Offerpad Solutions Inc

Good afternoon. Thank you for attending today's OfferPad second quarter 2024 earnings conference call. My name is Jayla and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Taylor Giles with Investor Relations. Taylor, you may proceed.

Good afternoon and welcome to OfferPad second quarter 2024 earnings call. I'm joined today by OfferPad's Chairman and Chief Executive Officer Brian Baer and Chief Financial Officer Peter Knag. 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 measures 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. With that, I'll turn the call over to Brian.

Thank you, Taylor, and thanks to everyone for joining today. Before we dive into updates, I'm excited to introduce our new CFO, Peter Knogg. Peter joined us in June and has already been making significant contributions. Previously, he was EVP and CFO at Turner Broadcasting, the parent company of CNN, TNT, and TBS. With his financial expertise, leadership in business operations, and understanding of complex transactions, we are thrilled to have him and confident in the impact he'll have on our organization. Turning out of the second quarter, we delivered revenue within our guidance, and another quarter of incremental improvement in adjusted EBITDA, despite the continuing uncertainty of the macro economy and real estate market. And we continue to make strides in building a long-term profitable business that can weather any economy. Highlights of the quarter include new renovate clients like Fannie Mae and Freddie Mac, growth in the agent partner program, enhancements in our technology, and streamlined operations that we expect will lead us to EBITDA profitability by year's end. These initiatives are positioning us for sustained profitability in any market. As for the housing market, we recognize this is a moment in time that must be carefully managed, but we remain focused on our long-term strategy. Over the past year and a half, we have constantly highlighted the volatility of interest rates and home affordability and the impact it has on the market. As a result, we have been very disciplined in our approach to inventory. In Q2, The market experienced a surge in volatility again, with mortgage rates surpassing 7%, softening buyer demand, which led to increased active inventory in most markets across the country. Our disciplined approach has enabled us to navigate these challenges effectively, leading to an improved gross margin for the third consecutive quarter of 8.7%. Holding home short-term provides us with the flexibility to adapt quickly to market shifts. With the anticipation of the potential transition from a seller's market to a buyer's market, we've adjusted our buying criteria, focusing less on volume and more on wider margins per home. For example, on the acquisition side, we are leveraging our renovation strength to buy homes that need more renovations, enabling us to add more value to the home and ultimately boost margin. We've intentionally increased our assumed hold times and additionally focus on homes that have fewer actives in the area. Sellers continue to be very interested in our cash offer and we've seen significant increase in the volume of requests from one quarter to the next. Despite this acceleration, we are exercising stringent discipline in our property acquisitions during the market transition. We take pride in the strong demand for our services and in turn, we provide the best possible experience for our customers. Our C-STAT score of 93% reflects our unwavering commitment to exceptional service and underscores our dedication to exceeding customer expectations, solidifying our reputation as a trusted leader in the real estate market. Returning to the macro economy, absent a significant reduction in mortgage rates, we believe we'll be heading into a buyer's market. As one of the largest home buyers in America, this positions us well. especially as home sellers face longer marketing times, more competition, and seek quicker access to their liquidity. With inventory growing, this shift may present significant opportunities for our cash offer business. As buyers continue to struggle with affordability and cost of living, Offerpad presents a compelling alternative to traditional resale homes. The average resale home on the market is over 30 years old. and many buyers can't afford the unnecessary upgrades or even basic refreshes after closing. Offerpad provides a cost-effective solution by offering newly renovated move-in ready homes. These homes are typically located in desirable locations, close to established schools, workplaces, restaurants, and amenities, making them more attractive option compared to new homes. New homes often come at a higher price point, longer wait times, and are typically situated farther from established amenities and services. By choosing to purchase an OfferPad home, buyers can enjoy the benefits of a newly renovated home in a prime location without the higher cost and longer wait times, making OfferPad a strong alternative in today's challenging real estate market. Our disciplined and patient approach within our buy box has proven successful in this evolving market. Our short-term strategy focuses on proactively adapting to changing real estate conditions by purchasing fewer properties and concentrate on higher margin opportunities. This approach positions us well for the anticipated shift to a buyer's market, where we believe our model will excel. Now let's transition to discussing our other platform services, which have been instrumental in enhancing our margins. Offerpad Renovate leverages our expertise in operations and home renovations, offering timely, cost-efficient, and high-quality renovation services to B2B partners. I'm pleased to share that we've experienced another strong quarter for Renovate, with closed renovation projects growing over 300% versus the prior year, generating roughly $5 million in revenue. We're focused on building an extensive list of Renovate partners. I'm excited to share that we've onboarded and are renovating homes for both Freddie Mac and Fannie Mae, along with a host of other new partners. We've officially launched our RenoCaptain technology platform in multiple markets. giving our B2B clients real-time updates, enhanced transparency, and project management efficiency. We anticipate we will fully deploy the technology to all partners by the end of the quarter. While Rental Captain provides substantial efficiencies to third parties, it also produces significant cost efficiencies for OfferPad. We continue to expand our partnership channels. In June, we announced an integration with Realtor.com, allowing us to extend our reach and provide cash offers directly through their platform. This enables us to meet sellers where they are in their process. Utilizing our proprietary AVM called Citrus Value, we generate an instant estimated offer for the customer. The integration has already produced excellent early results. I'd like to now focus on our Agent Partner Program, or APP, that supports the agent community and represented sellers. Since announcing our revamped agent partner program earlier this year, agent offer requests have surged, especially in cities such as Atlanta, Charlotte, Orlando, Phoenix, and Tampa. In quarter two, agent requests represented over 25% of total requests and produced nearly a third of our acquisitions, up from 19% a year ago. This is a key contributor to our ability to improve CAC at nearly 50% year over year at our most efficient level since Q2 2022. To drive continuous engagement within our partner program, in Q2 we launched the Powered by OfferPad platform, an online portal for agents and agent teams who are part of our pro and max agent programs. Agents can manage their OfferPad listings seamlessly by viewing all listing activities in a centralized location, including viewing cash offers, accessing detailed seller and property information, and managing leads and referrals efficiently. We have been invested in technology to make business more efficient. As a result of these investments, we have been able to streamline costs and improve margins, putting the business on a path towards delivering consistent improvements in adjusted EBITDA and cash flow through the end of the year. When transactions return to more normal levels, we expect revenues to grow much more efficiently compared to expenses, given our focused investments in technology. In closing, I'm proud of our team's ability to innovate and navigate short-term challenges while planning for long-term success. With an anticipated shortage of homes and an aging supply in the coming years, OfferPad is set to become a leader in delivering refreshed and renovated homes to buyers. Our strategic imperatives include focus on growth and product development in our asset light services, offering end-to-end solutions for selling, buying, and expanding our partner ecosystem. This progress is driven by our dedicated employees and committed partners. I specifically want to thank the OfferPad technology and product teams for their continuous drive to improve and develop groundbreaking solutions. We will weather this difficult environment with discipline, patience, and preparation while positioning OfferPad for sustained profitability in any market condition. With that, I'll turn the call over to Peter.