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Operator
Good afternoon. Thank you for attending today's OfferPad first quarter 2022 earnings call. My name is Bethany and I will be your moderator for today's call. All lines will be 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 star 1 on your telephone keypad. I'll now turn the call over to Stephanie Layton, Senior Director of Investor Relations at OfferPad. Stephanie?
Stephanie Layton
Thank you, and good afternoon, everyone. Welcome to OfferPad Solutions' first quarter 2022 earnings call. Our Chairman and Chief Executive Officer, Brian Baer, and Chief Financial Officer, Mike Burnett, are here with me today. 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. The reconciliations of OfferPad's non-GAAP measures to the comparable GAAP measures are available in the financial tables of the first quarter earnings release on OfferPad's website. I'll now turn the call over to Brian.
Brian Baer
Thank you, Stephanie. I'm excited you could all join us today. This is our third earnings call since going public, and we keep building upon our track record of delivering exceptional results. Today, I will share details about our progress in 2022, future plans, and market trends. Mike will cover our first quarter 2022 financial results and second quarter 2022 expectations. I'll start with a few highlights before we dive into details. I'm proud to share that Q1 was our best quarter in OfferPad's history. We set a new company record with $41 million of net income in Q1. Our top-line revenue increased $1.1 billion year-over-year, and we reported positive adjusted EBITDA for the sixth consecutive quarter. Demand continues to grow for our products with a 115% increase in request volume year-over-year. In the first quarter this year, companies faced labor challenges, supply constraints, rising interest rates and inflation. The housing industry saw mortgage rate increase. And with all of this, we navigated effectively and achieved exceptional results. We continue to prove we can grow at a robust pace profitably. These accomplishments are possible because we built OfferPad to address the toughest pain point in real estate, the transaction. Finding an agent isn't hard. The transaction is. At OfferPad, instead of providing customers with a list of options for different companies they can use to complete each part of their transaction, agents, renovation companies, mortgage companies, moving companies, title companies, et cetera, we take care of all these things. Providing a list of options has been the norm. Completing the transaction for the customer on their timeline is what we do best. To facilitate the transaction with the most control and certainty, allowing for the best customer experience, we own the asset at the core of the transaction. We own the home. Not only does this provide a seamless service for customers, but it also limits offer path exposure to underwriting risk by supporting a highly efficient logistics business. When we can control the majority of the transaction components, we can better control the timing and financial outcome. The power of owning the home also allows us to build a larger suite of high-margin, low-risk services that logically attach and simplify the homeownership experience for the consumer even more. These qualities controlling the transaction and building out additional services directly support our ability to meet our long-term goals. We have a clear mission, disciplined strategy, vast expertise, and an abundant drive to reimagine the real estate landscape. We are proud to lead this transformation by offering customers a simpler solution. To drill down into details for the first quarter, in Q1, we made meaningful progress in all three of our focus areas, market penetration, market expansion, and ancillary services. We added 600 new zip codes, increasing our service territory by nearly 15%. This includes 75 new zip codes in Austin, Texas, expanding that territory by 50%. And all three of our new California markets are up and running. Importantly, with each new market, we complete a post-launch review. Our culture values a continuous improvement mentality that encourages our team to keep learning, innovating, and building upon our existing strengths. We look for ways to enhance our internal processes, reduce risks, and optimize our core business tasks. We then incorporate our learnings into future launches. For example, when we entered California, we added a stock launch two weeks prior to our official opening date as a process improvement identified from prior experience. We employ experts with decades of experience who still push to learn and improve every day. That mentality fuels our ability to succeed. Looking forward, we plan to expand our services to five additional markets this year. We expect our next market launch in Fort Myers, Florida will be up and running during the second quarter. Our plans for the remainder of the year, including expanding to Cincinnati, Ohio, Fort Wayne, Indiana, Fort Collins, Colorado, and Colorado