Q4 2024 Opendoor Technologies Inc Earnings Call

February 27, 2025

Thank you for watching!

Speaker Change: Good day and thank you for standing by. Welcome to the Open Door Technologies fourth quarter 2024 earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. To ask a question during the session you will need to press star 11 on your telephone.

Speaker Change: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kimberly Niehaus, Investor Relations. Please go ahead.

Speaker Change: 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 investor.opendoor.com. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website.

Speaker Change: Before we start, I would like to remind you the following discussion contains forward-looking statements within the meaning of the federal securities laws.

Speaker Change: All statements, other than statements of historical fact, are statements that could be deemed forward-looking, including, but not limited to, statements regarding Open Door's financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion, and management objectives for future operations.

Speaker Change: These statements are neither promises nor guarantees, and undue reliance should not be placed on them.

Speaker Change: Such forward-looking statements involve risks and uncertainties that can cause actual results to differ materially from those discussed here.

Speaker Change: Additional information that could cause actual results to differ from forward-looking statements can be found in the risk factors section of our Open Doors most recent annual report on Form 10-K for the year ended December 31, 2024, as updated by our periodic reports filed after that 10-K.

Speaker Change: Any forelooking 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 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.

Speaker Change: 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 measurements to evaluate the company's financial performance.

Speaker Change: For reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. I will now turn the call over to Carrie Wheeler, Chief Executive Officer of Opendoor.

Speaker Change: Good afternoon, everyone. Thanks for joining us today. With me today is Celine Freja, our Chief Financial Officer.

Carrie Wheeler: At Open Door, we're on a mission to reinvent the U.S. residential real estate industry.

Carrie Wheeler: And in 2024, we took decisive steps to simplify our business, sharpen our focus, and drive towards sustainable, profitable growth.

Carrie Wheeler: Early in the year, we saw strong home acquisition momentum, but as macro signals pointed to potential instability in late Q2, we acted swiftly, adjusting our pricing to manage risk and maintain healthy unit economics.

Carrie Wheeler: At the same time, we took proactive steps to strengthen our operations. In Q3, we completed the separation of mainstay, and in Q4, we launched a cost efficiency program and a workforce reduction to align our structure with our profitability goals.

Despite persistent macro headwinds, we executed with discipline.

Carrie Wheeler: In 2024, we purchased 30% more homes than in 2023, we improved contribution margin to 4.7% up from negative 3.7% the year before, and we significantly reduced our adjusted net losses.

Carrie Wheeler: As we enter 2025, we're seeing a slower start to the spring sailing season with additional macro pressures compared to last year.

Carrie Wheeler: On the supply side, clearance rates, meaning how quickly homes go under contract, are pacing 25% lower than last year.

Carrie Wheeler: New listings are holding steady, but active listings are up nearly 20%, signaling a slowing market.

Carrie Wheeler: On the demand side, Viz's two new listings are down 20-25%, while D-Listings are up over 30%, hitting decade highs as more sellers exit the market.

Carrie Wheeler: And with little near-term rate release in sight, the lock-in effect of low mortgage rates for sellers and affordability challenges for buyers will persist.

Carrie Wheeler: Given these dynamics, we are refining our approach further, optimizing contribution profit dollars, exploring new revenue opportunities, and ensuring open doors position to drive long-term value.

Carrie Wheeler: Our commitment is clear. Profitable, sustainable growth. And there are four key areas where we're focused on improving our cash offer business.

Carrie Wheeler: First, we are setting spreads to optimize for contribution margins. Given the continued depressed housing backdrop, and a particularly slow start to the spring selling season, we began increasing spreads in January to manage risk.

Carrie Wheeler: As has always been the case, we will monitor key macroindicators and make prudent adjustments to spreads with a bias towards optimizing for contribution margins.

Carrie Wheeler: Second, we are enhancing the customer experience. A better experience drives higher conversion.

Carrie Wheeler: We've enhanced our pricing models, improving price segmentation and market level spread accuracy so that we can better differentiate spreads across price points and expand our conversion. This has allowed us to drive improvements in conversion at like-for-like spreads.

Carrie Wheeler: Additionally, we know that many sellers come to Opendoor, get an offer, and then wait before making a decision. In fact, over 70% of our 2024 acquisitions came from sellers who declined their first offer but later accepted a refresh one. This year we're strengthening our re-engagement strategy so when sellers are ready, Opendoor is top of mind.

Carrie Wheeler: Third, we are better aligning our marketing strategy to seasonal buying and selling patterns.

Carrie Wheeler: We'll focus our marketing efforts to more closely align with when our spreads tend to be lower and when Open Door's value proposition for customers is even greater. This will result in increased acquisitions in Q4 and Q1, and will position us to sell those homes in the spring and summer selling seasons when buying demand typically peaks.

Carrie Wheeler: In Q2 and Q3, we expect to scale back marketing span and in turn acquisitions since homes acquired in those quarters will be sold into a lower demand environment and recognize lower price appreciation over the holding period.

Carrie Wheeler: This strategy aligns our marketing spend to how our spreads change throughout the year and allows us to benefit from seasonal price swings and maximize the value of every transaction.

Carrie Wheeler: And fourth, we're continuing to operate with greater discipline. We enter 2025 as a leaner, more efficient organization, and we'll continue to drive efficiencies throughout the year.

Carrie Wheeler: Beyond improving and expanding our cash offer business, we're also focused on expanding our offerings to serve even more sellers and unlock new revenue opportunities.

We are growing the list with Opendoor and our Marketplace.

Carrie Wheeler: In 2024, we expanded lists with Opendoor to nearly all of our markets, and we launched Marketplace in Charlotte and Raleigh. These products give more sellers more choices. In 2025, we'll continue expanding them, ensuring sellers can choose the option that best fits their needs.

