Q2 2025 Offerpad Solutions Inc Earnings Call

Peter Knag: Good afternoon. Thank you for attending the Offerpad Solutions Inc. second quarter 2025 earnings call. My name is Matt, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would like to pass the conference over to our host, Cortney Read. Cortney, please go ahead.

Cortney Read: Good afternoon and welcome to Offerpad's Q2 2025 earnings call. I am joined today by Offerpad's Chairman and Chief Executive Officer, Brian Bair, and Chief Financial Officer, Peter Knag. During the call today, management will make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain, and events could differ significantly from management's expectations. Please refer to the risks, uncertainties, and other factors relating to the company's business described in our filings with the U.S. Securities and Exchange Commission. Except as required by applicable law, Offerpad does not intend to update or alter forward-looking statements, whether as a result of new information, future events, or otherwise. On today's call, management will refer to certain non-GAAP financial measures. These metrics exclude certain items discussed in our earnings release under the heading Non-GAAP Financial Measures.

Good afternoon. Thank you for attending the Offerpad Solutions Inc. second quarter 2025 earnings call. My name is Matt, and I'll be the moderator for today's call. All lines are muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press *1 on your telephone keypad. I would like to pass the conference over to our host coordinator, Cortney Read. Please go ahead.

Good afternoon, and welcome to Offerpad's second quarter 2025 earnings call. I'm joined today by Offerpad's Chairman and Chief Executive Officer, Brian Bair, and Chief Financial Officer, Peter Knag.

During the call today management will make forward-looking statements as defined in the private Securities. Litigation Reform, Act of 1995.

Forward-looking statements are inherently uncertain, and events could differ significantly from management's expectations.

Please refer to the risks, uncertainties, and other factors relating to the company's business described in our filings with the U.S. Securities and Exchange Commission.

Except as required by applicable law, Offerpad does not intend to update or alter forward-looking statements.

Whether as a result of new information, future events, or otherwise,

Cortney Read: The reconciliations of Offerpad non-GAAP measures to the comparable GAAP measures are available in the financial tables of the first quarter earnings release on Offerpad's website. With that, I will turn the call over to Brian.

On today's call, management will refer to certain non-GAAP financial measures. These metrics exclude certain items discussed in our earnings release under the heading, "Non-GAAP Financial Measures."

Brian Bair: Thank you, Cortney, and thank you all for joining us today. Before we move into Q2 results, I want to take a moment to acknowledge a recent development. We finalized a capital raise of $21 million in July. This brings our total liquidity to over $75 million, strengthening our balance sheet and supporting key growth initiatives. This represents a strong endorsement of our model, our execution, and the momentum we are building. This capital enhances our flexibility and supports our ability to make selective market-driven acquisition decisions, expand high-margin asset-right services like Renovate and Direct Plus, and strengthens our customer experience infrastructure, including home pro in-person appointments and platform enhancements. Turning now to market conditions, affordability challenges and ongoing economic uncertainty continue to weigh on both buyers and sellers, holding back broader market activity. The traditional spring selling season was underwhelming.

The reconciliations of offer pad, non-gaap measures to the comparable. Gaap measures are available in the financial tables of the first quarter, earnings release on offered Pets website, with that. I'll turn the call over to Brian.

Thank you, Cortney, and thank you all for joining us today.

Before we move into Q2 results, I want to take a moment to acknowledge a recent development.

We finalized a capital raise of 21 million in July.

This brings our total liquidity to over $75 million, strengthening our balance sheet and supporting key growth initiatives.

This represents a strong endorsement of our model, our execution and the momentum we're building.

This Capital enhances, our flexibility and supports our ability, to make selective Market driven, acquisition decisions.

Expand high margin asset right services, like renovate and direct plus and strengthens our customer experience infrastructure. Including home Pro, in-person appointments and platform enhancements.

Brian Bair: Additionally, listing inventory continues to rise, giving buyers more to choose from. This shift has created a more competitive environment for sellers, with homes sitting on the market longer and often selling below asking price. The increase in inventory is also putting downward pressure on home prices, which saw a slower pace of appreciation this quarter compared to earlier periods. Even in this buyer-favorable environment, high interest rates and tight budgets are still limiting how many buyers can take action. This mix of selective demand and cautious sentiment is causing more homes to linger and reinforcing the need for solutions that help sellers navigate with clarity and confidence. Through effective marketing and strong consumer demand, we continue to see steady request volume, reinforcing both the ongoing need for our model and the trust sellers place in Offerpad as one of the largest home buyers in the country.

Turning now to market conditions, affordability, challenges, and ongoing economic uncertainty, continue to weigh on both buyers and sellers holding back broader Market activity. The traditional spring selling season was underwhelming.

Additionally, listings are continuing to rise, giving buyers more to choose from.

This shift has created a more competitive environment for sellers with homes sitting on the market longer and often selling below asking price.

The increase in inventory is also putting downward pressure on home prices with stocks slower, pace of appreciation. This quarter compared to earlier periods.

Even in this buyer-favorable environment, high interest rates and tight budgets are still limiting. How many buyers can take action?

This mix of selective, demand, and cautious sentiment is causing more homes to linger and reinforcing the need for solutions that help sellers navigate with clarity and confidence.