Springs, Colorado. Our growth is also visible in the expansion of our ancillary services. We are now licensed to provide acrobat home loans in South Carolina and Ohio, bringing the service to a total of nine states. This growth in the service can also be measured by the increase of our loan volume. In the first quarter of 2022, our loan volume increased 29% compared to the fourth quarter of 2021. A key driver supporting our real estate logistics and growth is the innovative proprietary technology we utilize. In fact, technology is captured as one of our three strategic priorities. These priorities include maintaining best in class operational execution, growing in a disciplined and responsible manner, and utilizing innovative technology to build upon our foundation of real estate expertise. Ultimately, these priorities help us create the best products to serve the most customers. On our last earnings call, we highlighted our 2022 focus on buyer engagement. As you know, we have a flex listing offering available to customers in addition to our express cash offer service. Through Flex, we have in-house real estate agents that can list a customer's home on the open market while allowing the customer to keep our cash offer as a backup. Our Flex agents also help customers looking to buy a home. In the first quarter of 2022, we improved our home buyer services by adding a new buyer expert role on our team. These agents focused solely on engaging with prospective home buyers. Training was revamped in Offerpad University, providing our agents with enhanced knowledge around our growing suite of solutions. and the ever-changing landscape of the real estate industry. We also enhanced the home buying page on our website, adding new search capabilities and tour scheduling. We have seen significant increase in customers using our Flex product. Our Flex team completed 20% more transactions in Q1 over last quarter, and more than doubled the number of transactions year over year. This includes 100% increase in home buyer closings compared to the first quarter of 2021. I believe our ability to meet the customer at the beginning of their real estate journey will help increase our total transaction volume, reduce costs for the company and the customer, and provide a better one-stop experience for customers. I'm excited about our Flex products growth, and we are just getting started. To further support our focus on providing the best solutions for homebuyers, we plan to initiate a soft launch of our Buyer Boost program in the second quarter of 2022. Through this program, buyers will have the advantage of making an offerpad cashback offer, increasing their ability to compete in an intense seller's market. Turning now to the broader real estate market trends, we are still seeing significant strengths in our markets. We continue to see high demand and low supply. As the real estate market changes, different opportunities will present themselves. We can adapt by leveraging the variety of services we provide and leaning into the advantage of being both a home buyer and seller. Currently, consumers have easy access to liquidity by selling their home quickly in a strong seller's market. As the market adjusts, consumers' ability to access the liquidity in their home on their timeline will become more challenging. Our ability to solve this challenge will offer even more value to our customers. Remember, too, that iBuying is less than 2% of our total market, meaning OfferPath can continue to grow even if the broader market is slowing. Offer passed on increase in market share from Q3 to Q4 last year following Zillow's exit from iBuying. Additionally, seven markets reached 8% or higher iBuying penetration in the fourth quarter last year, highlighting the increase in consumer awareness and adoption. Our top of funnel requests increased as well. In the first quarter, we hit a record high request volume company-wide. According to similar web analysis of U.S. real estate websites with over 100,000 visitors, Offerpad's website ranked in the top 10 for the largest year-over-year growth in total website visitors from 2020 to 2021. This strength in website traffic mirrors the increase in request volume we saw. Importantly, even with our significant growth, we are proud that the quality of our service remains a strength with 94% customer satisfaction rating in Q1. I don't think anyone can argue that consumers are unsatisfied with the old way of real estate with the lack of certainty and control in selling their home. We are solving that every day at Offerpad. We had a fantastic first quarter. Living our values proved once again to deliver results exceeding expectations. Importantly, the success of our company allows us to serve more customers and communities. To learn about ways Offerpad is engaging with the communities we serve, please visit our newly published ESG page on our investor relations website. There are so many great things we are already doing and so much more we aspire to do in the future. On that note, I'll turn the call over to Mike.
