Opendoor Technologies Inc

Good day, and thank you for standing by. Welcome to the Open Door Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Elise Wong, Vice President of Investor Relations. Please go ahead.

Thank you and good afternoon. Details of our results and additional management commentary are available in our earnings release and shareholder letter, which can be found on the Investor Relations section of our website at investor.opendoor.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 are statements that could be deemed forward-looking, including, but not limited to, statements regarding open-door financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion, and management objectives for future operations. These statements are neither promises nor guarantees, and undue reliance should not be placed on them. Such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in the risk factor section of Opendoor's most recent annual report on Form 10-K for the year ended December 31st, 2022, as updated by our periodic reports filed after that 10-K. Any forward-looking statements made in this conference call, including responses to your questions, are based on management's reasonable current expectations and assumptions as of today, and Opendoor assumes no obligation to update or revise them, whether as a result of new information, future events, or otherwise, except as required by law. The following discussion contains references to certain non-GAAP financial measures. The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurements to evaluate the company's financial performance. For reconciliation of each of these non-GAAP financial measures, to the most directly comparable gap metric. Please see our website at investor.opendoor.com. I will now turn the call over to Kerry Wheeler, Chief Executive Officer of Opendoor.

Good afternoon. Also on the call with me today is Christy Schwartz, our Interim Chief Financial Officer, and Dodd Frazier, President of Capital Markets in our enterprise business. I'm looking forward to speaking with you today, not only because it's my first earnings call as CEO, but because of our clarity as to the path ahead, which I believe will make Opendoor stronger than before. While navigating a major housing cycle has not been easy, we've never lost sight of our vision. We are building a managed marketplace for residential real estate that will enable consumers to buy, sell, and move at the tap of a button. Challenging times like these have the benefit of increasing urgency, demanding focus, and putting teamwork front and center. That's energizing and part of why I decided to take the CEO role. clear to me what our value proposition is for customers and where we need to focus at this moment. I also believe deeply in what we're building towards. Our value proposition is incredibly strong. About 99% of home sellers still go through the traditional real estate process, a process that remains offline, uncertain, and totally broken. Customers come to us because they crave the certainty and convenience of our cash offer that they cannot get anywhere else. Even in this moment of high spreads, We are able to convert over 10% of real sellers and earn an NPS of nearly 80. We stand alone in what we're able to offer consumers today. Given our current coverage of almost 30% of all real estate transactions in the U.S. today between our buy box and the markets we're in, we have a significant runway for future growth. As for right now, we are highly focused on stabilizing our core business and ultimately returning to positive free cash flow, and we're making solid progress. As of year end, we sold or were in contract to sell two-thirds of the loss-making homes acquired before the housing market reset, also known as our Q2 cohort, and we expect they'll be behind us shortly. The homes we've acquired since the reset are outperforming our expectations and are on track to deliver contribution margins in line with our 46% annual margin targets once they're fully sold. However, we've lowered our acquisition volumes via higher spreads in our offers, coupled with lower marketing spend. We expect to keep relatively high spreads in the near term, given continued uncertainty into how the housing market will perform. That said, we have reduced our spreads from last year's record levels based on early indicators of stabilization in the housing market, and we'll continue to do so as we see more consistent positive macro signs. Ultimately, we would expect lower spreads to translate into higher acquisition volumes. In the meantime, we're going to measure cost structure in light of how expected volumes are pacing this year and next, with the goal of returning the business to adjusted income profitability in 2024, assuming some normalization in the housing market. In addition to stabilizing our first-party business, we are aligning on three key areas in 2023 to further our progress towards building the managed marketplace for residential real estate. First is to enable more sellers to choose Opendoor. No matter the macro backdrop, sellers value the certainty and simplicity that an Opendoor offer provides. This year, we're focused on diversifying our demand funnel so that more home sellers start the journey with Open Door. The recent launch of our Zillow partnership is one key example set to substantially increase our reach in a scalable and efficient way. We're also expanding our list with certainty product, which gives sellers the option of listening on the MLS while retaining the certainty of an Open Door offer that they can take at any time. Second is to realize greater operational efficiencies throughout the business by shifting our focus from building for scale and velocity to strengthening our foundational pricing, operations, and customer platforms. This includes continued improvement in pricing capabilities to increase offer competitiveness and inventory turns. We will also invest in refactoring our tech platform and infrastructure to enhance productivity and reduce fixed expenses. We are going after at least 100 basis points of margin improvement from all these initiatives by year end, the full impact of which we expect to realize in 2024. I'll be disappointed if we don't do better than that. And finally, we're building Exclusives, our third-party product offering that will be critical to creating a managed marketplace. This will position Opendoor to have a mix of on- and off-balance sheet transactional volumes to enable capital-efficient market share gain for years to come. We plan to scale this product in three phases. First, we're focused on perfecting the consumer experience. Second, we will build liquidity and network effects in an individual market. And third, we'll refine our playbook and scale to all markets. Given our highly focused investment approach this year, we expect to be in phases one and two for 2023, meaning we'll go deep in selected markets to build liquidity and selection that's required for a great user experience. While our ambitions remain significant long-term, we're realigning our near-term goal to 30% of transactions in our marketplace by the end of the year, in those markets where we've launched exclusives. As we look ahead, we're energized about our future. We've set clear goals that will stabilize the business in the short term while strengthening our foundation for the long term. And we believe we have the team, the balance sheet, and plans in place to ensure we realize these goals. With every customer we serve, we're more convinced that the current process of buying and selling a home is broken and that Opendoor is in a position like no other to continue to transform the status quo and be the category winner that we've always envisioned. With that, I'll pass the call over to Christy to discuss our financial highlights.