Offerpad Solutions Inc

Good afternoon and welcome to the OfferPad second quarter 2022 earnings call. My name is Sam and I will be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question at this time, please press star one on your telephone keypad. I'll now turn the call over to Stephanie Layton, Vice President of Investor Relations and ESG at OfferPad. Stephanie?

Thank you and good afternoon everyone. Welcome to OfferPath Solutions second 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. Access is 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 second quarter earnings release on OfferPad's website. I'll now turn the call over to Brian.

Thanks, Stephanie. Hey, everyone. Appreciate you joining us today. I'll cover some company highlights, market trends, and our focus for the remainder of the year. Mike will share our second quarter 2022 financial results and our third quarter 2022 expectations. Highlights for the first half of the year include we generated nearly $2.5 billion in revenue and $52 million of net income. We sold more homes in the first half of 2022 than we did during all of 2021. We completed more than 6,500 renovation projects with an average timeline of 21 days. We maintained an average time from home acquisition to sale below 100 days, and we launched six new markets. We also continue to see increasing customer interest in our solutions. More people visited our website during the second quarter than ever before. Requests for an express cash offer also hit an all-time high. The interest validates the increasing level of awareness around our services and the value we provide to customers. For our flex listing service, transactions increased 47% quarter over quarter and 123% year over year. In the first half of the year alone, we signed more listing agreements than we did during all of 2021. We've made great progress growing Flex, and we expect it will be an increasingly important solution as the real estate market adjusts. The choice between our Express Cash Offer and our Flex Listing Service not only provides customers a more individual experience based on their preferences, it also provides the company diversified revenue streams with different advantages in either a buyer or seller's market. Our ancillary service offerings also grew in the second quarter. Offerpad Home Loans reached more customers in more states, with loan volume increasing 37% over quarter one. In addition, Offerpad Home Loans has a new mobile app and consumer portal, making it easier to shop this solution. The new app will deliver a completely digital mortgage experience from start to finish. Utilizing powerful communication and self-service tools, the app unites borrowers, loan officers, and Offerpad real estate experts to provide a streamlined home buying experience. Enhancing our Offerpad Home Loans product is another step towards becoming a one-stop solution for homeowners. Our 94% customer satisfaction rating in the second quarter remains a key indicator that our services continue to resonate with customers. A great example comes from Rachel West in Arizona. Rachel bundled by buying a new home, selling her existing home, and using our OfferPad Home Loans mortgage service. She posted, I highly suggest their bundling packages. I received discounts for using their realtor and lender, Rachel shared. I was so nervous buying my first pre-existing home, I learned so much. I will definitely use OfferPad again. This is why we do what we do. because there is a way to make buying and selling a home easier. Turning to the broader real estate market, the stopping we have been expecting is here. Over the last 18 years in real estate, I have learned when markets adjust, especially this quickly, it's very important to be decisive and get proactive with owned inventory. You want to sell your current inventory quickly and replace it with new inventory underwritten for today's climate. Keep in mind, most homes we own currently and homes that are just closing today were underwritten back in March and April under completely different market conditions. For example, the home we underwrote then potentially had no other homes on the market within a mile. Now today, when the home hits the market, it has 7 to 10 comparable homes. I'm going to talk through several dynamics we are seeing nationally and then walk through how we are proactively adjusting to the unique market conditions. Housing supply increased rapidly from a low of 1.6 months in January to more than two and a half months supply. The Fed increased interest rates quickly and mortgage rates increased from the historic lows to over 6% at a high point. In June alone, mortgage rates increased 75 basis points in just four business days. The pace of change in rates on top of the home price appreciation has added to consumer affordability challenges and has caused some buyers to wait on the sidelines for things to settle. Not all markets are seeing the same magnitude of change. In general, the markets that have seen the greatest rates of price appreciation are being impacted the most. For example, the Midwest and Southeast, including markets in Georgia, North Carolina, and Florida, are currently showing active buyer demand. The Southwest moves faster with visible softening in our Phoenix, Denver, Austin, and Las Vegas markets. This is a good example of how our geographic diversity mitigates risk during the transition between market cycles. The diversification we have today has been thoughtfully and intentionally established over the last six years, supporting the resiliency of our business. Our team's extensive real estate experience is another strength supporting our ability to execute through different market cycles. Our regional general managers have an average of 22 years of real estate experience, and our local general managers have an average of 17 years. So how do we put this expertise to use? We have a sophisticated underwriting model with various levers we can pull in different market conditions. Because the markets have been so hot for so long, we built in some cushion for each home in case the market slowed. We saw this happen. But this cushion has allowed us to price our inventory to sell after a swift deceleration of home price appreciation, without having to take a larger impairment than we are. To adjust, we revised our overall buy box by putting a cap on our purchase price in several markets, conducting real-time market-by-market reviews of our inventory. We are prioritizing acquisitions closer to each market's median price point, and we are offering our flex listing service to customers with higher-priced homes. We reduced the length of time available for customers to select their closing date, reducing the 90-day closing time they had in the past. Our acquisition teams updated our underwriting assumptions to account for additional risk by incorporating wider spread, adjusting for increased active inventory on the market, increased our estimated holding times, increased our service fee, and interest expense among other items. One other important adjustment we have made is with our renovations. Our team has increased the amount of upgrades on certain properties to ensure our homes have the inviting look and feel buyers want. When inventory increases and multiple competing homes are available to choose from, we want our home to sell first. This helps limit our exposure to extended holding times. Limiting our exposure to extended holding times will be increasingly important during the second half of the year. The efficiency and effectiveness of our renovations can mitigate the risk by reducing extended time to cash and aged inventories. In the second quarter, our team completed over 3,500 renovation projects, with an average investment of $17,000 per home. The average duration in renovation improved to 20 days in the second quarter, compared to 23 days in the first quarter. The sophistication of our renovations operation is unique, and it will be an important near-term strength. As a lease, we are closely watching and managing inventory over 180 days. Because of some of the proactive measures I mentioned above, as of June 30th, owned inventory over 180 days was less than 2%, well below our target of less than 10%. We know the real estate market is fluid and short-term results can fluctuate. But we believe this disruption is temporary. As one of the country's largest homebuyers, we believe OfferPad will have great opportunities as the market stabilizes into what we expect will be a stronger buyer's market. When it takes sellers weeks or months to sell their home the traditional way with no certainty and no control, we believe more and more consumers will come to Offerpad. Looking forward, I have complete confidence that we are well equipped to deliver on our long-term goals of supporting our customers and delivering sustainable shareholder value. On that note, I'll turn the call over to Mike.