Brian Bair: For nearly a decade, Offerpad has helped sellers steer through any market. In today's environment, sellers are seeing more for-sale signs in their neighborhood and feel the urgency to act, but many still don't have a clear view of what their home is worth or how to approach the sale. That's where our model stands out. We offer real solutions. Sellers benefit from a fast cash offer with the flexibility to choose their own closing date. Exposure through our Direct Plus cash offer marketplace, featuring both short-term and long-term investor offers, a program to receive cash upfront with the potential to earn more after the home sells on the open market, or a listing option guided by trusted specialized real estate experts. Turning to the quarter itself, in Q2, we delivered $160 million in revenue and sold 452 homes, reflecting disciplined execution across our platform.

Through effective marketing and strong consumer demand, we continue to see steady requests volume reinforcing both. The ongoing need for our model and the trust sellers place in Offerpad as one of the largest home buyers in the country, for nearly a decade, has helped sellers steer through any market.

Neighborhoods and fill the urgency to act that many still don't have a clear view of what their home is worth or how to approach the sale.

That's where our model stands out. We offer real solutions.

Stellar's benefits from a fast cash offer with the flexibility to choose their own closing date.

Exposure through our direct plus cash offer Marketplace featuring both short-term and long-term investor offers.

A program to receive cash upfront, with the potential to earn more after the home sales on the open market or a listing option, guided by trusted specialized real estate experts.

Now, turning to the quarter itself.

Brian Bair: Our ability to remain resilient in a slower transaction market is a direct result of our increasingly diversified model, supported by a selective, market-driven approach to the homes we choose to acquire. To stay competitive and better support sellers in this environment, we focus on enhancing speed, transparency, and service throughout the experience. Over the past few quarters, we introduced real-time pricing ranges delivered in minutes and enhanced the inspection process with quicker scheduling and fewer handoffs. In Q2, we officially launched Home Pro. This program brings specialized agents into the home through pre-scheduled appointments to walk the sellers through every available solution. We spent years building this model to serve sellers in any market, and we were the first to bring it all together. Our infrastructure delivers a true end-to-end solution powered by both people and platform.

In Q2, we delivered $160 million in revenue and sold 452 homes, reflecting disciplined execution across our platform.

Our ability to remain resilient in a slower. Transaction Market is a direct result of our increasingly Diversified model supported by a selectively market-driven approach to the homes. We choose to acquire

To stay competitive and better support sellers in this environment, we focus on enhancing speed, transparency, and service throughout the experience.

Over the past few quarters. We introduced real-time pricing ranges delivered in minutes and enhanced the inspection process with quicker, scheduling and fewer handoffs.

In Q2, we officially launched Home Pro.

This program brings specialized agents into the home through pre-scheduled appointments to walk the sellers through every available solution.

We spent years building this model to serve sellers in any market and we were the first to bring it all together.

Brian Bair: Our tenured, highly trained customer solution team gives Home Pros direct access to expert guidance and real-time support. Behind the scenes, our proprietary technology creates a faster and more seamless experience. It's the blend of human expertise and smart automation that allows us to deliver high-quality service at scale. Operational excellence and scale remain core to our approach, driving impact beyond the seller experience and into other areas of the business. We achieved another record quarter for our Renovate business, delivering $6.4 million in revenue, our second consecutive record, and our strongest performance since launching the product. Backed by experienced teams and proven workflows, we're helping investors and institutions turn distressed inventory into move-in-ready homes and doing it at scale. This momentum in Renovate is part of our broader strategy to extend our asset-light services and deepen relationships with institutional buyers.

Our infrastructure delivers, a true end-to-end solution, powered by both people and platforms.

Our tenured highly, trained customer solution, teams, gives Home Pros, direct access to expert, guidance, and real-time support.

Behind the scenes, our proprietary technology creates a faster and more seamless experience.

It's the blood of human expertise and smart automation that allows us to deliver high-quality service at scale.

Operational excellence and scale remain core to our approach driving impact beyond the seller experience and into other areas of the business.

We achieved another record quarter for our renovate business, delivering 6.4 million dollars in Revenue. Our second consecutive record, and our strongest performance since launching the product.

That I experienced teams and proven workflows. We're hoping investors and institutions turn to stress inventory, and to move in ready, homes and doing it at scale.

Brian Bair: We continue to invest in Direct Plus, our asset-light marketplace that drives demand by linking homes with institutional and individual investors. For sellers, this means greater exposure and more opportunities to receive competitive cash offers. Even amid historically low industry-wide acquisition volumes, especially from long-term holders, Direct Plus has delivered meaningful growth, driven by recent enhancements. Partners now have the flexibility to engage with homes at different points in the sales process, increasing buyer participation and leading to a notable Q2 uptick, clear momentum that directly benefits sellers. In addition to expanding access, we have broadened our marketplace to include more partners with varied acquisition strategies. This creates more competitive offers for sellers, allowing them to have the opportunity to a higher price point and the ability to close on a timeline that works for their unique situation.

This momentum in renovate is part of our broader strategy to expand our asset right services and deepen relationships with institutional buyers.

We continue to invest in direct plus our asset light Marketplace that drives Demand by linking homes with institutional and individual investors.

For sellers, this means greater exposure and more opportunities to receive competitive cash offers.

Even amid historically low industry-wide acquisition volumes, especially from long-term holders, Direct Plus has delivered meaningful growth driven by recent enhancements.

Partners now have the flexibility to engage with Homes at different points in the sales process, increasing buyer participation and leading to a notable Q2 uptick. This clear momentum directly benefits sellers.

