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Operator
good afternoon thank you for attending today's offer pad fourth quarter 2022 earnings call my name is hannah 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 vice president of investor relations and esg at offerpad stephanie
spk02
Thank you, and good afternoon, everyone. Welcome to OfferPad Solutions' fourth quarter and full year 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 reconciliation of OfferPad's non-gap measures to the comparable gap measures are available on the financial tables of the fourth quarter and full year 2022 earnings release on OfferPad's website. I'll now turn the call over to Brian.
Brian Baer
Thanks, Stephanie. Hey, everyone. Appreciate you joining us today. I'll cover some company highlights, operational updates, market trends, and our 2023 strategy. Mike will share our fourth quarter 2022 financial results and our first quarter expectations. Last year was truly a tale of two halves, with the striking difference in market conditions from the first to the second half of the year. Still, we had some remarkable accomplishments in 2022. Last year, we sold over 10,000 homes in a year for the first time in OfferPat's history, completed 9,985 renovation projects, increased our cash offer requests from the agent partnership program by 90% year over year, and increased our asset-light flex transactions, including listing, buying, and mortgages by 90% year-over-year. However, the historic interest rate increases and decline in affordability left us with two significant challenges in the fourth quarter. First was selling inventory acquired prior to the market shift. Second was securing additional capital to strengthen our balance sheet. I'm happy to report we made significant progress on both. We have reduced our inventory of homes acquired prior to September 1st from a peak of nearly 4,000 to less than 225 legacy homes active on the market. This brings us near the end of our legacy inventory disposition process and puts us in a strong position to sell through the vast majority of the remaining inventory acquired during the first half of the year by our target completion date of March 31st, 2023. In addition, Homes acquired after September 1st, 2022 that have sold are recording positive returns. Early results from these homes are consistent with our expectation for returns in more of a normalized market. I don't believe any amount of experience, technology or data could have predicted the rapid rise in mortgage rates, but navigating the climate provided valuable learnings we can use going forward. For example, With homes purchased in the fourth quarter, we adjusted the risk premium for factors like proximity to new builds and outlying areas, where price reductions have been more significant. The return to positive performance on homes purchased late last year reflects our underwriting adjustments, updated assumptions, and increased spreads as we continuously adapt. Second, on February 1st, we announced receipt of an additional $90 million through a private placement. We received participation from early investors, including Roberto Stella, an OfferPad board member, and First American Financial, more recent existing investors and new investors. I increased my personal investment in the company by participating as well. The mere ability to raise capital in today's challenging macro environment is notable. In addition, participation by current shareholders demonstrates continued confidence in our strategy and our ability to drive long-term value for our customers and shareholders. With these two challenges largely behind us, we are ready to move forward and capitalize on future opportunities. The good news is the opportunities are near. We are starting to see signs of improving and stabilizing real estate market conditions. In addition to a significant amount of publicly available data, we review our internal data including sentiment on a weekly basis. For the past four weeks, Our internal data has improved in all major categories. For example, the number of homes with no offers has been steadily decreasing, and showing activity has been increasing. Many of our market experts are now labeling their market condition as improving or stable instead of slowing. Most of our market experts are citing positive shift in the active to pending ratio, as well as a decrease in depreciation in accurately priced homes that are not directly competing with new builds. While markets are seeing price drops slowly, concessions are rising. There are a few markets still indicating declining prices, including Atlanta, Charlotte, and Phoenix. Notably, townhomes and condos are currently attracting more interest than single-family homes in Columbia, Columbus, Dallas, Orlando, and Raleigh, likely due to affordability. Also, a number of markets indicated that homes priced below $350,000 have the best overall velocity. Denver and Dallas have shown considerable improvement in sentiment. Overall, we are hearing more optimism from our market experts, although it is still early and durability of this trend is unclear. Before I talk about what's new with our 2023 plan, I want to review what's not. Our vision to provide a comprehensive platform for all things home has not changed. We have said from the beginning, we are more than just an iBuyer. Our mission is to be a one-stop solution center where people can address all of their real estate needs. We continue to believe that owning the entirety of the transaction is the best way to achieve our goal of simplifying the homeownership experience for customers. By providing one customer-centric source to buy, sell, finance, and renovate a home, we can continue to grow our company and our ability to increase the value of our platform. Our ultimate goal and long-term vision remain unchanged. but we are constantly evolving our strategy to keep pace with changing conditions and shifting customer needs. In 2023, this means we plan to retain and build our