumes tend to follow that same pattern and so we would look to reduce our spreads in Q4 in anticipation of again seasonal tailwind on pricing moving into the first quarter next year market volumes picking up also in the first quarter next year and selling into that strong first half of 2024.
And Thats, a rhythm or secret okay.
Seasonality every single year so.
It's quite consistent.
Yeah, absolutely okay awesome. Thank you so much.
Thank you.
This concludes the question and answer session I will now hand, the call back over to Cary Wheeler for closing remarks.
Thanks, very much I just wanted to say thanks for joining us today.
It comes across we really focused this year on what we can control and we made substantial progress in stabilizing the business and really using this time to make improvements that we think will yield benefits for years to come.
Thank you for your support to our shareholders and thanks to the open to our team for their continued hard work and dedication and we will talk to you next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.
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