Q2 2025 Opendoor Technologies Inc Earnings Call

Good day and thank you for standing by. Welcome to the open door, second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded after the speaker's presentation. There will be a question and answer session to ask a question. Please press star 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please, press star 1 1 again, I would not like to hand the conference over to your speaker today. Michael Jude, Capital markets and investor relations.

Details of our results and additional management. Commentary are available in our earnings release at shareholder letter, which can be found on the investor relations section of our website at investor open door.com.

Please note that this call will be simultaneously webcast on the Investor Relations section of the company's 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 laws.

all statements other than statements of historical fact, which statements that could be deemed forward-looking including but not limited to statements regarding open doors Financial conditions, anticipated financial performance,

Business strategy and plans Market opportunity and expansion and management objectives for future operations.

Assumes. No obligation to update or revise them. Whether as a result of new information, future events or otherwise except this 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 measurements to evaluate the company's financial performance.

For a Reconciliation of these non-gaap Financial measures to the most directly comparable, gaap metric.

Please see our website at investor.com. Open door.com.

I will now turn the call over to Carrie wheeler Chief Executive Officer of Open Door.

Thank you for joining us.

At Open Door, our mission is straightforward but bold to make selling your home, simple, certain and fast.

For most people selling a home is 1 of the biggest Financial transactions of Our Lives.

And too often it's also 1 of the most stressful. We believe it doesn't have to be that way.

over the past 10 years, we've built deep infrastructure and real estate pricing intelligence, operational capabilities and a marketing engine that reaches High intense sellers

doing. So we've amassed an unparalleled data set photos videos, agent notes and customer interactions from millions of home visits.

This proprietary data fuels our AI, and that AI powers our flagship product, the cash offer, which delivers results that traditional sales cannot.

Speed, certainty and control.

Our customers understand this.

Over the past 4 years, our net promoter score has been there. 80 exceptional in any industry.

An increasingly agents, understand it too.

In fact, 1 in 4 of our Acquisitions already come from an agent, bringing us their clients for a cash offer.

We are now making the most important strategic shift in our history.

Moving from a single product.

To a distributed platform with multiple offerings delivered through agents.

Agents already come to us every single day for a cash. Offer, we're simply changing the direction of traffic.

Putting the power of Open Door into their hands so they can bring our products straight to the seller.

We have 2 Things. No 1 else can give an agent 1. I'm parallel to the quality.

We are not giving agents cold names from a spreadsheet or putting them in the home with a motivated seller.

2, a differentiated product Suite.

More selling options, powered by a trusted local advisor.

Sellers can choose a certainty of a cash offer.

The upside potential of a market listing or hybrid of both.

This means sellers get more Choice more speed and more certainty, sellers win agents win and Open Door wins because we can serve far more sellers monetize, more leads and expand high margin Capital, light revenue streams

We began piloting, this new approach in select markets, last quarter.

The early proof points were compelling.

Times more customers are reaching a final underwritten cash offer relative to our traditional flow.

We're delivering offers faster with streamlined, in-home aging assessments.

Listing conversion rates are 5 times higher.

And we're unlocking more, capitalized earnings through our share of listing commissions.

On the strength of these results, we've gone from Pilot to full rollout in record time. Today partner agents are live in every Market we operate.

Our next phase is optimization.

More agents.

Better tools better training and more products.

We've launched our key agent iOS app, so agents can do high-fidelity home assessments right from their phone.

Enriching our Ai and deepening. The customer connection.

Being in the home, give the agents a chance to guide the seller through every option.

And we believe that face-to-face trust will be a powerful driver of conversion.

We've also launched Cash Plus a High Hybrid product, designed for sellers who want the convenience of a cash offer, but hope to maximize upside by going to Market.

Open door provides immediate cash to the seller. Gets the home list ready and works with the partner agent to list the home.

Upon resale. The seller can receive additional proceeds after expenses.

For sellers, it's the best of both worlds.

For agents, it's another competitive tool and keeps them engaged with the customer throughout the sales process.

for open door, it's a better risk-adjusted product, that uses less capital

Protects our downside and the lines are incentives, even more closely with the customers.

We are building a vibrant distributed ecosystem.

More certainty, and Opendoor gains more opportunities to monetize leads.

Serve customers and expand high-margin revenue streams.

This is a flywheel.