foundational cash offer, listing service, and mortgage business. We strongly grow our footprint with an increased focus on market penetration and expand our business-to-business partnerships and services, allowing OfferPat to grow our asset-light offerings. Seamlessly assisting customers from start to finish, finding a new home, selling their current home, financing the purchase, and providing a free local move removes friction from a home ownership experience. It also improves our financial health by increasing the number of transactions per customer and reducing our customer acquisition costs. While cash offers are a cornerstone of our foundation, it is truly the combination of our cash offers, listing service, and mortgage business that provide the simplicity and control customers want. Our access to top of funnel, Sophisticated renovation department, real estate expertise, and customer solution center approach differentiate our model. In 2023, we will focus on increasing our engagement with each customer to enhance our value proposition and support our financial goals. Turning to our growth strategy, in 2023, we expect to accelerate our acquisition volume with a focus on increasing penetration in more affordable markets. In response to the broader real estate market slowdown, we reduced the pace of our acquisition and the size of our team. Mike will provide more details regarding our cost reduction efforts and right sizing. As part of the reset, we will not be acquiring homes in California at this time. Our engagement in California will be limited to renovation projects, allowing us to focus our resources on more affordable and established markets. We will look to build our acquisition volume on a market-by-market basis, targeting homes with price points near the median. Finally, a key pillar of our 2023 strategy will be developing our business-to-business partnerships and services. In December 2022, we extended our renovation services to other businesses. Now, more homeowners and companies can utilize OperaPath's renovation department to update their portfolio of homes for rent or to sell. We have already completed over 200 projects under our renovations as a service business model. This asset-like service leverages our existing logistics, operation, and skill sets. We are also expanding our relationship with other home buyers. Our new Direct Plus program allows other cash buyers and single-family rental companies to purchase homes directly from a homeowner, seamlessly matching cash buyers with sellers. We've said this program will allow OfferPad to help more homeowners sell, even if the home is outside our existing markets. The service fee for this program presents another asset-light revenue stream, while the program itself can expand our ability to reach more customers. I expect 2023 will be an exciting year as we dive into the next evolution of our business. While change and innovation are a given, we commit to moving forward in a manner that stays true to our guiding principles. That means balancing our goals to attain growth and sustainable profitability, striving for the best-in-class operational execution, and building upon our foundation of real estate expertise with innovative technology fueling scale. No matter what market cycle we are in or how fast we transition, we will look to the heart of who we are, our mission, our vision, and our strengths to propel us forward. I'll now turn the call over to Mike.
Stephanie
Thanks, Brian. Last quarter, we talked about the challenging residential real estate environment that we are all too familiar with by now. and our expectations for continuation of these conditions in the near term. We also laid out our operational approach to dealing with these challenges, which included, one, a heightened focus on our legacy inventory to optimize the tradeoff between price and time to sale, knowing that we'd be accepting losses, and two, slowing down the acquisition side of the business to ensure that homes that we do acquire produce positive returns, Throughout the fourth quarter and into the first quarter, we have successfully executed against this plan. As Brian noted, we have reduced our inventory of homes acquired prior to September from a peak of nearly 4,000 to our current position in February, where we have less than 6% of those homes remain to be sold or put under contract. With this progress and consistent with our outlook from last quarter, we expect to have this cohort of homes largely sold or under contract by the end of the first quarter. On the acquisition side, we have and continue to be very conservative in our underwriting and disciplined in our acquisition pace. We acquired over 500 homes in the fourth quarter and have reduced our overall inventory count to approximately 1,800 homes at year end. In the short term, we are trading off volume for ensuring that we are acquiring homes at the right price to generate positive returns during this period of market dislocations. The homes we acquired after August that we have sold have produced returns in line with our expectations during a more normalized market, further validating our approach. Executing against this plan is enabling us to navigate the challenging climate and is positioning us to capitalize on our strategy for rebuilding and growing into more stable market conditions and re-engaging our path to profitability. Turning to the fourth quarter results, We generated $677 million of revenue, exceeding the top end of our Q4 guidance range. Our revenue was supported by the sale of 1,865 homes, which also exceeded the top end of our guidance range, at an average selling price of $363,000. Our adjusted EBITDA for the quarter was negative $103.7 million. This amount includes a $44 million inventory impairment charge. Absent this charge, adjusted EBITDA for the quarter would have been $59.7 million and within our original guidance range. The impairment charge further affected the cohort of homes acquired before the September timeframe as we made