Carrie Wheeler: We're also helping more sellers who are outside of our buy box.

Carrie Wheeler: Many high-intense sellers visit our site every day, even if their homes don't fit within our buy box.

Carrie Wheeler: We see a significant opportunity to connect these sellers with agents, helping them successfully transact while creating new revenue streams for Open Door.

Carrie Wheeler: At Opendoor, we're driven by our mission, transforming the real estate experience by making it seamless, convenient, and certain for sellers and buyers.

Carrie Wheeler: Our customers continue to reinforce the value of our platform every day. And as we move forward, our focus remains the same, building a profitable, sustainable business that delivers innovative solutions for sellers, buyers, and agents alike.

Carrie Wheeler: And with that, I'll turn it over to Selene for the financial overview.

Selene: Thank you, Kerry. In the fourth quarter, we exceeded the high end of our outlook for acquisitions, revenue, contribution margin, and adjusted EBITDA.

Selene: We delivered $1.1 billion of revenue in the fourth quarter, up 25% versus the same quarter in 2023, representing 2,822 homes sold.

Selene: Revenue for the full year was $5.2 billion, compared to $6.9 billion in 2023, due primarily to a lower starting inventory balance entering 2024.

Selene: On the acquisition side, we purchased 2,951 homes in the fourth quarter, compared to 3,683 in the same quarter last year, as spread levels remain elevated.

Selene: However, we were able to accelerate our pace of acquisition as we moved through the quarter, as we saw improvements in conversion at given spread levels.

Selene: These conversion gains were enabled by enhancements to our product flow and improvements to our pricing models.

Selene: For the full year, we acquired 14,684 homes, up 31% versus 2023.

Selene: Contribution profit was $38 million in the fourth quarter versus $30 million in Q4 2023, representing a contribution margin of 3.5%.

Selene: For the full year, contribution profit improved by half a billion dollars.

Selene: to $242 million versus a loss of $258 million in 2023. And for the full year, contribution margin was 4.7% versus negative 3.7% in 2023 and just shy of our annual target margin range of 5-7%.

Selene: Adjusted EBITDA loss was $49 million in the fourth quarter, representing a $20 million dollar year-over-year improvement.

Selene: For the full year, our adjusted EBITDA loss was $142 million versus a loss of $627 million in 2023.

Selene: This improvement in adjusted EBITDA losses was primarily driven by improved contribution profit and better expense management.

Selene: Turning to our balance sheet, we ended the year with 6,417 homes, representing $2.2 billion in net inventory, up 22% from the prior year.

Selene: We also had $1.1 billion in total capital, which includes $679 million in unrestricted cash and marketable securities, and $306 million of equity invested in homes and related assets, net of inventory valuation adjustment.

Thank you very much. Thank you.

We also had $6.9 billion in non-recourse asset-backed borrowing capacity.

Selene: composed of 3 billion of senior revolving credit facilities and 3.9 billion of senior and mezzanine term debt facilities of which total committed borrowing capacity was 2.2 billion.

Selene: In early 2025, we strengthen our capital position by amending and extending the term of certain debt facilities.

Selene: We have successfully renewed three revolving credit facilities and one term debt facility at Consistent or improved credit spreads while both of our mezzanine facilities were extended through 2027

Selene: The successful extension of these credit facilities is a testament to the ongoing support and confidence of our capital partners and positions us well to continue executing on our business plans.

Selene: As we enter 2025, we are focused on ensuring attractive unit economics in our cash offer business.

Selene: operating with strong cost discipline and making progress on our path to profitability. The macro real estate environment has been marked by higher interest rates for buyers and entrenched homeowners with existing low-rate mortgages who remain on the sidelines.

Selene: While many of the changes and programs we are putting in place are helping to counter some of these pressures, we anticipate that these headwinds will continue to impact our performance in the near term.

Selene: Our outlook expectations for the first quarter of 2025 include the following. Revenue is expected to be between $1 billion and $1,075,000,000.

Selene: Contribution profit between $40 million and $50 million, which implies a contribution margin of 4 to 4.7%.

adjusted EBITDA loss between 40 and 50 million.

Selene: adjusted operating expenses of approximately $90 million and non-cash stock-based compensation expense between $13 and $15 million which represents a decline of over 50% year-over-year.

Selene: We expect home acquisitions of over $3,500 in the first quarter, up slightly year-over-year.

Selene: Normalizing for bulk purchases we made in the first quarter of last year that are not expected to repeat this year, acquisition growth would be up over 10% year-over-year.

Selene: As Kerry mentioned, we are evolving our home acquisition strategy to enable us to concentrate our selling activity in the spring and summer selling season when buyer demand and home price appreciation are higher. This will also result in fewer homes acquired in the middle of the year relative to Q1 and Q4.

Selene: Additionally, while we continue to believe that five to seven percent is an appropriate annual contribution margin for our business, our margin will fluctuate from quarter to quarter driven by seasonality and other factors.

Selene: Our strategy for this year is to continue to enhance our pricing effectiveness, improve our customer experience and offerings, and drive efficiencies that we expect will meaningfully improve our adjusted net losses on a year-over-year basis.

Selene: Longer term, we are focused on implementing the strategy that Kerry discussed, building on our platform to position Opendoor to achieve profitable growth amidst varying real estate backdrops.

Selene: With that, I will ask the operator to open the line for questions.

Thank you for watching!

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Daylee with JP Morgan. Your line is now open.

Thank you for watching!

Daylee: Great, thanks for taking my questions. I have two. First one for you, Salim. Could you elaborate a bit more on your cost savings and cost efficiency opportunities and

Speaker Change: And I guess with the housing market being depressed for more than two years now, could you talk about how you're thinking about balancing the need to achieve profitability at current housing levels versus maintaining operational scale?