The more agents, we enable the more sellers we serve, the more transactions, we handle the stronger. Our platform gets

Our marketing dollars become more efficient, as we monetize more of the sellers who come to us.

And as we go transactions, we further leverage our cost structure.

Value compounds for customers agents and shareholders alike.

We are making these changes in the midst of very challenging housing market. The second half of 2025 will reflect lower acquisition and resale volumes due to the macro environment and continued High spreads seasonality. And the fact that we are early in our transition,

Our near-term Outlook. However, does not reflect what we're building towards durability relevance.

Scale for the next decade.

We know exactly where we're going and we're taking decisive steps to get there.

With that, I'll hand it over to Selene for the financials.

Thank you Carrie we delivered a strong second quarter at 1.6 billion dollars in Revenue. We achieved our first quarter of the adjusted ebit doll profitability, in 3 years. This outcome is an indicator of the meaningful operating leverage. We have driven and provides a roadmap for what a&i Break Even could look like in the future.

Our Q2 performance reflects deliberate choices. We've made including increased marketing, spend in Q4 2024 and q1 2025 to acquire more homes ahead of the spring selling season and widening offer spreads in Q2 2025 to manage risk. As we prioritize marketing, spend efficiency and disciplined underwriting.

On the acquisition side, we purchase 1,757. Homes in the second quarter slightly ahead of our expectations, but down year-over-year driven by meaningfully, wider spreads and accompanying reduced marketing. Spend

Contribution profit was 69 million in the second quarter. Representing a contribution margin of 4.4%.

This was down from 95 million and 6.3% in Q2 2024 driven by a higher mix of older inventory in our Q2 resale cohorts.

Adjusted ebit da was 23 million in the second quarter compared to a loss of 5 million in Q2 2024.

Turning to our balance sheet, we ended the quarter with 4,538 homes representing 1.5 billion dollars in net inventory. We also had 1.1 billion dollars in total Capital primarily comprised of 789 million in unrestricted, cash and 167 million of equity invested in Holmes. Net of inventory, valuation adjustments.

At quarter end, we had 7.8 billion in non-recourse asset back borrowing, capacity of which total committed borrowing capacity was 2 billion dollars.

In may, we issued 325 million of convertible senior notes due in 2030. This transaction allowed us to extend the maturities on 246 million of our existing converts by 4 years and add 75 million in cash to our balance sheet.

Turning to our Outlook. The housing market has further, deteriorated over the course of the last quarter.

Persistently, High mortgage rates continue to suppress buyer, demand leading to lower clearance and record deal listings. Our second half expectations, take into account current macro Dynamics, typical seasonal patterns in our cash offer business and the early stage nature of our platform Evolution, which is not yet a material contributor to our results.

Our guidance for the third quarter of 2025 includes the following

Approximately 1,200 homes acquired revenue between 800 and 875 million contribution margin of 2.8% to 3.3%.

Adjusted ibida between -28 million and negative -21 million.

And stock-based compensation expense between 10 and 12 million.

And while we're not providing full year guidance at this time, I would like to add some additional color for the balance of the year.

We expect Q4 Revenue to decline, sequentially at a similar level to the Q3. Sequential decline. Based on the Dynamics, I just mentioned

Contribution margin will also be pressured in the second half by an unfavorable mix of older lower margin homes. Given lower acquisition volumes likely putting our goal of year-on-year, contribution margin Improvement Out Of Reach

And that we're grateful for it. We welcome engagement from all of our investors, including the many shareholders who are new to the company.

We appreciate your enthusiasm for what we're building and we're listing intent.

Into your feedback.

This increased visibility is an opportunity to tell our story to a broader audience. We intend to make the most of it. We've been laying the groundwork to execute on the strategy we have laid out to serve every seller possible.

To build a profitable business and in doing. So to create long-term shareholder value. We look forward to updating you on our progress, in the coming quarters and with that I will ask the operator open the line for questions.

Thank you as a reminder, to ask a question. Please press star, 1, 1 1 on your telephone and wait for your name, to be announced to withdraw your question. Please. Press star. 1 1 again. Please limit yourself to 1 question and 1 follow-up.

Our first question comes from daily with JP Morgan. You may proceed.

Great. Thanks for taking my question, first, 1 for Saline, um, in regards to your 32 items.