the strategic decision to reduce prices or excess offers at a reasonable threshold below our listing price based on current market conditions and the outlook for that particular market or location. Phoenix, Denver, and Austin continued to be affected to the greatest degree. The cumulative charge over the past three quarters has amounted to less than a 6.5% reduction in the August inventory value. We continued to use a combination of bulk sales and strategic price adjustments to work through the inventory on a market-by-market basis. During the fourth quarter, we completed three bulk sale transactions covering an aggregate of just over 250 homes and continued to make good progress addressing the portfolio. As expected and consistent with the extreme market disruption over the past six months, along with our lower acquisition pace, our time to cash for holding period increased in the quarter to 142 days, well above our goal of 100 days in a normal market. We expect this to peak in Q1 and then to decline back to normalized levels in the second half of the year. On the cost side of the business, we have taken action commensurate with the slowdown in our volume. Since our peak headcount in August last year, we have reduced our overall workforce in the aggregate by approximately 50%, including a recent reduction in February, resulting in a combined total annual savings of approximately $40 million. With the business now right-sized and more in line with our expectations for 2023, we are positioned to efficiently and effectively execute against our operating plan. From a balance sheet perspective, we reduced our debt balance by nearly half a billion dollars primarily through the sale of homes, as our inventory balance decreased to $665 million at year end. Our unrestricted cash balance was $97 million, driven by the net loss in the quarter, as well as net debt reductions. Importantly, this past month, we successfully completed a $90 million private placement of prepaid warrants, which are convertible in a common stock. This capital raise not only reflects the continued support from our early investors, but also included more recent existing investors and new investors as well. This capital will position the company to continue to execute our strategy as we begin to rebuild and capitalize on the opportunities ahead of us. As we move towards a stabilizing market, we expect Q4 will represent the low point of the transition period, and our Q1 results will reflect sequential bottom-line improvement. Specifically, in the first quarter of 2023, we expect to sell between $1,300 generating revenue of between $480 million and $540 million. We also expect adjusted EBITDA to be between negative 35 million and negative 55 million, which represents a significant sequential improvement and the first step back toward achieving positive adjusted EBITDA again. The sequential lower top line revenue range for the first quarter of 2023 reflects the purposeful decrease in homes acquired during the latter half of 2022. In the fourth quarter, we acquired 539 homes, and we again expect to have a lower acquisition volume in Q1 before increasing our acquisition pace in the second quarter and into the second half of the year. The expected improvement in our adjusted EBITDA is also supported by the previously mentioned changes we have made to right-size the organization and reduce costs. We anticipate these reductions, in addition to other spending cuts, we'll appropriately position the company to leverage our cost structure into the second half growth. Our continuous focus on cost management, the infusion of incremental capital, our nearing completion of the disposition of the legacy inventory, along with positive performance of homes purchased during the fourth quarter, all support our expectations that Q4 results represented the low point of our reported net income, and we expect to see sequential bottom line improvements beginning in Q1 2023. With our measured approach to growth and responsible cost management, OfferPad has demonstrated its ability to execute on a strategy that can adapt in response to changing conditions and capitalize on new opportunities. The combination of building upon our foundational services, cash offers, and our listing service, and introducing new asset-led services moves us closer to the true vision of a holistic, simplified solution that meets the unique needs of each customer. I'll now turn the call over to the operator to begin the question and answer session.
Operator
Certainly. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. We kindly ask participants to limit themselves to one question today and then one follow-up. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your questions. We will pause here briefly as questions are registered. The first question is from the line of Day Lee with J.P. Morgan. You may proceed.
Day Lee
Great. Thanks for taking the question back, too. So, first of all, Brian, given the greater push towards SLI revenue stream, I'm curious to hear your thoughts around the long-term potential of the cash offer model to change over time. And then secondly, Mike, I think you alluded to this in your prepared remarks. Well, how should we think about understudy detail as we progress through the year? And when do you expect to be understudy detail profitable again?
Brian Baer
Hey, Dave. Yeah, as far as the cash, you know, that's always going to be core of what we do is the cash offer is, you know, as we've talked about a lot is that You know, we've never looked at this as we're an iBuyer. We've looked at it as a solution center, specifically for transactions for the customer. And so as we will continue to roll out more products that are more, you know, quote, unquote, asset light, you know, we'll still have a focus on the cash offer. Now, potentially that doesn't mean that it will be our cash as we, you know, as we look at Direct Plus and some of the other things that we do. But the cash offers will always be core of what we do.