Speaker Change: And then secondly, could you give us an update on what you're seeing from Marketplace and Charlotte and Rylai's that give you confidence to expand the offering more broadly? Thank you.

Speaker Change: Yeah, I'll take your question on operating costs. Look, we've taken significant action in the latter half of the year to reduce our overall fixed cost base, as we've talked about before.

We executed the

disposition of mainstay as well as

did a RIF and implemented other cost savings initiatives.

Speaker Change: And what we said at the time that we did that, that we expected that to deliver $85 million worth of cost savings. And as we look towards 2025,

Speaker Change: We'll continue to look for areas of efficiency within the business and how to operate more effectively and drive further cost savings as we progress throughout the year.

looking at it from a longer-term perspective.

I would say that

Speaker Change: you know, in this environment, we are optimizing for contribution profit.

Speaker Change: and working to significantly reduce our losses, which we have done in 2024.

Speaker Change: down $500 million year-over-year, and we expect, again, to materially reduce our losses in 2025. That'll be driven in part by improved contribution profit or contribution margin, as well as the full-year impact of the cost-efficiency programs that we put into place.

and in terms of how we think about.

Speaker Change: We believe we have right-sized and will continue to right-size the business for the scale we're operating at today from a fixed cost perspective, but also feel like we can, at our current fixed cost levels, we think we can support a higher level of growth.

Speaker Change: In the medium term, should that come to pass, don't feel like we need to scale those costs back up within reason, but it's all dependent on the growth outlook for the business over the long term.

Hey Dave, it's Carrie. I'll take the Marketplace question.

for your comments, so we have been in...

Speaker Change: Texas, mostly Dallas for quite some time and we recently expanded into last year to Raleigh and Charlotte.

Speaker Change: And reason being, two-fold. One, customer saying yes to trial marketplace. High take rate on that to people opting into the product.

Speaker Change: And then a pretty good clearance rate into Marketplace, notwithstanding the fact that just, you know, we have a lot less visibility than you would have for that home on MLS.

Speaker Change: What we think we're creating in Marketplace is a different kind of seller who...

and the free markets we've got.

Thank you. All right.

Speaker Change: Our next question comes from the line of Yagal Aranyan with Citigroup. Your line is now open.

Yagal Aranyan: Hey guys, good afternoon. I'll ask about the other third-party products or what the list with Open Door and what you're seeing since you've

Yagal Aranyan: expanded that into all of your markets, and what the opportunity you think might be on these products, moving them outside of your buy box. And there's, I guess, a good amount of debt that's...

Yagal Aranyan: coming to in 2025 and 2026, and just as that starts to play out, how you think about current interest rate environment, capital needs, liquidity, and what your approach is going to be there. Thank you.

Yagal Aranyan: I'll hand it over to Celine to talk about Balance Sheet.

Yagal Aranyan: So illicit open door, just as a reminder, that's letting someone access the market, test it, but with the certainty of an open-door cash offer for a finite period of time. In all markets towards the end of last year, so still relatively small for us in terms of overall percentage of revenue,

Yagal Aranyan: In this environment, given where we are with spreads and just what we feel as it continues to be a soft macro, it will be something we will lean more into in 2025.

Yagal Aranyan: On the balance sheet side, look, we've planned to significantly reduce losses year over year, as we've indicated, and we feel good about our overall liquidity position.

Yagal Aranyan: In regards to our facilities entering this year, we have recently amended or extended more than half of our facilities, increasing our borrowing capacity at similar or better credit spreads.

Yagal Aranyan: And over 90% of our $8 billion of available borrowing capacity is now extended through at least 2026. We've done this in and amongst a difficult market environment, which demonstrates solid credit performance, financeability of our assets, and the steady commitment of our long-term lending partners.

We currently have $1.1 billion in capital.

Yagal Aranyan: and while we don't comment on future capital transactions with regards to our converts

Yagal Aranyan: They don't mature until August of 2026, that's a year and a half out from now. And we're constantly evaluating our capital structure and opportunistically assessing the market for ways to support our balance sheet. But overall, we feel good about where we are right now.

Speaker Change: Hi. And if I could ask one more follow-up, just bigger picture is, you know, we all know the market continues to be challenging.

Speaker Change: and you're right sizing for the current market environment, but, you know, with hopes that one day this starts to improve. How are you balancing the?

Speaker Change: Maybe the way you thought about the previous 5X and the markets you were operating in and how you approach expansion and then opportunity, meaning, you know, would the target be to kind of go after the same addressable market?

do you narrow it down to regions and areas where...

you can get better contribution margins.

Does that approach change at all?

Thought about that or you just

Spencer Nichols: and Spencer Nichols. We look forward to seeing you next month. Thank you. 1 1 2 1 2 1 3 1 2 1 3 1 2 1 3 1 4 1 4 1 4 1 4 1 4 1

We haven't

Spencer Nichols: We haven't pulled back on all the buy box expansion we've made whether it's geographically or price point. What we have done has gotten a lot better at price segmentation and how we adjust for the right spread for the right home at the right time. So one of the things we talked about in the shorter letter is

Spencer Nichols: We've had meaningful gains on a spread-adjusted basis of conversion. And so what we'll continue to challenge our team to and make improvements is, like, let's get better at pricing that home. And if certain segments are challenging,

Spencer Nichols: Florida condos, for example, we're going to be really wide and discriminating on our pricing and certain, but we have not we're not retrenching From our buy box today

Speaker Change: Does that answer your question? It does, yes. Thank you. You're welcome. Our next question comes from the line of Nick Jones of Citizens. Your line is now open.

Nick Jones: Great. Hi. Thanks for taking the questions. I guess first, can you talk about exclusive listings? This is increasingly a topic of conversation in the industry. To the extent, I think folks have tried in the past.