Stephanie
Thanks, Brian. Today I will cover our first quarter 2022 financial results, discuss the impacts from current market conditions, review some of our risk mitigation strategies, and also provide our outlook for the second quarter. As Brian mentioned, our first quarter this year was the strongest quarter in our company's history, and we again exceeded the high end of our Q1 guidance ranges. Revenue increased by over $1 billion, or 384% year-over-year, and also increased 58% sequentially. Our revenue in the first quarter of 2022 at $1.37 billion exceeded the revenue reported in the first three quarters of last year combined through the powerful combination of higher average sales prices and increases in volume from both organic growth in existing markets and new market expansions. Importantly, our robust top-line growth was not just growth for growth's sake. It was profitable growth. Q1 gross profit increased 294% from the prior year, and we reported positive adjusted EBITDA for the sixth consecutive quarter. Adjusted EBITDA was $50.4 million, the highest in company history. And after reporting positive net income for the full year 2021, we continued that trend as we set a new company record with GAAP net income of $41 million for the quarter. Excluding a $5.7 million credit to mark-to-market the value of our warrant liability, adjusted net income is $35.3 million. Gross profit this quarter was $132.1 million at a gross margin of 9.6% compared to 8.1% in the fourth quarter of 2021. This represents the seventh consecutive quarter gross profit has increased. The first quarter has historically been a strong sales quarter with lighter acquisitions, reflecting the seasonality of the real estate market. In four out of the last five years, sales have exceeded acquisitions in the first quarter. The outsized revenue growth this quarter was driven by a record 3,602 homes sold. Though we expected to show strong volume increases in the first quarter, we exceeded the top end of our guidance range by nearly 15%. This was the result of a couple of factors. First, the previously discussed longer renovation times that we experienced in late 2021 due to supply chain issues began to improve, and by Q1, this extra inventory was ready to lift. Second, market conditions for residential home sales were extremely favorable in Q1, recovering from a slowdown at the end of the year partially due to the Omicron variant. Lastly, we also saw some favorable impact in the quarter from a full forward of sales from the second quarter of 2022, as buyers were looking to lock mortgage rates on their new home ahead of the impending rate increases. On the acquisition side, we acquired over 2,850 homes in the first quarter. Again, Q1 is traditionally the lowest quarter for acquisitions due to seasonality, and we are seeing the normal increase month over month within the quarters, with March of this year setting a record for the most homes we have ever bought in a single month. We are expecting our acquisition momentum from March and April to continue in Q2 and to drive sequential revenue increases in Q3 and Q4 of this year. Our results this quarter, once again, proved our ability to achieve both strong top-line growth and enhanced bottom-line profitability. Our operational execution and focus on efficiency were key drivers in continuing to effectively leverage our cost structure, as our total operating costs improved to 6.4% of revenue compared to 7.7% in the fourth quarter of 2021 and 11.3% in the first quarter of 2021. Our strong revenue growth is allowing us to continue to invest in the business while still reducing our overhead costs as a percentage of revenue. After completing a remarkable year in 2021, we started 2022 on an even stronger footing. As interest rates have increased and are expected to rise further, we have made the proper adjustments to our applicable input variables in our underwriting and do not anticipate changes in our cost of capital to have a material impact on our business. While increasing mortgage rates will have an impact on the real estate market, we continue to see the limited supply and outsized demand for housing as the primary drivers for the current market conditions. Housing supply remained at historic lows with the national supply of housing in March at two months and the average supply in offer pads markets at 0.6 months. We saw this supply and demand imbalance once again support increasing home prices with our average sales price reaching $381,000 in Q1 compared to $357,000 in the fourth quarter last year. The majority of our growth, however, is driven by our increasing market penetration and market expansion. For perspective, in the first quarter, approximately $720 million, or two-thirds of the $1.1 billion increase in revenue, was driven by the increase in market penetration within our existing markets and new market expansion. The remaining $370 million increase in revenue is attributable to the increase in average sales price. Similar to our model adjustments accounting for increasing interest and mortgage rates, we regularly review and adjust our risk management strategies to account for other anticipated changes in the real estate market conditions. Four mitigating factors reduce our exposure when market changes occur. These factors include the limited time in which we own a home, a contribution margin after interest that can comfortably allow for decreasing home prices over our average hold-in period, geographic diversification, and product diversification. We have a strong track record of owning our inventory for less than 100 days from purchase to sale. Of that time period, the home is typically under contract to sell for roughly 30 days. Thus, our average exposure to fluctuations in the real estate market is typically limited to a short window of approximately 70 days or less. Even during the most aggressive historical declines during 2008 through 2012, National