Offerpad Solutions Inc

good evening thank you for attending today's offerpad third quarter 2022 earnings call my name is megan and i'll be your moderator for today's call i will 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 offerpad solutions third quarter 2022 earnings call our chairman and chief executive officer brian bair

And our key 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 on the financial table of the third 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, operational updates, and our focus for the remainder of the year. Mike will share our third quarter 2022 financial results and our fourth quarter expectations. In the third quarter, we maintained an average time from home acquisition to sell below 100 days, kept inventory aged over 180 days at 5%, or 150 homes, earned a 93% customer satisfaction rating, and grew our listing and buyer closings by 100% year over year. Given the macro and real estate market conditions in the third quarter, these accomplishments really speak to the flexibility of our model and the value our products offer to homeowners. In the second quarter, we shared that the softening of the real estate market was here. Since then, the economy, consumer sentiment, and the real estate market have changed significantly. An increasingly hawkish Fed, persistent inflation, substantial increases in mortgage rates, and further escalation of global conflict have put the financial and credit markets on edge. The downstream impact left residential consumers in a temporary state of shock. Since we launched in 2015, most of the U.S. has experienced a seller's market. But the value proposition we provide is even stronger in a buyer's market. When sellers can't go from listing to pending in days, and instead it takes weeks or months, iBuying becomes even more attractive. And if we are smart about how we underwrite homes in the market, there is an opportunity for enormous growth. But we aren't there yet. Right now, we are in between a seller's market and a buyer's market, and expectations between the two parties are vastly different. Sellers are holding on to the idea their home is still worth what it was six months ago, and buyers aren't willing to engage at those prices. This in-between phase is the most challenging period for the entire real estate market, including iBuyers. I'd like to discuss today how we have planned for and are navigating this time. Offerpad's core strategy of providing a comprehensive suite of real estate solutions is more important than ever right now. Because of our diverse product offerings, including our asset-light listing service, Offerpad has continued to provide customers more certainty and control. In addition, we are continuously innovating to create new products that can help mitigate many of the challenges homeowners are facing. For example, in addition to increasing the scope of renovations on certain properties, to position our homes to sell first when competing inventory is present. We are also offering customizable renovation services. We recently started testing our new service called MyWay in our Phoenix market. With MyWay, homeowners can select paint, flooring, countertops, and appliances from a list of options that match their own personal style. Updates will be completed before they move in, and the cost of upgrades can be rolled into the mortgage. The breadth and efficiency of our renovations team is a key differentiator and an important asset as we grow. This offering aligns perfectly with our mission to provide customers with a more convenient and streamlined homeownership experience. On the operations side, we continue to adjust as the market evolves. Specifically, we updated our underwriting to account for increased risk, extended holding times, and depreciating prices. In fact, The difference between homes underwritten in the first half of the year compared to the second half is so distinct that I can tell the day a home was underwritten just by looking at our closing summary sheet. In the third quarter, we also revised our buy box by applying the purchase price cap we implemented in select markets during the second quarter to all markets. Instead of turning away customers with homes outside new parameters, we have been offering our listing service. Leaning into our FlexListing service has allowed OfferPad to continue helping customers through the current market conditions while lowering the financial risk to the company. Customers working with one of our local licensed agents can receive free, show-ready services, including landscaping and cleaning services, in addition to a home improvement advance. Also, customers continue to save by bundling a home sale, home purchase, and OfferPad mortgage. Our flex listing and buying service has grown from 7% of our transaction volume in the second quarter of 2020 to 29% of our transaction volume in the third quarter of 2022. With gross margin profile of 31% year-to-date, we expect our listing service will continue to be an important product supporting our long-term gross margin target. The ability to use our renovations department as a risk mitigation tool and differentiator along with the ability to grow our asset-light listing service, provides OfferPad the flexibility to navigate through changing market conditions. Our presence in 28 markets across the country provides another risk mitigation opportunity. While markets like Phoenix, Denver, and Las Vegas are still experiencing rapid and significant pullback, we are starting to see signs of stabilization from the more affordable markets. By relying on our local experts, We are strategically deploying our capital into locations with more stability and better line of sight while maintaining a more conservative acquisition approach in markets with higher volatility. The diversification we have today has been thoughtfully and intentionally established over the last seven years, supporting the resiliency of our business. To provide some historical context, in 2016, we were operating in only four markets. At that time, our largest market accounted for 84% of our revenue. In the third quarter of 2022, no market accounted for more than 10% of our revenue. This highlights the clear benefit and risk mitigation that comes from strategic market diversification. Lastly, we continue to demonstrate a conservative and disciplined approach to managing our expenses. Like many others, we recently made an adjustment to the size of our internal team to reflect the current state of the market. When conditions change, Offerpad adapts. We have made some difficult but responsible decisions over the last quarter, and we will continue to adjust as the market evolves. Given the current macroeconomic environment, we do expect volatility in the real estate market will likely extend beyond the duration of historical market transition periods. Revolutionizing a $2 trillion industry isn't easy, especially in times like today. Yet the simplified services we have introduced to the consumer over the past seven years confirms there is a better way. The value of OfferPad's brand and the future potential value we can add by encompassing more services are reasons why we expect more and more people to come to OfferPad first. We are more than just an iBuyer. We are a real estate partner using technology and deep real estate expertise to serve our customers. I firmly believe technology-enabled solutions that simplify the home ownership experience will define the future of real estate. The iBuying industry is in its early days with only two major players. The upside potential is tremendous. As it becomes harder for homeowners to sell and the pain points from the traditional model resurface, more sellers will be looking for an easier solution. Being one of the country's largest home buyers in what we expect will soon be a strong buyer's market, could significantly amplify our opportunity to grow. As a real estate solution center with cash offers, listing services, mortgage, and a leading renovation team, I believe OfferPad is well positioned to excel. On that note, I'll turn the call over to Mike.