Opendoor Technologies Inc

Good day, and thank you for standing by. Welcome to the Open Door Third Quarter 2023 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Kimberly Niehaus, investor relations officer. 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 doors financial condition, anticipated financial performance, business strategy and plans, market opportunity 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 31, 2022, as updated by our periodic reports filed after that 10-K. Any forward-looking statements made on this conference call, including responses to your questions, are based on management's reasonable current expectations and assumptions as of today. An open door assumes no obligation to update or revise them, whether as a result of new information, future events, or otherwise, except as required by law. The following discussion contains references to certain non-GAAP financial measures. The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurements to evaluate the company's financial performance. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. I will now turn the call over to Carrie Wheeler, Chief Executive Officer of Opendoor.

Good afternoon. Also on the call with me today is Christy Schwartz, Interim Chief Financial Officer, and Dodd Fraser, President of Capital and Open Exchange. As a market-leading platform that is leveraging technology to transform and simplify the way people buy and sell their home, Opendoor has the opportunity to build a generational company and disrupt the massive market. Over the past year, our team has been hard at work scaling our customer acquisition channels and improving our pricing systems and cost structure. We believe we've laid the foundation to reaccelerate revenue next year as we build for a future of sustained profitable growth. In the third quarter, Opendoor purchased 3,136 homes. This was an increase of 17% quarter over quarter, despite the fact that average new listings were down 8% within our buy box in our markets, demonstrating our ability to gain share despite lower market transaction volumes. Throughout 2023, we made cost structure and pricing accuracy improvements and passed those through to spread reductions, which in turn enabled us to increase acquisitions quarter over quarter. These spreads improvements, combined with our growing partnership channels and plans to increase advertising spend in the first half of 2024, should allow us to accelerate home acquisitions next year. Our third quarter results demonstrate continued execution in what remains an uncertain US housing market. Mortgage rates hit a 22-year high of 8% in October, up over 100 basis points since reported Q2 results in August. Market clearance rates, while still at historically healthy levels, have declined more than expected with higher rates further depressing buyer demand. While these market moves do have implications for our business, we continue to operate within our risk management framework and focus on controlling what we can control. Based on current conditions and signals we're observing, our plans to increase acquisition volumes next year have not changed. We continue to closely monitor leading indicators so that we can respond to shifts in the market. Acquisitions from our partnership channels increased 33% sequentially in Q3 and are up over 76% compared to Q1. We continue to make progress on expanding our partnership channels across online real estate platforms, agents, and home builders. Our exclusive partnership with Zillow continues to scale and is live in 45 markets as of this week. With more opportunities for customer re-engagement in this channel and our previously launched markets continuing to mature, we saw meaningful transaction growth in the quarter. In early October, we announced a partnership with eXp Realty, the largest independent real estate company in the world. This agreement enables eXp's agents to request a cash offer on qualifying properties on behalf of their clients directly within their eXp dashboard. Ultimately, we believe Opendoor enables agents to better serve their clients and improve productivity. By leveraging AI and other technologies, we continue to drive operational excellence across our platform, including pricing, inventory management, and home operations. In terms of pricing, our proprietary home data asset that we've built over the last decade, coupled with deep human expertise, is enabling Opendoor to build proprietary real estate-specific AI models. For example, we use AI to extract home conditions from customer-provided inputs, such as chat conversations, images, and videos. These inputs are used by our centralized pricing team and improve our pricing accuracy with the objective of durably reducing spreads. For inventory management, we continue to develop technology and improve processes to centralize operations and conduct quality control remotely. We get real-time home-specific signals from our proprietary home security system and customer and agent feedback from each home visit, which enhances our ability to quickly and cost-effectively respond to issues. We leverage AI to automatically categorize feedback and extract data points. Maintenance quality has improved significantly with 99% of work meeting our quality standards of our statements of work. Additionally, agent feedback has indicated that listed home quality improved by over 10% throughout the year. Finally, we continue to enhance our transactions and operations platforms in Q3. We piloted automated operator work assignments successfully to more effectively load balance work across operators and are expanding it to all operator groups over the next two quarters. We also recently revised our end-to-end CRM. Changes to the platform have enabled us to respond to customers faster, capture more useful structured data, and ensure that each step of the transaction is completed on time. Switching gears for a minute, I wanted to make a comment on potential disruption in the real estate industry regarding the Buyer Broker Commission. Just this week, a jury ruled against NAR and other brokerages in one of several lawsuits that are challenging the practice of listing agents, and therefore home sellers, being required to pay the buyer broker's commission. To be very clear, Opendoor's core business does not derive revenue from the buyer broker commission. On the contrary, the buyer broker commission is a cost that we pay when we resell our homes. The BBC currently represents approximately 2.5 points of our overall cost structure, which is meaningful. If the buyer broker commission were reduced or went away, those costs to us would be reduced. At Opendoor, we built our entire platform with a focus on giving customers transparency and choice as to how they sell their home. As such, we believe we're well positioned to improve the experience of sellers and buyers as changes in the real estate ecosystem materialize. Before I turn the call to Christy, I'd like to thank the Opendoor team for their continued hard work to reshape the real estate industry and fix a broken process. We believe we've built the foundation for a future of profitable growth as we exit the year with an improved cost structure, strong balance sheet, and scaled customer acquisition channels. And we remain steadfast in our mission to power life's progress one move at a time. Christy will now review guidance in the financial results. Thank you.