Nick Jones: to maybe bypass the MLS or really kind of own unique content or inventory. Can you talk about how you see that maybe fitting into your playbook or if that's kind of a good or bad for the business?

Nick Jones: Yeah, I mean, obviously we just talked about Marketplace exclusives for us. I mean, at the highest level.

We're on the right side of consumers. Consumer first business.

Nick Jones: I think CCP is about giving consumers full access and transparency and availability, all those things are critical.

Nick Jones: But I also think at the same time, there's room for evolution. It doesn't always work for everyone to expose their home to the MLS, and we think people should have choice.

Nick Jones: So the extent that there's innovation in the traditional system, we're all for it, so long as it's in favor of consumer choice, which...

Nick Jones: Again, Marketplace for us is in that strike zone. It's about giving customers an option to do something around their home and explore liquidity, shy of having to expose it to the full MLS.

Thank you for watching!

Speaker Change: Makes sense. And then I guess I want to go back and double click deeper on costs.

if you think

towards the path to profitability, you know,

Speaker Change: This model, I guess, should work in a single market. You have a certain amount of infrastructure, so you can scale. To what end do you try to get more aggressive, really bringing cost out of focusing on less markets, just to kind of?

Speaker Change: maintain the business or grow within a smaller geography versus kind of maintaining maybe a larger infrastructure, larger cost basis to kind of wait for the tides to change in the industry. Thanks.

Speaker Change: Yeah, I think we do look at that trade-off and we discuss that trade-off internally quite a bit. We are comfortable with the geographic spread that we have today, the resources that we have in place in the various markets.

Speaker Change: relative to the level of inventory and buying and selling that we're doing there. So no plans to retrench or pull back in any markets just for the purpose of cost savings. We do look at it at the contribution margin level for each market for the homes we're buying in those markets and as long as we're getting the contribution margins that we want to see then there's no real reason to think about shrinking our addressable market.

Thank you for watching!

Thank you.

Speaker Change: Thank you. Our next question comes from the line of Ben Black with Deutsche Bank. Your line is now open.

Speaker Change: Hi, this is Jeff Steiner. I'm for Ben. Thanks for taking my questions.

Speaker Change: Just quickly, I mean, given that you ended the year with just under 50% of your inventory, kind of having been on market over 120 days, and you talked about how clearance rates are down 25% to start the year. Is that...

Speaker Change: going to be sort of an overhang on the contribution margins you're able to attain, like moving, I know in 1Q you're guiding to 4 to 4.7 percent, but as we move into 2Q and maybe the full year, is that something to think about when thinking about the full year 25 contribution

Speaker Change: and then just as a kind of a follow-up earlier you talked about adjusting your pricing model

Speaker Change: to kind of, you know, take into account different price points. Is there any, and I know you brought up the segmentation, you know, regional segmentation, is there anything in price points that you might be seeing as far as more success and...

Speaker Change: in one price point versus the other, whether it be on the spread or clearance rates or like maybe a drag, that's really kind of what's keeping some of the lower clearance rates. Thank you.

Speaker Change: Thanks, Ben. Let me take the question on DOM and contribution margin to start and then I'll hand it over to Kerry.

Speaker Change: So yeah, we ended the year with 46% of our homes and inventory at greater than 120 day dom, which was up year over year. As you probably know, this metric does tend to fluctuate based on seasonal factors, market dynamics, and our resale strategies. A little bit of context on that.

Speaker Change: First and foremost, our acquisitions in the quarter in Q4 were down 20% year over year. And so, as a result, you would expect the share of

Speaker Change: 120-day plus dom homes to be higher on a year-of-year basis because we have slightly less less fresh inventory this year versus last year Secondarily, I would say we slowed home level price drops in Q4 as the market started to slow We did not want to sell those homes into a lower demand environment

Speaker Change: And so, as we slowed that, you know, that obviously extends the DOM, you know, the overall share of the DOM over 120 days.

Speaker Change: Taking a step back from that, what I would say is, for Q1, we are below the 5-7% contribution margin range, which is implied in our guidance. But we are confident in our ability to deliver 5-7% even with the inventory being a little bit older.

Speaker Change: We are seeing the tail of inventory that we bought in the spring at lower spreads come through in our results. That puts about a point of pressure on our contribution margin for Q1 that we don't think we'll repeat or.

be a factor in Q2 and beyond.

Speaker Change: But cohorts we've acquired more recently are starting to sell through at higher contribution margin levels, which does give us the confidence to be able to operate within 5 to 7 percent. And so we don't, like, overall, as we're managing the portfolio, we don't view those longer DOM homes to be a significant overhang.

Speaker Change: Great, then I'll just maybe make a couple comments on some of the conversion gains we're seeing.

Speaker Change: We implemented a new pricing model in Q4 and what has resulted is

really because of better price segmentation, so not...

Speaker Change: , it's not about changing what price points we are willing to acquire, willing to make an offer on, it's really about do we understand market level dynamics better, better home level accuracy.

Speaker Change: Thanks for your question. Our next question has been posed to the rest of us.

Speaker Change: will increase spreads for harder-to-sell homes, and we don't see an equivalent reduction in conversion for those harder-to-sell homes. And the net of those two things expands our conversion frontier. So those are the gains we've been seeing so far, which has been a real benefit to volumes, which has been great.

Great. Thank you.

Speaker Change: Thank you, and our next question comes from a line of people with pages you have been allowed to open.

Speaker Change: I jumped on late, so if you already hit on this, my apologies. But just broadly speaking on operating expenses, if you can provide any color on how you're thinking about.

Speaker Change: managing that level through the year relative to the levels you're guiding to for the first quarter.