Brian Bair: For Offerpad, it means greater asset-light deal flow and stronger alignment with partner needs. Across the core initiatives, Home Pro, Renovate, Direct Plus, and our flagship Cash Offer Program, we are building a balanced, agile, and efficient business. Each platform plays a vital role in enhancing customer experience, optimizing inventory management, and efficiently scaling our asset-light marketplace. Our recent progress demonstrates precise execution and lays a robust foundation for sustainable long-term growth. Looking ahead, our priorities remain clear: scale high margin asset-light services that drive predictable contribution profit, maintain cost discipline and operating leverage to support sustainable growth, and position Offerpad to accelerate as buyer activity and transaction volumes rebound. Finally, before I turn it over to Peter, I want to thank our team. Despite operating with leaner resources, they have continued to deliver strong results, a testament to the focus, grit, resilience, and outstanding execution across our organization.

In addition to expanding access, we broadened our Marketplace to include more partners with varied acquisition strategies. This creates more competitive offers for sellers, allowing them to have the opportunity to a higher price point and the ability to close on a timeline that works for their unique situation.

For Offerpad, it means greater asset-light deal flow and stronger alignment with partner needs.

Across the core initiatives Homepro, Renovate, Direct Plus, and our flagship Cash Offer program, we're building a balanced, agile, and efficient business.

Each platform plays a vital role in enhancing customer experience, optimizing inventory management, and efficiently scaling our asset-light marketplace.

Our recent progress, demonstrates precise execution. And Laser robust foundation for sustainable long-term growth.

Looking ahead our priorities remain clear scale, High margins asset, light services that drive predictable contribution profit.

Maintain cost, discipline and operating leverage to support sustainable growth.

And position Offerpad to accelerate as buyer activity and transaction volumes rebound.

Peter Knag: Thank you. I want to reinforce Brian Bair's message. Our team has been instrumental in driving this performance. Their discipline and focus have led to stronger margins, smarter inventory management, and more effective solutions for our sellers. As you just heard, we've been operating with greater efficiency and discipline, and that's reflected in our Q2 results. For the second quarter, we reported revenue of $160.3 million with 452 homes sold. This reflects a measured approach to inventory management aligned with our goal of driving contribution profit, maintaining capital discipline, and responding to ongoing market dynamics. At the end of the quarter, we held 662 homes in inventory with only 87 aged homes, over 180 days and not under contract. This compares favorably to prior quarters and reflects continued progress in both our acquisition targeting and pricing strategy.

Thank you.

I want to reinforce Brian's message. Our team has been instrumental in driving this performance. Their discipline and focus have led to stronger margins, smarter inventory management, and more effective solutions for our sellers.

As you just heard, we've been operating with greater efficiency and discipline and that's reflected in our Q2 results.

for the second quarter, we reported revenue of 160.3 million with

4552 homes sold.

This reflects a measured approach to inventory management aligned with our goal of driving contribution profit maintaining Capital discipline and responding to ongoing market dynamics.

Peter Knag: We acquired 443 homes during the quarter, with continued emphasis on strategic markets and properties aligned to our margin targets and overall business objectives. Gross margin was 8.9%, resulting in $14.2 million in gross profit. Operating expenses, excluding property-related costs, totaled $17 million, down 30% compared to the same quarter last year. This continued improvement reflects the structural cost reductions we've made across the business, including advertising efficiencies, platform improvement, and organizational streamlining. Adjusted EBITDA loss improved 39% to $4.8 million, marking another quarter of sequential gains. We ended the quarter with $22.6 million in unrestricted cash and over $55 million in total liquidity, including the net value of our inventory. With July's $21 million primarily non-dilutive raise, total liquidity now exceeds $75 million.

At the end of the quarter, we held 662 homes in inventory, with only 87 age tones, over 180 days and not under contract. This compares favorably to Prior quarters and reflects continued progress in both our acquisition targeting and pricing strategy.

We acquired 443 homes during the quarter with continued emphasis on strategic markets and properties aligned to our margin targets and overall business objectives. Gross margin was 8.9% resulting in 14.2 million in Gross profits.

Operating expenses excluding property related costs totaled 17 million down 30% compared to the same quarter last year.

This continued Improvement, reflects the structural cost reductions. We've made across the business including advertising efficiencies platform improvements and organizational streamlining

Adjusted EVA improved 39% to $4.8 million, marking another quarter of sequential gains.

We ended the quarter with $22.6 million in unrestricted cash and over $55 million in total liquidity, including the net value of our inventory.

Peter Knag: Also, and importantly, thanks to our strategic approach and growing mix of asset-light channels, we're able to operate with less cash on hand, giving us a comfortable runway as we continue progressing towards breakeven. To support that strategy, we also established new lending facilities with Genesis and Ascent. These facilities increase our operational agility and reduce committed capacity, giving us greater control over costs. In Q2, as mentioned, we achieved further reduction through headcount optimization, tighter management of third-party spend, and improved lending terms that lowered our cost of capital. We expect these changes to drive additional sequential improvements into Q3 and beyond. Looking ahead, we expect third quarter revenue in the range of $130 to $150 million, with 360 to 410 homes sold.

With July's, 21 million primarily non-diluted Rays. Total liquidity now exceeds 75 million

Also, and importantly, thanks to our strategic approach and growing mix of asset-light channels, we're able to operate with less cash on hand, giving us a comfortable runway as we continue progressing towards break-even.

To support that strategy. We also established new lending facilities with Genesis and Ascent these facilities, increase our operational agility and reduce committed capacity, giving us greater control over costs.