U.S. home prices declined on average less than 1% per month. This is an important factor to note as we turn over our inventory every three to four months and replace it with newly underwritten homes with updated assumptions and data points reflecting current and anticipated market conditions. We therefore mitigate our overall exposure to the effects of a severe or prolonged downturn. Second, our contribution margin after interest over the past five quarters ranged from 5% to 10%, exceeding the exposure from decreasing home prices. Our model is built to sustain periods of market fluctuations, even in a more normalized market with contribution margins after interest of 3% to 6%. Third, it is unusual for the real estate market in all cities and states to move in tandem. This is why we have methodically expanded our geographic footprint across the U.S. to 24 markets spanning 16 states and serving over 1,700 cities and towns. While we did experience more consistent movement of markets over the past two years, historically markets across the country have operated at different points in the real estate cycle. This geographic diversification provides us another source of risk mitigation. Lastly, we have two different foundational offerings with our Express Cash Offer and our Flex Listing Service. The two services each have different strengths, but also work particularly well when offered together. For example, a customer can list their home with our Flex Listing Service and keep their Express Cash Backup offer for 60 days. Because these two products appeal to different customers and have advantages in different market conditions, they offer another element of diversification to our business. we can increase or decrease our focus on each offering depending upon demand. A great example of this was the increase in demand we saw for our express cash offering through COVID as a result of social distancing and increased use of technology during that period. From an operational perspective, our ability to complete the right renovations efficiently and our ability to minimize aged inventory also reduces our inventory holding exposure. Our renovation efficiency improved in the first quarter of 2022 compared to the fourth quarter, reflecting in part our ability to effectively navigate around supply chain constraints. The average duration in renovation was 23 days in the first quarter compared to 24 days in Q4. In addition, our inventory owned over 180 days as of March 31st was below 5%, which is significantly lower than our target of less than 10%. Turning to our outlook for the second quarter, our expectations for a strong start to 2022 materialize, and we anticipate continuing that momentum into the second quarter. Specifically, in Q2, we expect to sell between 2,900 and 3,100 homes, generating revenue of $1.1 billion to $1.15 billion, or nearly a 200% increase over Q2 of 2021 at the midpoint. We also expect to extend our track record to seven consecutive quarters of positive adjusted EBITDA, estimated to be between $27 million and $37 million. In short, we expect to produce another strong quarter of profitable growth. In conclusion, we are executing our strategy and our model is thriving. Our model has proven adaptable in a dynamic environment. Our strategy of balancing robust growth with sustainable profitability has proved to be a successful combination as we once again demonstrated our ability to generate positive net income, supporting the long-term health and value proposition of our company. We will continue to execute our ground game paired with our innovative technology and expect to deliver on our commitments to our customers and our shareholders. I'll now turn the call over to the operator to begin the question and answer session.
Operator
Thank you. 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, please press star 1. 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. Our first question comes from the line of Mike Eng with Goldman Sachs. Please go ahead.
Mike Eng
Hey, good afternoon. Thank you very much for the question. I just have two. Just first on purchases, I was wondering if you could give a little bit more color about how we should think about purchases for 2Q. You know, is that going to be similar to 1Q levels, and how are you balancing, you know, increasing purchases with being price disciplined. And then on the second question, I was just wondering if you could talk a little bit more about renovations. You know, is that beginning to contribute to gross margins in the form of home price appreciation? Thank you very much.
Stephanie
Great. Thanks, Mike, for your question. For the first one, in terms of acquisitions for Q2, as we talked about, Q1 is traditionally a seasonally low quarter for acquisitions, and so our expectations at Q2 will show that seasonal ramp up. And so our acquisitions are generally strongest in Q2 and Q3. So we would expect that pattern to play out, and I don't see anything different on the landscape that would drive variations to that. Our request volumes still continue to be strong and support that view, So I think we're in good shape there. In terms of the renovations, we've also, you know, we've made really good progress on that. We spent some time in prior calls last year and the last couple quarters with, you know, some supply chain issues that slowed us down a little bit. That really, you know, That bottleneck unleashed really in the first quarter here, and the guys did a fantastic job of getting back on track. And I would say we're in a much more normalized position on that front to the point where, yes, it does come back to be a part of the equation for the margins as we go forward. We're still seeing inflation. We're still seeing price increases. Labor is tight. So it hasn't gotten easier yet. And we think that's going to continue for the second half, but we do have the process in pretty good shape as we're going forward.