Stephanie
Dave, can I ask you to repeat the question you broke up a little bit there for me?
Day Lee
Yeah, so for you, Mike, I think you alluded to this in your prepared remarks, but how should we expect adjusted EBITDA to progress as we move through the year, and when do you expect to be adjusted EBITDA profitable?
Stephanie
Yeah, what I think, and obviously we've got a lot of volatility in terms of the backdrop, interest rates, et cetera, but the way we see it today is We will successfully get through the legacy piece of the inventory largely by the end of the first quarter. So I think that's certainly where we see our trough from an EBITDA standpoint for the year. And then we'll see some gradual build into the latter three quarters. I think because we've slowed down acquisition pace, I think we'll see some moderate improvement going from quarter one to quarter two. And then we'll see where we get into how much we can restart the growth engine again to rebuild in the second half. So I won't really put a timeline on when we get back to EBITDA positive at this point. I think we still need to see how we shake out in terms of our ability to really re-engage on the acquisition side. But we are seeing good signs of improvement and stability in the markets. And so I think it's really just a matter of time. We've shown that we've been able to do that consistently in the past under various conditions, so I'm confident that we'll get there. It's just a matter of the timeframe.
spk09
Got it. Thank you.
Operator
Thank you, Mr. Lee. The next question is from the line of Nick Jones with JMP Securities. Please proceed.
Lee
Great. Thanks for taking the questions. On the first one, just how do you feel – Your algorithm has adjusted to kind of deal with more volatile interest rates. It sounds like the homes you're acquiring now are performing how you expect. So is that really just stabilization of the market or is kind of your buying patterns or the way you're charging fees kind of structurally different and maybe prepared to manage kind of ongoing volatility in interest rates?
Brian Baer
Yeah, great question. You know, the market always helps. You know, when the market's more consistent, you know, we have a more consistent way we can underwrite the homes, and so that always helps. But as far as the algorithm and how we underwrite, that's always key to everything that we do. And so the adjustments we make, you build in more risk, and that's from time to cash, how long you're going to own the home, to the type of homes that we're buying. Like, for example, you know, De-risking ourselves with more median home price homes is really important. Where we're buying, we're more focused on affordability right now as we look through segmentation and property scoring. So all of that is key to underwriting. So right now, we still are underwriting a lot of risk into the homes. But we are seeing, as Mike said, we are seeing a lot more stability in some of these markets, all with the big question mark of when in all markets. But in general, we're seeing more consistency in those markets. But it starts and stops with underwriting and the risk that we build in. And we definitely are seeing strong performance of the homes that we're underwriting now under these new conditions.
Lee
Great. And then that's great. And a follow-up on some of the kind of B2B services is you kind of offer repair-type services. Does that potentially leave you spread too thin as you want to ramp back into high buying, particularly if you kind of right-size the cost structure? How should we think about that and its impact on the overall high buying business as things stabilize? Thank you.
Brian Baer
Yeah, great. Over the last six years, we have built a really strong machine to do transaction volume, and that's from renovation, that's from customer experience, that's from a call center. really across the board. And so as we outsource and do business to business with other companies, we're built to do that. A lot of variable costs, just like opening a market ourselves, we can grow into that volume as well. And so the machine that we've built here is turtle with the great teams that we have there.
Operator
Thank you, Mr. Jones. The next question is from the line of Ryan Tomasello with Stifle. Please proceed.
Jones
Hi, everyone. Thanks for taking the questions. I just wanted to touch on the expense piece first. Following these headcount reductions you called out, if you feel like the current expense structure of the company is properly aligned with this go-forward business model that incorporates asset light fee streams and presumably a lower volume pace, at least over the near term. And Mike, it'd be helpful if you could talk about where run rate OPEX is here heading into next quarter, however you prefer to define it.
Stephanie
Yeah, Ryan, we have unfortunately gone through a couple, two or three reductions in force over the past few months, really getting to the point where we do feel like we've right-sized the business for where we're at and where we're going over the next few quarters here. Even with the addition of some of the asset-light components of the business, I think we're appropriately structured now from a headcount, both on the front end and the back office as well. So I think we've landed in a good place there. In terms of run rate going forward on the OpEx, so much of it is going to be really has a percent of revenue based on where the top line goes. Again, I think we're going to see definitely the impact of slower buying and the ramping up of the other businesses in the first part of the year. I'm hesitant to give you a number here, but In terms of the annualized savings of the headcount reductions, we mentioned that it's about $40 million of annual impact. We did the last component of that in February, so you can't exactly straight line that, but benefiting certainly Q2, Q3, Q4 at the clip of $10 million a quarter I think is reasonable to assume.