Um,

you talked about macro conditions on worsening throughout to queue. Um, is that kind of stable now or do you, or you still seeing incremental softness heading into the back half? And I think you talked about the 32 by not including meaningful impact from the neuro initiatives. Like the agent working with agents um is that like how long does that process take of when the

Expect that to be a more meaningful contributor, and the map will follow up.

Hey Dave, thanks for the questions, I'll take the first 1 that I'm carry, talk a little bit about uh, our new initiatives. Um, just in terms of the macro and what we see, I would say yes, uh, I think at the current moment, uh, things seem to have stabilized, uh, definitely well below where, uh, things were at the beginning of Q2, uh, we did see, uh, sort of ongoing, deterioration throughout the quarter. Um, and, and now things seem to be in a bit of a stable pattern. And so our outlook for both Q3 and Q4, uh, assume that we stay at or around,

This sort of overall macro environment, uh, a subject to seasonality adjustments, um, that are normal for this time of year.

Hi. I'm a topic of like, when can we see the impact of all the changes? We're talking about our new go to market, our expanded product Suite. Um, I see a couple of things 1 is, we're going to see the impact of that show up in conversion. And in contracts long before we see it, hit the p&l for a couple reasons 1 is we have been ramping into key connection markets throughout the last quarter or so now live in every single Market. But certainly ramping and our job right now is to optimize get more agents and rules more training um and get them live. Um, 2, there's just a natural lag between when we enter into a contract and where or

For a listing agreement, and then when that home actually gets sold. And when we recorded with revenues, if you think about ramping activity, a lag between, um, contractor listing to, when we actually realize it, on the p&l, we're going to see the real impact of this kind of show up in 2026. And then last point would be, um, Cash Plus, that's a meaningful growth lever for us. We believe, based on what we're seeing so far in our pilot markets incremental to conversion, but that's in a handful of markets, ramping very quickly, next quarter. And we have this call, it'll be in all markets. But again, that's going to take some time to kind of get in the hands of all of our key connection agents.

Got it and as a quick follow up um does this newer initiative like a connections or Cash Plus change your contribution of marketing profile of the business?

I think um with respect to the uh the various outcomes, and the or the product Suite that we have, um, I think Cash Plus enables us to have more confidence in being able to deliver, uh, within our Target contribution margin range. It's a better risk adjusted process, uh, uh, or a risk risk adjusted product for us. In addition to um, the fact that the initial cash outlay is lower than it would be otherwise for a normal cash offer and then with respect to listing outcomes that is high margin revenue for us. Uh but uh obviously um will not show up as much on the revenue line uh but should help contribution margin over time.

Understood, thank you.

Thank you.

Thank you.

Our next question comes from Ryan, tomasello with KBW, you may proceed.

Uh, similar to what the 3Q guidance implies is that going to be on an absolute dollar basis or on a percent basis. And uh similarly with the 50 million. Third quarter Opex, guidance be a good run rate for fourth quarter as well.

Thanks for the questions. Um, and sorry, uh, that the sequential guidance comment was not clear, but just to clarify, that's sequential on a percentage basis, not on a dollar basis. Um, and then in terms of 50 million Opex run rate, um, I would say know that, um, it's going to move from quarter to quarter. We've talked about in the past, our new marketing strategy, um, which is heavier in q1 and Q4, uh, to align with the time of year when spreads are lower and we're acquiring homes in advance of the spring selling season. And so, uh, we would expect um, uh, heavier marketing load in Q4 and q1 and a lighter marketing load in Q2 and Q3. And so what you have in Q3 is a, a lighter marketing load, um, all our SQL. Uh, so we would expect Opex to ramp back up in Q4 and q1, uh, driven by marketing.

Okay, that's clear. And I have just a quick follow-up. With the shift to more of a buyer's market across parts of the country, are you seeing any notable increases in request volumes from sellers in those markets? And generally, how are you thinking about the potential for more seller demand coming into the platform?

Yeah, I I would say no, um, our our guidance and our Outlook, um, doesn't doesn't imply that there are, uh, is any increase in seller demand coming? Uh, because we haven't yet seen, uh, an increase in buyer demand, uh, leading to higher clearance. Um, you know, if, and when that does happen, then we would expect more sellers to, um, be comfortable taking offers and, and wanting to sell their homes. Uh, but we're not currently seeing that. In, our guidance doesn't imply, that that's going to happen. Um, and then how do we think about demand, generally speaking? Um, we we are, uh, we are aligned, like, I mentioned before we're aligning, our marketing, spend, um, to points in time in the year when we can be uh inquisitive um and uh, acquire homes ahead of the spring selling season, when you tend to have higher buyer demand um and can realize better prices. And so,

We are going heavier in marketing. As I mentioned in Q4 and q1 uh to drive um more Acquisitions at a time when spreads uh, historically have been lower. Um, and then we lean back out um, in the summer months. Uh, when the focus is more on resales and than it is on, um, you know, uh,

Us being buyers in the Market at that time.