In Q2 as mentioned, we achieved further reductions through headcount optimization tighter management of third-party spend and improved lending terms that lowered. Our cost of capital. We expect these changes to drive additional sequential improvements in the Q3 and Beyond

Peter Knag: However, as we move through the back half of the year, our revenue mix will shift, with a higher percentage coming from asset-light services led by the Home Pro program. In addition, we also anticipate continued sequential improvement in adjusted EBITDA as we maintain emphasis on contribution margin and operating leverage. Our focus remains clear: operate with discipline, scale solutions, and stay positioned to capture more opportunity as the market evolves. We're building a stronger, more efficient business, one that's built to last and built to lead. We appreciate your time and support. We're now ready to take your questions.

Looking ahead. We expect third quarter Revenue in the range of 130 to 150 million with 360 to 410, homes sold. However, as we move through the back, half of the Year, our Revenue mix will shift with a higher percentage coming from asset light Services, led by the homepro program.

In addition, we also anticipate continued sequential Improvement in adjusted Eva dies. We maintain emphasis on contribution, margin and operating Leverage

Our focus remains clear: operate with discipline, scale solutions, and stay positioned to capture more opportunity as the market evolves. We're building a stronger, more efficient business that's built to last and built to lead. We appreciate your time and support. For now, we're ready to take your questions.

Matt: If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. We ask that you limit yourselves to one question and one follow-up, and then re-enter the queue if you have additionals. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions register. First question is from the line of Dae K. Lee with JPMorgan. Your line is now open.

If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2.

Again, to ask a question, press star 1.

We ask that you limit yourself to 1 question and 1, follow-up and then re-enter the queue if you have additional.

As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.

First question is from the line of daily with JP Morgan, and why is that open?

Dae K. Lee: Great. Thanks for taking my questions. I have two. First one, on home acquisition pace for the remainder of the year, could you tell us how it's pacing so far in Q3 and how you're thinking about home acquisition for the back half of the year? When you are underwriting homes right now, is it still with the assumption of higher spreads, or do you feel like you have enough visibility where the spreads can normalize a little bit? Secondly, you are seeing very strong momentum in Renovate. I am just curious what has been driving that and how you are thinking about the pace of Renovate growth in the back half of the year.

Great. Thanks for taking my questions. I have to, um, first 1 on the home acquisition phase. Um,

For the remainder of the Year, could you could you tell us how its spacing so far in 3Q and how you're thinking of a home acquisition, for the back half of the year? And

when you're underwriting homes right now, is it still with the Assumption of

Um, higher spreads, or do you feel like you have enough visibility where the spreads can normalize a little bit? And then secondly, you're seeing very strong momentum in Renovate, and I'm just curious what's been driving that and how you're thinking about the pace of Renovate growth back in the back half of the year?

Peter Knag: Hi, I will jump in. This is Brian. Hey, Dae, good hearing from you. Renovate, several things happening there. We continue to sign more and more customers up to the program and deliver good results on that end of it. So our efficiency is still strong. Even in this environment where a lot of the large institutions are on the sidelines or at lower volumes, we have really focused down the pipeline a little bit with the mid to small investors that we could do renovations for. The team has done a fantastic job there. One of the things we say all the time is that if somebody likes the renovation person that they are using, I would say put a side by side, and we normally will beat them from the cost, the efficiency.

To the program and, uh, deliver good results on that end of it. So our efficiency is still strong and, uh, you know, even in this environment where a lot of the large institutions are on the sidelines or at lower volumes. Um, you know, we really focused on, um, down the pipeline a little bit with the mid to small.

Peter Knag: Doing tens of thousands of homes on our own behalf leads to a lot of really good efficiencies there. So really happy with what we are seeing in the momentum on that end of it. As far as the pricing and how we are underwriting the spread side, we are still having a very disciplined approach there. As I mentioned the last several earning calls, as we continue to see a lack of buyer excitement, the affordability is still an overhang of everything. So we are still focused on an area that there are pockets in every market that are still working that are decent transaction areas. Then there are definitely pockets that are not. As I mentioned before, outlying areas, next to new builds, those are the kind of things that we are being very cautious of buying that.

Um uh investors that we could do Renovations for. And so the team has done a fantastic job there and. And uh, and so, you know, it 1 of the things we say all the time is that if somebody likes the renovation person that they're using, I would say put a side by side, um, and we normally will be them from the cost, the efficiency and, you know, doing tens of thousands of homes on our own behalf, you know, leads to a lot of, a lot of really good efficiencies there. So really happy to, um, with with what we're seeing the momentum more on on that end of it, as far as the pricing, how we're underwriting the spread side. Um, we're still having a very disciplined approach there. Um you know, as I mentioned the last several earning calls as we continue to see um, a lack of buyer excitement. Um, and you know the affordability is still an overhang of everything. And so, um, you know, we're we're still focused on uh, in areas that there's pockets in every Market that that are still working that are decent transaction areas and then there's definitely Pockets that are not. Um, and as

Peter Knag: But interior homes that have good transactions, we are still buying and focused on that type of product. We are still focused on spread. The way we look at spread, it is just a risk metric for us of what we are seeing in the environment. So as we see more actives and more for-sale signs going up in areas, we want to be really careful from a supply and demand issue of just that our home shows well, that it is going to sell before some of the other ones. But also, we are not buying a home, even if it is the lowest price in the area with a lot of supply that is getting chased down by prices. Did I cover?

Matt: Yeah, Dae, any follow-ups on that or you want to jump in?