Jones
Got it. Thanks for that. And then Similarly, on the capital position, congrats on getting the raise done in February. Since it sounds like the cash offer product will continue to be a core piece of the platform, if you can just talk about your comfort level with the current capital position if you feel like the $90 million raise puts you on a good footing to scale the business from here.
Stephanie
Yeah, you know, Ryan, with the steps we've taken in the business, you know, through our slowdown in the home acquisitions, our more conservative underwriting, the cost reductions and, you know, expansion into more asset-light offerings, you know, we have a business plan that supports our current level of capital. Obviously, from, you know, the debt standpoint, you know, we continue to work with our lenders and have good relationships built, you know, with them. They continue to support the company. And so we've had good success there. We're right-sizing the business across all fronts there so that we've got the appropriate amount of capital and not an excess of unused capital that's inefficient in that process. So I think from where we can see today and given the current conditions, we're comfortable with where we're at.
Jones
Great. Thanks for taking the questions.
Operator
Thank you, Mr. Tomasello. The next question is from the line of Michael Eng with Goldman Sachs. Please proceed.
Tomasello
Hey, good afternoon. Thank you for the question. First, I just wanted to ask about the cohort of homes that were acquired after August that you said have produced returns as expected. I was just wondering if you might be able to give us a little bit more detail there, measured by contribution profit per home or adjusted gross margin percentage. And then similarly, what are the biggest changes in purchase strategy today relative to prior to September? I know you talked about California, so any incremental detail around geographies or change in underwriting process would be helpful. Thank you.
Stephanie
Michael, I'll start with your first question. Generally, when we're looking at normalized profitability levels, we've always spoken to the unit economics in terms of contribution margin after interest. Our range has always been a range of 3% to 6% there. And so that's generally where we see things. And of course, as we're coming back online and moving into a more stabilized period, you'll see a start at the bottom of that range and then hopefully continue to be able to maintain within that. But that's so far what we're seeing.
Brian Baer
Yeah, and then as far as the assumptions and underwriting, again, as we're right now, I'll just give you a couple examples. Outlying areas have been affected more than most areas. So the outlying areas, we're being cautious next to new homebuilders. But as you're underwriting, just like you do it to an accelerating market, to a decelerating market, you can underwrite those risks in there as well. There still is a supply issue of homes. Affordability is still there, but there's still a supply issue of homes. We're definitely focused more on the median home price, allowing some more time to sell that home once we acquire that home, and then building in other assumptions like for closing cost contributions for when we go to sell the home to help the buyer on that end. That's something that when the market's on the uptick, you don't have to underwrite in, but we're underwriting that in there as well. You know, there's a lot of different levers that we pull there to really de-risk. And a lot of it is just really the buy boxes. The median home price, the more affordable the home, the more people that can afford it. And so as we're really, you know, hyper-focused on that, you know, that second and third tier home, you know, the $700,000 to $900,000 home right now that, you know, we're not as focused on that inventory right now just because of the affordability. The other thing that I'll just highlight, one other point on that is that, you know, what we're seeing when we talk about more consistency in the market, if you remember the last time we talked, they said, you know, there's so much equity that homeowners have in their home. The price reductions they were doing were very inconsistent. They were inconsistent with what we've seen before because there was so much equity homeowners had. Well, those, you know, and I think I also said those can't last forever from massive price reductions. And so we're seeing more consistency. people are reducing prices or, you know, as we look at inventory, we're not seeing the mass price reductions we were seeing early on last year as people were trying to free up their liquidity.
Tomasello
Excellent. Thank you for the thoughts, Brian and Mike. Appreciate it. Great. Thanks.
Operator
Thank you, Mr. Eend. The next question is from the line of Jay McCandless with Wedbush. Please proceed.
Eend
Hey, good afternoon. I wanted to ask first about the disclosure. I think it was February 1st, 8K, that the B-class shares would be converted to A-class shares after the upcoming shareholder meeting. Could you talk about that disclosure as well as the timing and some of the reasons behind it?
Brian Baer
Yeah. You know, as we mature as a company, what I have learned over the last several months of being public is, you know, investors don't like the high vote on those things. And so as we get more, you know, more, I guess, mature as a company, that's something that's been important to me is, you know, what's the best thing for the company going forward? And we feel strongly that is. And so that's why you saw the change there.