Got it, thanks.

Thank you.

Our next question comes from Eun with Citigroup, you may proceed.

Hi. This is Wayne Trin on free golf. Um, I just wanted to ask about the distributed platform, it seems to be performing well with the twice as many customers, reaching a cash offer and getting that offer faster. Um, can you just walk us through how it's kind of done since you've gone into rapid expansion and can you talk about the share economics? You'll have their with, um, agent between conversions and lead generation.

I'm happy to do that. Um, let's talk a little bit about why we're doing this. First of all, to make it clear, I'll talk about what we're seeing on the conversion side, which is exciting, and then we'll talk about unit economics.

On the why um based on what we've been trying over the last quarter or so is that pairing our sellers with an agent early in the selling Journey drives incremental conversions full stop um an agent's able to get to a customer early. They can contextualize a suite of options, not just 1 option but a whole range of of uh alternatives for how they sell and they guide that seller to the best outcome and that converts better.

So so far what we're seeing is twice as many customers getting through our funnel, all the way to a funnel underwriting. Then we have seen historically on our traditional direct to Consumer flow. That means we have more customers that we have a chance to convert on.

We're seeing total conversion to selling outcomes, be higher, we're seeing 5 times more, people convert to a listing than otherwise we would have um been able to monetize the lead into and those are all great proof points. We're seeing some small amount of degradation of cash conversions so far but that was anticipated. And we believe it's temporary 2 reasons for that 1.

That is a, um, should be a durable, conversion, lever to serve more sellers, then we're seeing today on the cash side. So that's the conversion story with respect to us the economics. I think, in terms of how this all rolls through for, for agents, or for us or for both, I assume,

I'll keep going. Um,

Yeah, so on the Cash Plus versus cash economics, the way to think about it, at a high level, is we're valuing the home in the exact same way we do today for our traditional cash offer product. We're just providing less cash upfront. The seller is still able to unlock a ton of their equity; they can pack up, they can move out, they can do what they need to do next. We'll take on the burdens of repairs and we'll take on the burden of getting it listed with that partner agent. However, that seller gets additional proceeds after the resale, net of expenses.

Seline said this earlier. But just to be very clear, it reduces our upfront Capital needs. It gives us better downside protection.

And it still targets a similar contribution margin to our historical cash offer product, but we think the likelihood of hitting that target is higher in this model.

Um, in terms of the economics to the agent, they get their listing Commission on the back end when that home resells.

On the listing to the extent that we have taken 1 of our customers, paired them with an agent that agent eventually goes on to list the home for that customer. Um, there's a listing commission involved the agent earns that and we take a share of that commission our shares at the high end of business use standard because our lead quality, frankly is so strong and high converting and what that gives us is capitalized high margin Revenue

Very helpful. Thank you. And then my second question would be on the pace of Acquisitions. Um, last quarter, you talked about our bill chemistry. Um, I guess are you still think about the same way and is there any sense you can give us of the magnitude of sequential increase from Q3 to Q4?

Yeah, we are still thinking about it in the same way. Um obviously all else equal for the macro environment. Um as you know we've been uh responsive to that. Um, and we've adjusted our Pace, um, according to what we see in the macro. Uh but as we currently sit here today, we would expect um, Acquisitions to sequentially scale back up in Q4 relative to Q3. But we're not in the position to uh guide or give color on. Uh how much that could be or what that could look like. It's really dependent on uh what happens uh, when the macro environment. Uh where we set spreads and the progress that we make on this uh platform pivot. Um, and so we'll uh we'll update you on that to 90 days.

Got it. Thank you.

Thank you.

Our next question comes from Andrew bun with citizens, you may proceed.

Thanks so much for taking the questions. Um I wanted to ask about the new platform and just kind of where is Agent and consumer awareness within some kind of your oldest markets. How are you guys thinking about driving the awareness of kind of newer offerings and changing the the consumer perception of what Open Door is?