Brian Baer
Yeah, one thing I would add on renovation is that renovation is going to become more important. What we've seen over the last couple of years with with supply and demand of the product that we put on there. We still want to have a really nice opera pad product that we're proud of that we put out there. But because of the demand, we've been able to, you know, we don't have to put all the bells and whistles on every home that we own. As the market changes and we start seeing more supply, this is where we can really flex our renovation muscle and We actually, as you're competing against more homes for a buyer to buy, having nice renovation in those homes becomes more important. And so that's something that we're focused on as well.
Mike Eng
Great. Thank you very much for the thoughts, Brian and Mike.
Stephanie
Thank you.
Operator
Thank you. Our next question comes from the line of Dave Lee with J.P. Morgan. Please go ahead.
Dave Lee
Great. Thanks for taking the question back, too. Just looking at your 1Q growth, it was very strong. So I'm curious if there's any particular market that drove that growth. And I think you talked about prior to the years seeing more of a growth across all markets. So I'm wondering if you're seeing any changes to that and if markets are behaving differently going forward. And then looking at your two cue guys, those feel like there's a change in the top line velocity. Just curious if you can double click on that a little bit more and explain how much of that is due to pull forward into one cue and if there's been any change to your strategy.
Brian Baer
Yeah, thanks for the question. I'll jump in just real quick on the markets. The one thing that I'm very proud of is our consistency we have had in most of our markets, if not all of our markets, with a lot of the challenging times that's been over the last year or so. We've got a really good playbook when executing new markets, when rolling out a new market. And one, there's some things we're getting them helpful. Just as we open a new market, more and more people understand our model and what we're doing is more of real estate as a service. And so we're executing well and just from consumer brand awareness when we get into new markets. And then the second part of that is just, you know, the team knowing what we're looking for in the teams to put in there and, you know, our ground game in those markets from a renovation director, acquisition director, and general manager, just across the board. Knowing what teams thrive in those markets has been really important, too. So we've been very consistent in our markets. And so I wouldn't say that... One market's really carrying this. I think we're pretty consistent around all markets.
Stephanie
No, I totally agree with that. And some of the comments about the geographic diversification as we've built out our market footprint. The other piece that benefits us in there is that there's less concentration in the individual market. So years ago, as we were starting the company, we were much more heavily concentrated in Phoenix. Now that's still our number one market. But we don't have really a single market that's, you know, 20% or more of the entire business. So, you know, the concentration in each of these markets is nicely dispersed as well. And we've got, you know, good, strong markets that we've been in for a while, the Charlottes, the Atlantas, the Phoenixes, even Tampa, you know, very strong recently as well. And then as the new markets we brought on, you know, are coming, they're getting up to speed. We're getting them up and functioning and individually profitable. on a faster pace than we ever have. So good results there. Your second question on the velocity, you know, I don't see it really, really slowing down. The business isn't linear. So if you take a look at, you know, Q4 was a little bit slower due to some macro conditions in terms of sales. So while it was strong sequentially and year over year, it was slowed down a little bit by some of the supply chain issues. And it really was, you know, Omicron at that point in time was a little bit of an issue too. So I would say Q4 might have been a little bit lighter than it would be under normal conditions. And then we were able to make that up, you know, very strongly in the first quarter here. We did have some pull forward, but I wouldn't say that's a real big piece of the puzzle. So really, as we begin to, you know, accelerate again on the acquisitions, we had a really good acquisition month in March that's continued into April. So we'll get that seasonal pickup again and kind of rebuild the inventory stock. And then I see, as I said earlier, you know, in the prepared remarks that, you know, we would expect sequential growth, you know, revenue-wise in Q3 and Q4 as we round out the year.
Dave Lee
Got it. Thank you.
Operator
Thank you. Our next question comes from the line of Andrew Boone with JMP Securities. Please go ahead. Andrew, your line is now open.