Speaker Change: Any color on on just additional efficiencies that we might expect to come to us with a balance of the year. Thanks. Yeah. Yep We we yeah, so

Operating expenses in Q4 were $87 million.

Speaker Change: and our guidance for this quarter is 90 which implies a slight uptick in OPEX from Q4 to Q1. That increase is really driven by variable OPEX.

You've seen our acquisition guidance implies

Speaker Change: sequential growth in acquisitions which is going to lend itself to running with a higher inventory balance through the course of the quarter and that will drive related costs higher on a quarter-or-quarter basis. Beyond that what I would say is we would expect

Speaker Change: Costs to come down over the balance of the year as we get the full impact of the cost savings initiatives that we've implemented thus far and look to further drive cost optimization and efficiency within the business, as well as adjusting our marketing strategy and aligning our marketing spend more closely to periods of time in the year when our spreads are lower and that marketing can be more effective.

Speaker Change: which is generally speaking in Q1 and Q4 relative to Q2 and Q3.

Great, I appreciate all that color. And then...

Speaker Change: Again, apologies if you already touched on this, but just relative to the break-even targets you've previously set for run rate.

acquisition volume and revenue I think 10 billion of

Speaker Change: of revenue. Obviously, a lot has changed over the last year in terms of your approach to the business and the efficiencies you're driving on the expense base. So, any update on what type of framework we should be thinking about for acquisition pace and top line revenue that could drive break-even?

Yeah.

Speaker Change: Yeah, just just again a sort of a reminder that we are focused on

Speaker Change: significantly reducing our ANI losses again in 2025 relative to 2024 in service of being in a position to be able to get to break-even sooner. We have not updated the framework specifically, but you can expect that the amount of volume and revenue that we would need to deliver on at ANI break-even is significantly lower versus the prior framework.

Speaker Change: We do that by focusing on delivering contribution margin in the target range of 5-7%.

Speaker Change: by operating with spread levels and enable us to achieve positive unit economics.

Speaker Change: and realizing margins within this target upon resale. On the cost side, as we've discussed, we've made significant progress on optimizing our cost structure. The actions that we took in the second half of the year are all in service of reaching ANI break even sooner.

Speaker Change: We entered this year leaner, more efficient, and will continue to drive further cost efficiencies. If I take a step back...

Speaker Change: Given all the work that we've done and will continue to do, we believe we're extremely well positioned to leverage any favorable shifts in the housing markets.

Speaker Change: We have made meaningful progress towards ANI positive, but the macro environment continues to be a headwind. So we are maintaining elevated spread levels, optimizing for contribution profit dollars rather than volume, while managing our risk and exploring other ways to monetize our funnel.

Speaker Change: We think as macro conditions stabilize, we can reduce spreads, drive higher conversions and volumes and take advantage of a much lower cost structure, which all should serve us well in our path to profitability.

Thank you for watching!

Thanks for taking the questions.

Speaker Change: Thank you. As a reminder, to ask a question at this time, please press star 11 on your touchtone telephone.

Nick McAndrew: Our next question comes from the line of Nick McAndrew with Zellman & Associates. Your line is now open.

Nick McAndrew: Hey guys, thanks for taking my questions. Maybe just to start, I think Kerry you mentioned this a little earlier, but launching Marketplace in two new markets as well as Lisp with Opendoor in nearly all markets.

Nick McAndrew: I'm just curious on how often you see any cross-product migration from sellers. And I think what I mean is, are there ever times where a seller might want to pivot?

Nick McAndrew: from one solution to another, and because you offer these additional products, you're able to keep them in the ecosystem, or is it a different type of seller that's attracted to kind of each product? Thanks.

Nick McAndrew: Yeah, I mean, what I'd say is what we have built and what we're known for is, you know, the greatest call to action for home sellers and real estate, which is like

Nick McAndrew: get an offer online and sell your home in minutes. And now that's what people come to us for. And we use it. It works really, really well. We know that because lots of people in the industry are using it, including agents.

Nick McAndrew: So people who come to us are looking for a selling solution, and then we are able to say to them, if that cash offer doesn't meet your needs, oh, by the way, you can explore, you've got some market FOMO, you want to test the market, you can do that with the assurance of a backstop, and potentially in slow select markets, you can explore an off MLS listing in a less exposing way, you don't have to get your home ready for resale, you don't have to do all the open houses, and again, with some assurance, you can default back to the cash offer.

Nick McAndrew: we're leveraging the strength of this incredible funnel we have of high-tech sellers and then our job is to be the best place to sell and get people all these solutions if the cash offer doesn't fit them perfectly.

For more information, visit www.FEMA.gov

Speaker Change: Got it. That's helpful. Thank you. And then maybe just to follow up to in the shareholder letter, you mentioned expanding your approach to capitalizing on a lot of the high intent leads that Opendoor, the website generates. And I'm just wondering if there's any color you can add on maybe how you think about...

Nick McAndrew: potentially monetizing that portion of leads that falls outside of your buy box.

Thanks.

to the podium.

Great, that's helpful. Thank you.

Speaker Change: Thank you and I'm showing no further questions at this time. I'd like to hand the call back over to Keri Wheeler, CEO, for closing remarks.

Speaker Change: I just want to say thank you to everyone for joining us today and we look forward to reporting on progress next quarter.

Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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Speaker Change: Good day, and thank you for standing by. Welcome to the Open Door Technology's fourth quarter 2024 earnings conference call.

Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kimberly Niehaus, Investor Relations. Please go ahead.

Thank you for tuning in.

Speaker Change: 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 investor.opendoor.com.

Speaker Change: Please note that this call will be simultaneously webcast on the investor relations section of the company's corporate website.

Speaker Change: Before we start, I would like to remind you the following discussion contains forward-looking statements within the meaning of the federal securities laws.