Eend
Okay. Thank you. And I guess, not to be flipped, but the median price home, I think, in a lot of markets is not only what OfferPad's looking for, but a lot of consumers are as well. I guess with the new buy box, is the 500-something homes that you acquired this quarter, is that achievable in this current environment where supply still seems to be pretty tight, or we should expect something lower than the number we saw in 4Q?
Brian Baer
No, we believe it is. And, you know, the same – The same thing that we've seen over the last several years is that even though there's more buyers at that level, You know, our cash offer, having the convenience and the control is really important to sellers and not have to deal with some of the financing and financials going through with variable rates and different things. And so that has been something as we continue to see, and we've talked about before, you know, more sellers coming to us first to sell us their home, which has been great. We're just more cautious right now of what we're buying, making sure it's around there. But, you know, so that's how we're looking at it.
Eend
And then I guess the other question I had, just this mid-300s ASP, is that sort of a reasonable number to assume that the buy box is going to fall in as the year progresses?
Stephanie
Yeah, Jay, I think that's probably a pretty good place to be that. And what we're seeing now is a little bit underneath that. But I think as you see the market continue to normalize a little bit as we go month by month here, you'll see more activity around there. So I think by and large, that's a decent place to be. More of our activity more recently has been a little bit below that, but it's the right zip code.
Eend
Okay. Thanks for two more questions.
Operator
Thank you, Mr. McCandless. The next question is a follow-up question from the line of Ryan Tomasello with Stiefel. Please proceed.
Jones
Yeah, thanks for taking the follow-up. With respect to the $44 million impairment, just trying to tie that together with your comments about the pre-September homes and the more recent homes that you said are within your target economics, I guess the $44 million, I guess, must have related to more than just the 225 homes you have left on the books from August, given the size, and I assume that those 225 homes probably have a carrying value So just any color on what the drivers were of the impairment you took this quarter would be helpful.
Stephanie
Yeah, Ryan, I think we got a couple things to sort out there. One is that the 225 is more of a real-time marker. So that is the number of homes in the legacy cohort around now in February here. The impairment pertained to everything that we had on the books as of 12-31. So a much larger number there. We had over 1,100 homes in that cohort that were still on the books at year end. So that's the difference there. I think that chews your math up a little bit, hopefully.
Jones
Okay, got it. Yeah, that's helpful. And then one more I'll sneak in here just with respect to the B2B partnerships, specifically on the Direct Plus platform. Any color you can provide around parameters for scaling that business, how meaningful of an opportunity you think that is, any color around the number of institutional buyers you currently have plugged into that platform, and any plans for scaling that, targeting specific markets sooner that are more prone to scaling that platform.
Brian Baer
I'm actually really excited about Direct Plus. Just as a reminder, Direct is something we've had since we began. Once we put a house under contract, we have a site that investors can go to and they can bid on that home before it hits the market. So that's been direct. The difference between direct and direct plus is direct plus is giving other investors top of funnel access so they're able to bid on the home the same time that we can bid on the home. And, you know, what I really like about that is it's a win-win-win for everybody involved as far as what we want to do is be a solution center to every customer and have an option for them as they exchange their home. And so, you know, so moving them to the top of funnel where they can bid on the home with us as well and get the customers potentially the offer that works for that customer. And then secondarily is that they'll close at the same time that the customer wants it closed. Instead of us putting it on our balance sheet, they'll close at the same time. So that's the difference with Direct Plus. We've had investors that have wanted this for a long, long time to have that kind of access. And so we're excited. We definitely have a lot of interest there. We're also being very selective about who we allow in the Direct Plus category. We want the customer to have the exact same experience as they get with OperaPad, and then as it closes. But we just want to make sure we have the right partners in there. And so a lot of interest on that end of it, and not just from the SFR world, but from short-term investors to other people that maybe are buying different type of homes on the fix and flip side. that they can access there as well. So a large appetite for that we think is going to be very successful. And then on top of that, a lot of these services, a lot of these people need renovation services as well, which ties perfectly into our renovation pipeline. So to be able to provide top of funnel, but then also our renovation skill set to them is really important. like. So we are focused a lot on that right now, and we expect some good things to happen there over the next year.
Jones
Thanks. Appreciate that. Thanks, Ryan.
Operator
Thank you, Mr. Tomasello. That concludes the question and answer session. Thank you for your participation. You may now disconnect your line.
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