Peter Knag: Yeah, I would just add to that on transactions, we are guiding this quarter to somewhere in the neighborhood of 400 Cash Offer transactions in Q3. That is along the lines as Brian Bair was getting to, and we have talked about in prior quarters, we are underwriting at higher spreads, so intentionally coming down in volume for our Cash Offer. Importantly, you are going to see a revenue mix shift along the lines of what we have talked about, and Brian Bair has also talked about in prior quarters towards a higher percentage of asset-light transactions.

As I mentioned before, outline areas, um, next to New builds, th those are the kind of things that will be in very cautious of buying that but, um, Interior homes that have good transactions were, um, were still buying as uh, buying and focused on that that type of product. Um, and we're still focused on spread and the way we look at, uh, spread, it's it's just a risk metric for us of of what we're seeing in the, in the environment. Um, and so, as we see more active and more for sale signs going up in areas, we want to be really careful from a supply and demand issue um of just that that our home 1 shows. Well, that it's going to sell before some of the other ones, but also we're not buying a home. Um, even if it's the lowest price in the area, with a lot of a lot of Supply um, that it's getting getting chased down by uh, by by by prices. So, um, did did I cover or are they any follow-ups on that or any? Um,

Or do you want to jump in? Yeah, I would just, I would just add, um, add to that from on transactions or guiding this quarter to, you know, somewhere in the neighborhood of 400 cash offer transactions in 3Q, and that's along the lines as Brian was, was getting to. And we've talked about in Prior quarters, we're underwriting at at higher spreads. So intentionally coming down in volume, uh, for our cash offer. But importantly, uh, you're going to see a revenue mix, uh, shift that along the lines of of what we've talked about. And, and Brian is also talked about in Prior quarters, uh, towards a high.

Peter Knag: The volume that we will be focused on will not be only the Cash Offer moving across the back half and into next year. It will be the total real estate transaction volume that includes with Home Pro, which launched in June, includes continued focus on underwriting and selling into institutional large financial institutions, SFRs, and smaller investors, but also selling into partner Cash Offers that do not go onto our balance sheet. Finally, and this is new, not new to us, we have done this in other forms previously, but selling it new with Home Pro, selling into a traditional list. Those are all going to be factors as you look at volume and as we in a quarter, when we get into next quarter, we will likely shift our guidance from Cash Offer home sold to total real estate transaction volume.

Higher percentage of asset light transactions. Um, so uh, the volume that, that, you know, will be focused on will not be only the cash offer moving across the back half and and into next year, it'll be the total real estate transaction volume that includes with homepro, which launched in in June includes continued, focus on underwriting and and selling into institutional, large financial institutions, sfrs and and smaller investors. Um, but also selling into partner, um, cash offer, uh, cash offers that don't go onto our balance sheet. And then finally, and this is this is new, uh, not new to us. We've done this in other in other forms previously, but selling it new with home Pro selling into, um, a traditional list. So, uh, so those are all going to be factors as you look at volume and, um, and as we in a quarter, when we get into

Peter Knag: One of the things I will just add there too, Dae K. Lee, this is a really interesting time because a lot of the sellers that are coming to us, the people that are selling in this environment are selling, they want the Cash Offer. It is extremely valuable to them. They have the certainty of the cash, but also the closing date. We also, with our Home Pro, we also want to give them different alternatives with the ability to get some of the cash now and then the benefit of some of the upside, and then a listing if they want to choose to list their house on the open market as well.

Uh, to next quarter we'll likely shift our guidance from cash offer home sold to to to, to Total real estate transaction volume. Yeah, 1 of the things. I'll just add there to, uh, they would, this is a really interesting time because, uh, a lot of the sellers that are coming to us. Um, they're the people that are selling this environment are selling. They they want to the cash offer is extremely valuable to them. They have the certainty of the cash but also the the closing date.

Peter Knag: It is just interesting because of the timing of the individuals right now is we are seeing a lot of urgency and more, I would say, people that are in, like I said, a life moment that need to sell than we have seen in quite a while.

Um, but we also with our home Pro, we also want to give them different Alternatives with, um, you know, the ability to get some of the cash now and and, uh, and then the benefit of some of the upside and then the a list if they want to choose to to, to list their house in the open market as well. So, um, so it's it's, it's just interesting because of the timing of of the individuals right now is is, um, we're seeing a lot of urgency and more. I would say people that are in uh, like I said, a life moment that need they need to sell, then we've seen in quite a while.

Dae K. Lee: Got it. Thank you. If I could just ask a quick follow-up on the asset-light offering mix going forward, you did talk about mix shifting towards more of those offerings. But right now, Renovate is the biggest piece of the other services revenue, you also talked about Home Pro becoming bigger. So I was curious, when you look ahead, do you feel like Home Pro is going to be a bigger piece of the overall asset-light offering or how should we think about that mix shifting going forward?

All right, thank you. If I could just ask a quick follow-up on at the light offering that's going forward, you did talk about mix shifting towards more of those

Offerings. Um, but right now renovate is

The biggest piece of the other services Revenue just but you also talked about home Pro becoming bigger. So just curious like when you look ahead like do you feel like home Pro is going to be a bigger?

Peter Knag: Yeah, I would say definitely. Again, the idea and the goal from when we started Offerpad Solutions Inc. was to be a one-stop solution center for customers that they can come and get exactly whatever the real estate needs is done. So obviously, the foundation is our cash offer, but also, that necessarily, especially in environments like this, even if our cash offer for whatever reason doesn't work, we can provide another cash offer through our Direct Plus channel. I think that's where you're going to see a lot of opportunity over time as the market starts to get back to a normal life and you start seeing more of the institutions and those jumping in, you'll see more of the Direct Plus side. You'll also see a lot of sellers that want to test the market by listing.