Speaker Change: These statements are neither promises nor guarantees, and undue reliance should not be placed on them.

Speaker Change: Such forward-looking statements involve risks and uncertainties that can cause actual results to differ materially from those discussed here.

Speaker Change: For reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com.

Speaker Change: I will now turn the call over to Carrie Wheeler, Chief Executive Officer of Opendoor.

Carrie Wheeler: Good afternoon, everyone. Thanks for joining us today. With me today is Celine Freja, our Chief Financial Officer.

Carrie Wheeler: At Opendoor, we're on a mission to reinvent the U.S. residential real estate industry.

Carrie Wheeler: And in 2024, we took decisive steps to simplify our business, sharpen our focus, and drive towards sustainable, profitable growth.

Carrie Wheeler: At the same time, we took proactive steps to strengthen our operations. In Q3, we completed the separation of mainstay, and in Q4, we launched a cost-efficiency program and a workforce reduction to align our structure with our profitability goals.

Carrie Wheeler: Despite persistent macro headwinds, we executed with discipline. In 2024, we purchased 30% more homes than in 2023, we improved contribution margin to 4.7% up from negative 3.7% the year before, and we significantly reduced our adjusted net losses.

Carrie Wheeler: As we enter 2025, we're seeing a slower start to the spring sailing season with additional macro pressures compared to last year.

Carrie Wheeler: On the supply side, clearance rates, meaning how quickly homes go under contract, are pacing 25% lower than last year.

Carrie Wheeler: Your listings are holding steady, but active listings are up nearly 20%, signaling a slowing market.

Carrie Wheeler: On the demand side, visits to new listings are down 20-25%, while delistings are up over 30%, hitting decade highs as more sellers exit the market.

Carrie Wheeler: And with little near-term rate release in sight, the lock-in effect of low mortgage rates for sellers and affordability challenges for buyers will persist.

Carrie Wheeler: Our commitment is clear. Profitable, sustainable growth. And there are four key areas where we're focused on improving our cash offer business.

Carrie Wheeler: As has always been the case, we will monitor key macroindicators and make prudent adjustments to spreads with a bias towards optimizing for contribution margins.

Carrie Wheeler: Second, we are enhancing the customer experience. A better experience drives higher conversion. We've enhanced our pricing models, improving price segmentation and market-level spread accuracy so that we can better differentiate spreads across price points and expand our conversion. This has allowed us to drive improvements in conversion at like-for-like spreads.

Carrie Wheeler: Third, we are better aligning our marketing strategy to seasonal buying and selling patterns.

Carrie Wheeler: We'll focus our marketing efforts to more closely align with when our spreads tend to be lower and when open doors value proposition for customers is even greater. This will result in increased acquisitions in Q4 and Q1, and will position us to sell those homes in the spring and summer selling seasons when buying demand typically peaks.

Carrie Wheeler: In Q2 and Q3, we expect to scale back marketing spend and, in turn, acquisitions since homes acquired in those quarters will be sold into a lower demand environment and recognize lower price appreciation over the holding period.

Carrie Wheeler: Beyond improving and expanding our cash offer business, we're also focused on expanding our offerings to serve even more sellers and unlock new revenue opportunities.

We are growing the list with Opendoor and our Marketplace.

Carrie Wheeler: In 2024, we expanded LISP with Opendoor to nearly all of our markets, and we launched Marketplace in Charlotte and Raleigh. These products give more sellers more choices.

Carrie Wheeler: In 2025, we'll continue expanding them, ensuring sellers can choose the option that best fits their needs.

Carrie Wheeler: We're also helping more sellers who are outside of our buy box.

Carrie Wheeler: Many high-intensity sellers visit our site every day, even if their homes don't fit within our buy box.

Carrie Wheeler: We see a significant opportunity to connect these sellers with agents, helping them successfully transact while creating new revenue streams for Open Door.

Carrie Wheeler: At Opendoor, we're driven by our mission, transforming the real estate experience by making it seamless, convenient, and certain for sellers and buyers.

Carrie Wheeler: And with that, I'll turn it over to Salim for the financial overview.

Salim: Thank you, Kerry. In the fourth quarter, we exceeded the high end of our outlook for acquisitions, revenue, contribution margin, and adjusted EBITDA.

Salim: We delivered $1.1 billion of revenue in the fourth quarter, up 25% versus the same quarter in 2023, representing 2,822 homes sold.

Salim: Revenue for the full year was $5.2 billion, compared to $6.9 billion in 2023, due primarily to a lower starting inventory balance entering 2024.

Salim: On the acquisition side, we purchased 2,951 homes in the fourth quarter, compared to 3,683 in the same quarter last year, as spread levels remain elevated.

Salim: However, we were able to accelerate our pace of acquisition as we moved through the quarter, as we saw improvements in conversion at given spread levels.

Salim: These conversion gains were enabled by enhancements to our product flow and improvements to our pricing models.

Salim: For the full year, we acquired 14,684 homes, up 31% versus 2023.

Salim: Contribution profit was $38 million in the fourth quarter versus $30 million in Q4 2023, representing a contribution margin of 3.5%.

Salim: For the full year, contribution profit improved by half a billion dollars to $242 million versus a loss of $258 million in 2023.

Salim: And for the full year, contribution margin was 4.7% versus negative 3.7% in 2023, and just shy of our annual target margin range of 5 to 7%.

Salim: Adjusted EBITDA loss was 49 million in the fourth quarter, representing a 20 million dollar year-over-year improvement.

Salim: For the full year, our adjusted EBITDA loss was $142 million versus a loss of $627 million in 2023.

Salim: This improvement in adjusted EBITDA losses was primarily driven by improved contribution profit and better expense management.