And then I'd love just something a little bit more tactical. As we think about the back half of '25, can you just talk about the Trenton spreads and how we should think about spreads in terms of offers for the back half of the year? Thanks so much.

I'll go first um, Miss Carrie, thanks for the question. Um, a couple of things. First of all, how are we going to get? Um, the word out about key connections to agents. Um,

1 of the things, I think, is important to understand, is we already have 25% of our business coming to us today, from agent Partners. Those are agents who fully understand the power and importance of having a cash offer in hand when they're going to a listing appointment. And they're kind of asked with their customer asking for for a cash offer today. So, we already have tons of agent relationships, they understand the power of it. They know, they can rely on it. We don't we trade, we close on time. Um, we make it very easy and seamless for them to extend that offer to their client. This is just us changing the flow of traffic. This is us taking our high-intensity seller leads and putting in the hands of agent Partners um, marsan.

Sense of what we're going to see is that this is going to become very symbiotic, right? Agents coming to us us going to agents. Um, you know, on on the news of some of the marketing we've done recently around our key Agent app or push. Um on key connections we've had a ton of inbound from agents who understand what this could mean for their business. They understand what it means for their next lead. They're we're solving a problem for them, they're not having to go find our next customer. They understand, they get a differentiated Suite of products to sell to their clients that they can't get anywhere else.

Getting this into the hands of agents and having it kind of stem from their consumers. Listen, we've been marketing for a long time to Consumers. We get lots of sellers who come to us. Our brand awareness has continued to create over time will continue to Market to Consumers, our number 1 job. Right now is to take more of those, many, many sellers who come to us and convert them monetize. Those leads through the agent Channel. That's what we're excited to do.

Yeah, and then with respect to spreads and a normal seasonal environment. I would say that, uh, spreads tend to Peak, um, in late summer or late spring early summer and then, they will Trend down from there, uh, throughout the course of the second half, um, before they would will start to come back up, um, in late winter, and early spring. That that's what we, uh, how we normally manage the business. Um, and so, all our SQL, that is what we would expect to see between now and the end of the year.

Thank you.

Thank you, and as a reminder, to ask a question. Please press star, 1 1 1 on your telephone. Our next question comes from Nick mcandrew with zelman and Associates. You may proceed.

Hey guys, thanks for taking my questions. Uh, maybe just a start. I you've noted that spreads have remained elevated and above historical Norms just giving weaker clearance rates. And I'm just wondering if you could provide any color or translate some of that to how much cushion You're Building into today's pricing environment and what kind of home price followed.

Utility you expect in the back half of the year.

Yeah, um, so generally uh we strive to set price to enable us to deliver uh within our Target contribution margin range. Um and so that that's how we set our spreads or approach setting our spreads. Um, the the challenge that I uh sort of

Referenced in the in the comments is uh when we assume a certain macro and then the macro further deteriorates, it starts to eat into uh, any cushion that we have. Um, and therefore makes it more difficult for us to hit the target contribution margin range. Um, but that is generally the, the approach that we take and then with respect to, uh, home prices, um, you, you know, uh, home price appreciation, uh, tends to vary, um, sort of, uh, depending on the time of year. Uh, the spring is, when you tend to see the highest, uh, or positive home price appreciation and then as you get into the fall and winter, uh, home price, appreciation tends to go negative. Uh, this is no different to what we're planning today. Uh, the only, um, difference that we saw, I would say in Q2 is the positive home price of pre appreciation, uh, period of time. This year was actually the shortest that it has been, uh, in, uh, quite a number of years. Um, we provide some charts on that in uh, the back of our shareholder letter that

I would refer you to. I think they can be a helpful guide to understand that.

That's helpful. Thank you, and Selena, maybe just a follow-up for you. I know you've established the ATM equity offering about a year ago, and it doesn't look like you've accessed it to date, even with the recent improvement in stock price and volume. So, I'm just curious if you can talk about the environment or circumstances in which you would consider raising capital through the ATM.

Thank you. Yeah like generally speaking we don't comment on future Capital raises uh as for the ATM. Uh no. We have not used it yet. Uh we have a year and a half remaining to use it and we'll be opportunistic and how how we leverage it um and beyond that. Uh I would say there's not much more I can say.

Great. Thank you.

Thank you, this concludes the conference. Thank you for your participation. You may now disconnect