Um, piece of the overall asset line offering, or how should we think about that mix shifting more forward?

Peter Knag: So our ability to get into the living room and having face time with the customer and figure out what is the best solution for them, that's always been kind of our mission statement is let's figure out what the best path forward is. Some of the questions we get is, or you know, we've had before is what's the perfect mixture? I don't know if there ever is a perfect mixture. I'd love to see it completely blended across all of our products. Right now, our Renovate product is just a B2B, and it's not B2C yet. A lot of the other things we're doing is more B2C. I won't say that way forever, but you're definitely going to see Home Pro definitely have more of an impact as customers have more choice in the path that they want to choose.

I would say definitely. Um, again the the idea and the goal for when we started offer pad was to to, to be a 1-stop solution Center for customers, um, that they can come and get exactly whatever the real estate needs is done. And so, obviously, the foundation is our cash offer but also, you know, that necessarily um especially environments like this. Even if our our cash offer for whatever reason doesn't work, we can provide another cash offer through our direct plus Channel um and I think that's where you're going to see a lot of opportunity over time as as the market starts to get back to a normalized and you see start seeing more of the institutions and those jumping and you'll see more of the direct plus side. But also you'll see a lot of um sellers that want to test the market by listing. And so you know, our ability to get into the living room and having FaceTime with the customer and figure out what is the best solution for them? That's always been kind of our. Our mission statement is let's figure out what the best path forward is.

And some of the questions we we, we get is or, you know, we've had before is what's the purpose? Perfect mixture. Um, I don't know if there ever is a perfect mixture, and I'd love to see it completely Blended across all of our products. Um, you know, right now our renovate product is just a B2B business and, you know, it's not B to C yet. Um, a lot of the other things we're doing is more B to C. Um, we'll say that way forever. But um, but but so yeah, you're definitely going to see home Pro. Um, definitely have more of an impact as as customers have more choice in in in the past that they want to choose.

Dae K. Lee: Got it. Thank you.

All right. Thank you.

Matt: Thank you for your question. Next question is from the line of Ryan Tomasello with KBW. Your line is now open.

Thank you for your question. Next question is from the line of Ryan Thomas solo with KBW. If you want to open

Juan Chong: Hi everyone, this is Juan Chong on for Ryan Tomasello from KBW. Thank you for taking questions. On the Home Pro offering, could you please elaborate a little bit on how the economics are like the Home Pro compared to a traditional cash offer?

Hi everyone. This is Juan for Ryan Thomas and KBW. Thank you for taking questions. Uh, on the Home Pro offering, could you please elaborate a little bit on how the economics are like with HomeCode compared to a traditional cash offer?

Peter Knag: I think the volume was pretty low, but I think you are asking about the economics on Home Pro. What I would stress there, and thanks for the question, it is an important question, as we move towards a revenue mix and a transaction volume mix that is heavier weighted towards the asset-light Home Pro services, the gross profit will be important. From a revenue recognition perspective, for Cash Offer Program, we recognize gross revenue with a single-digit margin. For the asset-light services, for selling into institutions and the Home Pro services, we recognize net revenue, which is the same or very similar to gross profit. So you are going to see a shift in our revenue mix and our gross profit mix that drives increasing gross profit, but decreasing revenue just because the margin profile is going to change.

I thank you. The the uh, the volume was pretty low, but I think you're asking about the economics on on homepro.

um,

and what I, what I stress there and, and thanks for the question. It's an important question. Um, the the, as we move towards a, um, a a revenue mix in in a transaction volume mix that's heavier weighted towards the asset light home Pro Services. The, uh, the, the growth profit will be, um, will be important, um, for, uh, from a revenue recognition perspective for cash. Offer, we recognize gross revenue with a, you know, with a single digits margin for the asset light Services. Um, for for, for selling into institutions, in the home Pro Services, we recognize net revenue, which is, which is the same or very similar to gross gross profit. So you're going to see a, a, a, a, a a, a shift in in, in our Revenue mix, uh, and and our and our growth profit mix that um, that that drives increasing gross profit. But

Peter Knag: From a transaction, the most important thing is from a transaction value perspective, regardless of whether we are selling, taking a mid-single-digit fee on a cash offer product or selling into institutions, the total value to the bottom line is in the same ballpark, is similar per transaction. That is what I would focus you on.

decreasing Revenue, just because the margin profile is going to change from a transaction. The most important thing is from a transaction value perspective, regardless of whether we're selling, you know, taking a, a mid single digit, uh uh fee on on a on a cash offer product or selling into institutions. The the total value to the bottom line is, is in the same ballpark is similar per transaction and so that's that's what I'd Focus you on.

Juan Chong: Okay, great. Thank you.

Peter Knag: The one thing I will just add there from. Oh, sorry, did you have another question? Yeah, I was just saying the one.

Okay, great, thank you. And just a quick, the 1 thing I I I'll just add there from

Oh, sorry, did you have another question?

Juan Chong: I will ask it after your comment.