Salim: Turning to our balance sheet, we ended the year with 6,417 homes representing $2.2 billion in net inventory, up 22% from the prior year.

Salim: We also had $1.1 billion in total capital, which includes $679 million in unrestricted cash and marketable securities, and $306 million of equity invested in homes and related assets, net of inventory valuation adjustments.

Salim: We also had $6.9 billion in non-recourse asset-backed borrowing capacity, composed of $3 billion of senior revolving credit facilities and $3.9 billion of senior and mezzanine-turned-debt facilities, of which total committed borrowing capacity was $2.2 billion.

Salim: In early 2025, we strengthen our capital position by amending and extending the term of certain debt facilities.

Salim: We have successfully renewed three revolving credit facilities and one term debt facility at Consistent or improved credit spreads while both of our mezzanine facilities were extended through 2027

Salim: The successful extension of these credit facilities is a testament to the ongoing support and confidence of our capital partners and positions us well to continue executing on our business plans.

Salim: As we enter 2025, we are focused on ensuring attractive unit economics in our cash-offer business.

Salim: operating with strong cost discipline and making progress on our path to profitability. The macro real estate environment has been marked by higher interest rates for buyers and entrenched homeowners with existing low-rate mortgages who remain on the sidelines.

Salim: While many of the changes and programs we are putting in place are helping to counter some of these pressures, we anticipate that these headwinds will continue to impact our performance in the near term.

Salim: Our outlook expectations for the first quarter of 2025 include the following. Revenue is expected to be between $1 billion and $1,075,000,000.

Salim: Contribution profit between $40 million and $50 million, which implies a contribution margin of 4 to 4.7%.

adjusted EBITDA loss between 40 and 50 million.

Salim: adjusted operating expenses of approximately $90 million and non-cash stock-based compensation expense between $13 and $15 million which represents a decline of over 50% year-over-year.

Salim: We expect home acquisitions of over 3,500 in the first quarter, up slightly year over year.

Salim: Normalizing for bulk purchases we made in the first quarter of last year that are not expected to repeat this year, acquisition growth would be up over 10% year-over-year.

Salim: As Kerry mentioned, we are evolving our home acquisition strategy to enable us to concentrate our selling activity in the spring and summer selling season when buyer demand and home price appreciation are higher. This will also result in fewer homes acquired in the middle of the year relative to Q1 and Q4.

Salim: Additionally, while we continue to believe that five to seven percent is an appropriate annual contribution margin for our business, our margin will fluctuate from quarter to quarter driven by seasonality and other factors.

Speaker Change: Our strategy for this year is to continue to enhance our pricing effectiveness, improve our customer experience and offerings, and drive efficiencies that we expect will meaningfully improve our adjusted net losses on the year-over-year basis.

Speaker Change: Longer term, we are focused on implementing the strategy that Kerry discussed, building on our platform to position Open Door to achieve profitable growth amidst varying real estate backdrops.

Speaker Change: With that, I will ask the operator to open the line for questions.

Speaker Change: Our first question comes from the line of Daylee with J.P. Morgan. Your line is now open.

Thank you for watching!

Daylee: Great, thanks for taking my questions. I have two. First one for you, Salim. Could you elaborate a bit more on your cost savings and cost efficiency opportunities?

Daylee: And I guess with the housing market being depressed for more than two years now, could you talk about how you're thinking about balancing the need to achieve profitability at current housing levels versus maintaining operational scale?

Daylee: Secondly, could you give us an update on what you're seeing from Marketplace and Charlotte and Rylai's that give you confidence to expand the offering more broadly? Thank you.

Speaker Change: Yeah, Dave, I'll take your question on operating costs. Look, we've taken significant action in the latter half of the year to reduce our overall fixed cost base, as we've talked about before.

Speaker Change: We executed the disposition of mainstay as well as Did a riff and implemented other cost savings initiatives

Speaker Change: And what we said at the time that we did that, that we expected that to deliver $85 million worth of cost savings. And as we look towards 2025,

Speaker Change: We'll continue to look for areas of efficiency within the business.

Speaker Change: and how to operate more effectively and drive further cost savings.

as we progress throughout the year.

looking at it from a longer-term perspective.

I would say that

Speaker Change: you know, in this environment, we are optimizing for contribution profit.

Speaker Change: and working to significantly reduce our losses, which we have done in 2024.

Speaker Change: down $500 million year-over-year, and we expect, again, to materially reduce our losses in 2025. That'll be driven in part by improved contribution profit, or contribution margin, as well as the full-year impact of the cost-efficiency programs that we put into place.

and in terms of how we think about.

Speaker Change: scale over time. We believe we have right-sized and will continue to right-size the business for the scale we're operating at today from a fixed cost perspective, but also feel like we can at our current fixed cost levels, we think we can support a higher level of growth.

Hey Jay, it's Carrie. I'll take the Marketplace question.

for your comments so we have been in

Speaker Change: Texas, mostly Dallas, for quite some time, and we recently expanded into last year to Raleigh and Charlotte, and the reason being, two-fold, one, customers saying yes to trial Marketplace, high take rate on that to people opting into the product, and then a pretty good clearance rate into Marketplace, notwithstanding the fact that just, you know, we have a lot less visibility than you would have for that home on MLS.

Speaker Change: What we think we're creating in Marketplace is a different kind of seller who...

have some aspirations to sell, certainly.

Speaker Change: but is shy of wanting to put their home on the MLS. Oftentimes, because of home conditions, it's not list-ready, but they want to trial something, and they can always fall back to the cash offer, but they don't want to expose themselves to the taint of, you know, days on market and all that, and they're just not in a position to do that.

Speaker Change: In this market, having those kinds of homes available to buyers given affordability pressures is something we're still focused on pursuing, and so we'll continue to iterate and test in a very measured investment way in the three markets we've got.