Andrew Boone
Apologies. Sorry, I was on mute. Sorry. Thanks for taking the questions and sorry for the delay there. As we look at the 2Q EBITDA guide, there's a slight decline in margins as we go from 1Q to 2Q. Can you just help parse that out? Right? It seems like there are a lot of good things going on in terms of bundling, mortgage being more broadly available. Is that just HPA slowing down? And can you help us think about the impact of that as we get to the back half of the year? So how do we think about HPA in terms of kind of 3Q and 4Q? And then secondly, great to hear 115% increase in terms of request volume in the quarter. That's really impressive. Can you just step back and more strategically talk about bringing greater awareness to the platform, to Offerpad overall? And where do you think consumers are in just being aware of iBuying overall as an option? Thanks so much.
Brian Baer
Let me take the second question and I'll let Mike jump into the first one. Yeah, the one thing that, you know, I'm extremely, especially in our markets we've been in for a while, I think we're very, very, our brand awareness, the average home seller and buyer are very familiar with our model. You know, you take Phoenix and Atlanta and Tampa and Orlando, the markets we've been in, and now all the, you know, Texas markets. I've been very happy with our brand awareness. I think people really understand what we're going to do. What I'm very excited about, we talked about this in the last earnings call, was one of the things in the education that we have to do is having people not look at us only as an iBuyer where they can come and we'll buy their home on their timeframe, but also as a solution center where they'll start looking at us for other products. And that's whether they want to, you know, partner with us in listing their home or having us help them find their next home, whether it's not for Pat or not. And so we're starting to make some headway on that with our brand. And just as a reminder to everybody, you know, we're going to a market. You're going to see us on television. You're going to see us, you know, direct mail, all the digital media channels you would expect. We attack a market from that approach, and then obviously we'll get more strategic as we move along. But our brand awareness in markets is good, and we're starting the transition of people looking at us as more of a one-stop solution center. We have a lot of work to do there, to be clear, but we're starting to kind of break that threshold a little bit, which is great, too.
Stephanie
Great. Sure. Back on the EBITDA question on the outlook. It's about 50 basis points to the top end of the guidance below where we were this quarter. And Andrew, I wouldn't really read a whole lot into that. There's nothing structurally, I think, that really changes quarter to quarter. The business is solid, and there weren't really any one-timers that moved that one way or the other. So I think we still expect to continue that. It's also very sensitive. I mean, if you – move $5 million on the EBITDA line, you're back up to the same percentage. So there is some sensitivity involved there. So nothing that we're necessarily signaling one way or the other on that. HPA, as far as that's concerned, we have said now for the past three plus quarters that, yeah, these were extremely strong times and we would expect a pattern to kind of normalize Through that time, you know, we've had good success through the fourth quarter and the first part of this year and are pleased with, you know, our track record, you know, and the market conditions, you know, underlying that. So I do expect that to, you know, to rein in a little bit in the second half of the year. Can't really put a number specifically, you know, to it, but I think directionally, you know, our expectations that we do see, you know, HPA being, you know, less of a contributory factor in the second half.
Andrew Boone
Thanks so much. Apologies for the delay. No problem.
Operator
Thank you. Our next question comes from the line of Ryan Tomasello with KBW. Please go ahead.
spk06
Good evening, everyone. Thanks for taking the questions. You know, I think, you know, in this space of housing market, innovators like Offerpad and peers seems like investors are really at this point trying to understand the durability of these nascent models through a very volatile period of potentially decelerating or declining housing fundamentals. So I realize you touched on this in your prepared remarks, but I think it would be helpful to give you the opportunity to put a finer point around the checks and balances you have in place to identifying response and changing market conditions, and maybe even pass examples that you could point to in your operating history, if any, that might help explain, you know, the business's ability to navigate favorable market conditions.