Peter Knag: Okay, sorry. Yeah, I was just going to say the one thing I would tell you with Home Pro as we look at it is, the idea is if our request volume has stayed strong over the last, really after over the last several years, considering all the market conditions, the lack of the lower transaction volume, everything else, we still have a lot of our markets, people coming to us first to figure out what they can sell their home for and get a cash offer for and then figure out other solutions. The idea of Home Pro is to capture those customers, even if the cash offer before, if you have one, if you just have a cash offer, the cash offer works, yes or no, it is the right price, yes or no, but to really be able to provide the customer with other solutions.

Um yeah, I would just say the 1 the 1 Thing.

Peter Knag: Also, we are really indexed on our conversion, on our overall conversion to all of our funnel. Whether people are ready to transact now or in the next few months, we are really focused on being part of them or with them through that journey and whatever product it is. A lot of it is from the margin that Peter Knag mentioned, but also from a conversion perspective is to make sure that we can find a home and what works right for that seller.

Our markets people coming to us first to figure out what they can sell their home for and get a cash offer for and then figure out other Solutions. And so the idea of Home Pro is to capture those customers even if the cash offer before. If you have 1 if you just have a cash offer the cash offer Works. Yes or no. It's the right price? Yes or no. But to really be able to provide the customer with other Solutions. Also um, we're really indexed on our conversion on our overall conversion to to all of our funnel and whether people are ready to to transact now or in the next few months, we're really focused on being part of them or with them through that journey and whatever what whatever product is. So a lot of it is from the the margin that Peter mentioned it, but also from a conversion perspective, um, is to make sure that that we can find a home and what works right for that for that seller.

Juan Chong: Got it. Just to quickly follow up, following the recent equity raise in the new credit facility, how comfortable are you with Offerpad Solutions Inc.'s current capital position and the ability to self-fund a path to break-even cash flow?

Got it. And just to quickly follow up regarding the recent equity REITs in the new credit facility, how comfortable are you with the company's current capital position and the ability to self-fund the path to break-even cash flow?

Peter Knag: We are comfortable. In fact, our total liquidity at the end of this quarter was and is around $55 million between our cash and the net equity in our homes. At the end of the first quarter, it was around $60 million. We moderated, but not by a tremendous amount. We really made a lot of big strides on our fixed cost, as identified in the prepared remarks. Our fixed expense is $17 million. Based on continued cost outs, that is going to come down, continue to come down into Q3 and beyond. Our fixed cost is getting really, really low at a nice level that we are very comfortable with. At the same time, our gross profit is improving.

Yeah. Um,

We we are comfortable, in fact, you know, our our total liquidity at the end of this quarter. Um,

Peter Knag: What I would say is we have a path, we had a path without the capital raise, but we are excited about the flexibility that the capital raise gives us from a number of different perspectives, including making some changes operationally around how we fund homes, giving us some additional flexibility with the additional liquidity with our warehouse facilities, and importantly, improving our cost of capital. We have moved to a place where historically we had some significant commitment fees from financial institutions, and we have taken those down to a very, very low level, which has helped us with our cost outs. The last thing that I would say on the capital raise is I just want to stress that it was primarily non-dilutive, and that was our goal. We raised roughly the level of cash that we were looking for. We did it in a primarily non-dilutive structure.

Was and and is around 55 million between the our cash and the net equity in our homes at the end of first quarter, it was around 60 million. So we so we, you know, we moderated but but not by. Uh, but not by a tremendous amount. We really uh uh made a lot of big strides on our fixed cost as identified in the prepared remarks. Our our our fixed expense is 17 million and based on continued cost outs that you're that's going to come down, uh, continue to come down into third quarter and Beyond. Um, so our our our our fixed uh, cost is is getting really, really low at a at a, at a nice level uh that we're very comfortable with at the same time, our gross profit is improving so. So what I'd say is is is is we have a path, we had a path without the without the capital raise, but we're excited about the flexibility that the capital raise gives us from a number of different perspective and including

In making some changes, operationally around how we fund homes, um, uh, get giving us, um, some additional flexibility with with the additional liquidity, with, with our warehouse, uh, facilities. And then importantly, um, uh, improving our cost of capital. We've, we've moved to a place where

Peter Knag: We met with a lot of different investors and with a group of investors that were across the two tranches of equity and debt that we are excited about. We concluded it on that basis.

Um, you know, historically, we had some some significant commitment fees from financial institutions and we've taken those down, uh, to a very, very low level, uh, which has been, which is, which has helped us with our, with our cost outs. And then, um, the last thing that I'd say on on the capital raise is I just, I want, I want to stress that it was primarily non-dilutive. Uh, and that was our, our goal, we raised about the, you know, roughly the level of cash that we were looking for. We did it in a, in a primarily non-dilutive, uh, structure, um, with with uh, we met with a lot of different investors and with some with some, with a group of investors that were across the, the 2, Trae, and and debt that that were excited about. Um and uh, um,

And, uh, um, and so we concluded it on that basis.

Juan Chong: Got it. Thank you.

Got it. Thank you.

Matt: Thank you for your question. The next question is from the line of John Colantonio with Jefferies. Your line is now open.

Thank you for your question.

Next question is from the line of John Colony with Jeffrey as I open.

Vincent Kardos: Hey, thanks for taking the question. This has been for John. It is Jefferies. You have historically talked about 1,000 homes per quarter as sort of the North Star for the point at which scale should combine with the mix shift to asset-light services to help you deliver break-even EBITDA and cash flow. Maybe just talk about how you view the path to 1,000 homes from here or whether that is even still a relevant goal now that there is clearly this increased focus on asset-light transactions. If not, whether there is a new target to keep in mind, whether that pertains to acquisitions in the traditional sense or whether it is total real estate transactions and what the timeline looks like at this point. Just a quick one on following the cost outs underwent in April.