Thank you for watching!

Thank you. All right, thank you.

Speaker Change: Our next question comes from the line of Yigal Aranyan with Citigroup. Your line is now open.

Speaker Change: Good afternoon. I'll ask about the other third-party products or what the list with Open Door and what you're seeing since you've

Speaker Change: expanded that into all the markets and what the opportunity you think might be

Speaker Change: on these products, moving them outside of your buy box. And there's, I guess, a good amount of debt that's...

Speaker Change: coming to in 2025 and 2026, and just as that starts to play out, how you think about current interest rate environment, capital needs, liquidity, and what your approach is going to be there. Thank you.

Speaker Change: Here you go, let's carry on. I just need to touch base really quickly on this with Opendoor. I'll hand it over to Celine to talk about Balance Sheet.

Speaker Change: So this is Opendoor, just as a reminder, that's letting someone access the market, test it with the certainty of an Opendoor cash offer for a finite period of time, in all markets towards the end of last year, so still relatively small for us in terms of overall percentage of revenue.

Speaker Change: In this environment, given where we are with spreads and just what we feel continues to be a soft macro

Speaker Change: It will be something we will lean more into in 2025.

Speaker Change: On the balance sheet side, look, we've planned to significantly reduce losses year over year, as we've indicated, and we feel good about our overall liquidity position.

in regards to our facilities entering this year.

Speaker Change: We have recently amended or extended more than half of our facilities.

increasing our borrowing capacity at similar or better credit spreads.

Speaker Change: And over 90% of our $8 billion of available borrowing capacity is now extended through at least 2026. We've done this in and amongst a difficult market environment, which demonstrates solid credit performance, financeability of our assets, and the steady commitment of our long-term lending partners.

We currently have $1.1 billion in capital.

Speaker Change: and while we don't comment on future capital transactions with regards to our converts, they don't mature until August of 2026. That's a year and a half out from now and we're constantly evaluating our capital structure and opportunistically assessing the market for ways to support our balance sheet but overall we feel good about where we are right now.

Speaker Change: Hi. And if I could ask one more follow-up, just bigger picture is, you know, we all know the market continues to be challenging.

Speaker Change: and you're right sizing for the current market environment, but, you know, with hopes that one day this starts to improve. How are you balancing the?

to narrow it down to regions and areas where

you can get better contribution margins.

Speaker Change: Does that approach change at all? Have you thought about that or are you just...

Speaker Change: and I'm really busy working through what's been a challenging market right now. Thank you.

We haven't

Speaker Change: We haven't pulled back on all the buy box expansion we've made whether it's geographically or price point. What we have done has gotten a lot better at price segmentation and how we adjust for the right spread for the right home at the right time. So one of the things we talked about in the shorter letter is

Speaker Change: We've had meaningful gains on a spread-adjusted basis of conversion. And so what we'll continue to challenge our team to and make improvements is, like, let's get better at pricing that home. And if certain segments are challenging,

Speaker Change: and I'm going to talk a little bit about what we're going to be talking about today. We're not going to be talking about Florida condos, for example. We're going to be really wide and discriminating on our pricing.

Thank you.

Does that answer your question? It does, yes. Thank you.

Nick Jones: Our next question comes from the line of Nick Jones of Citizens. Your line is now open.

Nick Jones: Hi, thanks for taking the questions. I guess, first, can you talk about exclusive listings? This is increasingly a topic of conversation.

Speaker Change: in the industry to the extent, I think folks have tried in the past to maybe bypass the MLS or really kind of owner, can own unique content or inventory. Can you just talk about how you said maybe fitting into your playbook or if that's kind of a good or bad for the business?

Speaker Change: Yeah, I mean, obviously we just talked about Marketplace exclusives for us. I mean, at the highest level.

We're on the right side of consumers consumer first business

Speaker Change: I think CCP is about giving consumers full access and transparency and availability, all those things are critical.

Speaker Change: But I also think at the same time, there's room for evolution. It doesn't always work for everyone to expose their home to the MOS, and we think people should have a choice.

Speaker Change: So the extent that there's innovation in the traditional system, we're all for it, so long as it's in favor of consumer choice, which, again, marketplace for us is in that strike zone. It's about giving customers an option to do something around their home and explore liquidity, shy of having to expose it to the full MLS.

Thank you for watching!

Speaker Change: Yeah, that makes sense. And then I guess I want to go back and double-click deeper on costs.

as you think

towards the path to profitability, you know,

Thank you for watching!

Thank you.

Speaker Change: Thank you. Our next question comes from the line of Ben Black with Deutsche Bank. Your line is now open.

Speaker Change: Hi, this is Jeff Steiner. I'm for Ben. Thanks for taking my questions.

Speaker Change: Just quickly, I mean, given that you ended the year with just under 50% of your inventory kind of having been on market over 120 days, and you talked about how clearance rates are down 25% to start the year. Is that...

Speaker Change: going to be sort of an overhang on the contribution margins you're able to attain? I know in 1Q you're guiding to 4.7%, but as we move into 2Q and maybe the full year, is that something to think about when thinking about the full year, 25 contribution margins?

Speaker Change: And then just as kind of a follow-up, earlier you talked about adjusting your pricing model.

Speaker Change: in one price point versus the other, whether it be on the spread or clearance rates or as one with maybe a drag, that's really kind of what's keeping some of the lower clearance rates. Thank you.

Speaker Change: Thanks, Ben. Let me take the question on DOM and contribution margin to start and then I'll hand it over to Kerry.

Kerry: So yeah, we ended the year with 46% of our homes and inventory at greater than 120-day DOM, which was up year over year. As you probably know, this metric does tend to fluctuate based on seasonal factors, market dynamics, and our resale strategies.

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