Brian Baer
And I would tell you, it's a great question. Thanks for the question. I would tell you that OfferPad is built for this. I mean, this is what we have with our real estate DNA. You know, the market conditions are always doing something. Obviously, with what we're seeing out there right now, a lot of it is highlighted and under the spotlight right now. But, you know, down to in a normal market, you know, down to a subdivision level, a street-by-street level of how we're assessing our risk of every product and every home that we buy and how we're assessing that risk. So everything that we do, It's about the risk assessment of buying, renovating, and selling a home in 100 days. And so we assess that risk. And as we build into that risk, obviously protect ourselves. The best thing about our model, we own that home for a very short period of time. But we have to be right during that period of time. And so that comes down, you hear me say a lot about logistics and execution. That's really important. But as we underwrite homes, one of the biggest monitors that we look for is active supply models. you know, it's just one-on-one supply and demand and it's so different in housing, is that, you know, you'll assess a home much different if there's 12 of the same model in the same subdivision than you would if that's the only home that's there in a one-mile radius. And so, you know, that's where – so we're watching – it's a really unique time in housing. You know, in most of our markets, you have just a few weeks' supply of homes. We are watching that closely. We meet on that weekly with checks and balances and receipts down to, hey, there's two stories in Charlotte over $500,000 price points. Is this something in the market that we're seeing? I mean, we'll get down and through data and analytics, through technology, through our ground game, which is obviously really helpful. with market dynamics in their ears the ground of what the market conditions are all of that is assessed working with our acquisition teams our renovation teams our our disposition teams um and that's where the logistics that come into it but the one point that i will say is you know as as we look at declining markets remember in real estate there's opportunity on on both ends of markets right now there, you look at our model, you could argue this is the worst time to be an iBuyer because someone in the open market can sell their home easier than they've been able to do the last 20 years. And so acquiring the amount of homes, I've been really pleased with the volume of homes we've been able to buy. And then once we own it, we can sell it on the other end, which we've discussed. But on a downturn, on the market where there's more supply, and that's something that we can really flex on because, you know, as homeowners have more trouble selling their home and it goes back to a normalized, let's say, you know, three to four to five month selling period, you know, using, you know, coming to offer pads where they can close on their schedule, it's going to be that much more valuable. So there's opportunity there and we can assess and we can build the risk into that as well. And that's why I was commenting before on renovation and some of those different things. So our property sells first and And so these are all things that, you know, we've been through and, you know, that we're prepared to do. And listen, right now with the market dynamics, you know, we're watching it closely and no one has a crystal ball. But, you know, and each market will be doing something a little bit differently over time. But anyway, so we're watching that closely.
spk06
I appreciate all that, Kyle O'Brien. And I guess, you know, follow up on the same topic of, you know, general investor concerns that we're hearing. know regarding your contribution margin targets um of three to six percent i think you know absent the potential you know the impact on mortgage rates in terms of the fundamentals of the housing market it seems like there are concerns around how uh you know offer pads financing structure is built to stomach the rate outlook that we're staring at over the next few months with aggressive rate hikes. So maybe you can just discuss what levers you've pulled to date around mitigating that impact, what you could still do, and really what kind of the max level is that you can stomach before you might need to evaluate changes to your funding sources. And as a quick follow-on to that, if I could squeeze one in, it would just be, Mike, how do you feel about the current cash position and overall liquidity position? Thanks.
Stephanie
Sure. Thanks, Ryan. So on the contribution margin, I mean, we have ranged anywhere, as I said, from 5 to 10% over the last four quarters. We were at 6.4% contribution margin after interest here. interest is a component of that, but it's not the primary component. So as Brian talked about some of the different levers that we can use in the underwriting, one of the factors that goes into that is our cost of capital. And so we're cognizant of that. It's part of the equation that we use to be able to give a good offer, a strong offer in the process. And it to date has not impeded us at all. So we're not seeing that really as a gating item. We've got in our debt capital structure about 20% is fixed. And so it's something that we keep an eye on, obviously, with the news today and the expectation of rate increases through the year. We're incorporating that into every home that we put an offer on. So I don't see that as an issue from a From a capacity standpoint, we've had great success in utilizing some very effective credit facilities. We've got great lenders that have been very supportive to the company, and we've only continued to expand those and add that to the portfolio. So I like where we're at from a debt capital structure standpoint. And then lastly on the cash position, we ended the quarter in the first quarter at nearly $200 million of cash. You know, we've been cash flow positive. You know, I'm comfortable with where we're at and our ability to execute against our business plan. As always, we'll be opportunistic. We watch the capital markets. If there's opportunities to access markets, you know, in a reasonable, you know, value accretive manner. We'll certainly do that because this is a capital-intensive business, and we recognize that, and we've got, you know, very good growth aspirations. So, you know, all those pieces go together, and we're constantly monitoring that situation, but I'm quite comfortable where we're at today.