Hey, thanks for taking the question. This is Vincent Han for John, it's Jeffries. Um, so you've historically talked about a thousand homes per quarter as sort of the North Star for...

The point at which scale should combine with the mix shift to asset light services to help you.

Deliver break even even done and cash flow. Um,

So, maybe just talk about how you view the path to a thousand homes from here, or whether that's even still a relevant goal. Now that there's clearly this

Vincent Kardos: Curious to know how you are thinking about runway on those initiatives in the back half. Thanks.

Increased focus on asset-like transactions. Um, and if not, whether there's a new target to keep in mind, whether that pertains to, um, acquisitions in the traditional sense or whether it's total real estate transactions, um, and what the timeline looks like at this point. And then just a quick one on following the cost outs under 1 in April, just curious to know your thinking about runway on those initiatives in the back half. Thanks.

Peter Knag: Okay, thank you, Vincent Kardos. For the 1,000 homes that we are hoping we would get that question, it is something that we have been thinking a lot about as far as what we do, in particular from a guidance perspective there. As I alluded to earlier, 1,000 real estate transactions continues to be our North Star. It is just a shift. We will do directionally fewer asset or balance sheet-based cash offer purchases where we take the home into our inventory, but we will be adding on transactions with partner cash offers as well as with financial institutions through our Direct Plus Buyer Program and through participating in the traditional list. The aggregate impact to the bottom line across all those transactions, even though the revenue recognition is different, is similar, and we are still heading towards 1,000 transactions, and that is still roughly where we hit break-even.

Um, yeah, for the Thousand. Um, uh, homes, that were hoping we'd get that question. I I I that's that is something that that, um, uh, that we've been thinking a lot about as far as, as, as what we do from a, in particular, from a guidance perspective there. And as I alluded to earlier um, the thousand, a thousand real estate transactions continues to be our North Star. It's just a shift. We're still, you know, we're um, we will do, um, you know, directionally fewer asset head or or balance sheet based cash offer, um, purchases where we take the home into our inventory. But we'll be adding on transactions with, uh, with partner, cash offer, ca cash offers, as well as, with financial institutions, through our direct plus um, uh product uh, and and through participating in the traditional list. So, um, the you know, the the aggregate impact of the, to the bottom line across all those

Peter Knag: I think you mentioned cost outs as well. We have come a long way, not quite, but almost $150 million in cost outs over the last two years. We are at $17 million in quarterly OpEx. That is going to come down more as the Q2 cost out initiatives across both employee costs as well as third-party spend come into the actual results in Q3. We are very focused on managing cost creep. We are going to keep the cost out that we already took out, and then we are going to always continue to look at additional opportunities. The one thing I will add on that just from a practical operational standpoint too, from the cost outs, because how do you achieve, obviously, if you are making reductions, how can you achieve what we need to achieve?

transactions even though the the the revenue recognition is different um is similar and and we're still heading towards uh a thousand transactions and that's still roughly where we had break even

Peter Knag: I will tell you, we are getting, like with Home Pro, the efficiency we have seen since we started testing Home Pro mid to later last year in just various markets and different variations. The product and technology lift of Home Pro is really allowing us to scale different, be able to provide a range offer instantly, the way that we are scaling some of the other products. I think technology we are getting a lot better and smarter on how we are going to go. As we scale the business again, we are going to scale it much, much, much smarter. Quite honestly, I think much faster too from some of the efficiencies we are seeing on the technology side. We are definitely leveraging that as we continue to build out Home Pro.

And I think you mentioned cost outs as well. Uh, we we've done, we've come a long way, not quite, but almost 150 million in cost outs over the last, uh, 2 years, we're, we're at 17 million in uh, in quarterly outex that that's going to come down more as the as the second quarter um cost down initiatives across both employee costs, as well as third-party spend um um, you know, come in uh um come into the to the the actual results in in third quarter. Um, and uh, we're very focused on on, on managing cost creep. So we're going to keep the cost out that we already took out. And then we're going to uh, always continue to look at look at additional opportunities. Yeah, the 1 thing, I'll add on that, just from a practical operational standpoint too, from the cost outs because how do you achieve, obviously? If you're, if you're, uh, if you're making reductions, how can you achieve, what we need to achieve? And I will tell you, we are getting

Um like with home Pro the efficiency we've seen since you know, we start testing home Pro um Mid to later last year um and just various markets and and and and different variations. But the Techno the product and Technology lifts of Home Pro, um is really allowing us to scale different. Be able to provide a range of offer instantly, um, the the way that we are, um, uh, scaling, some of the other, uh uh, some of our other products.

Um, so I think technology, we're getting a lot better and smarter on how we're going to go. So, as we scale the business, again, we're going to scale it much much, much smarter, um, quite honestly, I think much faster too from from some of the efficiencies we're seeing on the, on the technology side. So, um, definitely leveraging that um, and uh, as as we continue to to build out home Pro.

Matt: Thank you for your question. There are currently no further questions registered. As a reminder, it is star one on your telephone keypad. There are no additional questions waiting at this time. That will conclude the conference call. Thank you for your participation. You may now disconnect your lines.

Thank you for your question.

They're currently no further questions registered. So as a reminder, it is star 1 on your telephone keypad.

There are no additional questions waiting at this time. So that will conclude the conference call. Thank you for your participation. You may now disconnect your lines.