Brian Baer
Great. Thank you. Let me just throw one other on there, just another point to that. That's the one thing that it's really nice having two main products that we have. We have our Express, which is our cash offer, and then we have our Flex. What you never want to do is buy homes when you're uncertain what the market conditions are. Obviously, we pride ourselves in with our real estate of knowing what those conditions are, but also having another product. So when there's uncertainty or we have to build more risk into the cash offer side of it, we can help that customer by putting them into a flex product that's a very high-margin, low-risk business for us as well. And so having those different solutions on there and other products that they can use, it really helps us navigate any uncertainty in the markets. Of course, then once we get comfortable with what the market conditions are, then there's opportunity in those market conditions that I mentioned before. So just wanted to point out that having those two products and those two levers is really helpful.
Operator
Thank you. And the last question comes from the line of Ben Sherland with Cancer. Please go ahead.
Ben Sherland
Hey, guys. Thanks for taking my question. I'm looking at the guidance for the home price in the quarter, and I'm seeing it at the midpoint, $375,000. When I go on the website and look at the inventory, the average home is listed for about $409,000. Is there anything to read into that or you know, about your expectations for the rest of the quarter? Or could this just be a function of, you know, the mix of lower price tones selling quicker versus the higher price tones? Any color would be appreciated.
Stephanie
Yeah, I don't think there's really anything to read into that. You know, we have seen a lot of price appreciation, you know, quarter to quarter here. there is an expectation that that slows down a little bit. There's some mix that goes into that as well. A fair amount of the more recent new markets that we've opened have been Midwest markets. Those have been lower price point communities that we're operating into. So you do get a little bit of mix involved with that. And a lot of those, since we're new into the markets, we've just gone through an acquisition cycle and more of those are coming on. on the market for us, too. So I think it's really just, you know, a matter of, you know, we don't expect the ASP to, you know, continue to rise at the same rate that it has, but, you know, I think we're in a good position with, you know, $375,000 ASP.
Ben Sherland
Okay, great. And then maybe a follow-up on kind of the new markets. In an old presentation, I believe it was from 1Q21, You showed us the spread of the contribution margin after interest of older cohorts or older markets versus newer markets. In a competitive environment like today, do those newer market openings ramp up profitability quicker than they might have in 2020?
Stephanie
They do. And I think that's actually more of a function of the refinement of the model. and how we're going at this. I mean, one of the benefits that we've seen organizationally as we've grown is our ability to, you know, retain really good, you know, regional general managers and general managers who've got a good pipeline in building our structure. And so we've been able to take, you know, our model as we've gone into a new market, you know, learn from the things that have not gone right, capitalize on the things that we know work in each market, and really get better each time we're going in there. So I would tell you we are seeing the ramp to profitability quicker. in newer markets than we did, you know, years ago, and it's been quite successful.
Brian Baer
Yeah, and I just highlighted, and I agree with that. Again, this all comes down to, and I know there's a lot of noise out there, but this all comes down to, I don't think we've said anything different from, you know, for the last six years. This comes down to execution. This comes down by paying the right price on the front end for the home to renovating it in the right timeframe and putting it on the market and selling it in 100 days. And if you can get that execution logistics down, it's a very, very good model, and customers and consumers love it. And so that's what it comes down to is execution, and our execution is getting better and better in the markets that we're in overall, and we're getting just more consistent across the board.
Ben Sherland
Okay, great. Thanks, guys. Congrats on a great quarter.
Brian Baer
Yeah, thanks very much.
Operator
Thank you. The question and answer session has concluded. I will now turn the call over to Brian Baer, Chairman and CEO, for closing remarks.
Brian Baer
Thanks, everyone. I'm very proud that our revenue this quarter was over $1 billion higher than quarter one last year. The phenomenal growth and execution resulted in another profitable quarter with a record $41 million of net income. I want to give a massive shout-out to our amazing employees. They live by our main core value, results rule. I would also like to thank each one of our investors for believing in our vision to make real estate better. Thanks a lot, everyone. Enjoy your day. Thank you for joining us.
Operator
That concludes the OfferPad first quarter 2022 earnings call. I hope you all enjoyed the rest of your day. You may now disconnect your lines.
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