Offerpad Solutions Inc

Good afternoon, thank you for attending the offer past second quarter 2025 earnings call my name is matt and i'll be the moderator for today's call. All lines will be muted during the presentation portion of the call for opportunity for questions and answers at the end, if you'd like to ask a question, please press star one on your telephone keypad I want to pass the conference over to our host Courtney. Courtney please go ahead.

Good afternoon, and welcome to offer pad second quarter 2025 earnings call. I'm joined today by OfferPeds 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 metrics exclude certain items discussed in our earnings release under the heading non-GAAP financial measures. The reconciliations of OfferPad non-GAAP measures to the comparable GAAP measures are available in the financial tables of the first quarter earnings released on OfferPad's website. With that, I'll turn the call over to Brian.

Thank you, Courtney, and thank you all for joining us today. Before we move into Q2 results, I want to take a moment to acknowledge a recent development. We finalized a capital raise of $21 million in July. This brings our total liquidity to over $75 million, strengthening our balance sheet and supporting key growth initiatives. This represents a strong endorsement of our model, our execution, and the momentum we're building. This capital enhances our flexibility and supports our ability to make selective market-driven acquisition decisions, expand high-margin asset-light services like Renovate and Direct Plus, and strengthens our customer experience infrastructure, including home pro in-person appointments and platform enhancements. Turning now to market conditions, Affordability challenges and ongoing economic uncertainty continue to weigh on both buyers and sellers, holding back broader market activity. The traditional spring selling season was underwhelming. Additionally, listing inventory continues to rise, giving buyers more to choose from. This shift has created a more competitive environment for sellers, with homes sitting on the market longer and often selling below asking price. The increase in inventory is also putting downward pressure on home prices, which saw a slower pace of appreciation this quarter compared to earlier periods. Even in this buyer favorable environment, high interest rates and tight budgets are still limiting how many buyers can take action. This mix of selective demand and cautious sentiment is causing more homes to linger and reinforcing the need for solutions that help sellers navigate with clarity and confidence. Through effective marketing and strong consumer demand, we continue to see steady request volume, reinforcing both the ongoing need for our model and the trust sellers place in Offerpad as one of the largest home buyers in the country. For nearly a decade, Offerpad has helped sellers steer through any market. In today's environment, sellers are seeing more for sale signs in their neighborhoods and feel the urgency to act, but many still don't have a clear view of what their home is worth or how to approach the sale. That's where our model stands out. We offer real solutions. Sellers benefit from a fast cash offer with the flexibility to choose their own closing date, exposure through our direct plus cash offer marketplace, featuring both short-term and long-term investor offers, a program to receive cash upfront with the potential to earn more after the home sales on the open market, or a listing option guided by trusted, specialized real estate experts. Now turning to the quarter itself. In Q2, we delivered 160 million in revenue and sold 452 homes, reflecting disciplined execution across our platform. Our ability to remain resilient in a slower transaction market is a direct result of our increasingly diversified model, supported by a selective, market-driven approach to the homes we choose to acquire. To stay competitive and better support sellers in this environment, We focused on enhancing speed, transparency, and service throughout the experience. Over the past few quarters, we introduced real-time pricing ranges delivered in minutes and enhanced the inspection process with quicker scheduling and fewer handoffs. In Q2, we officially launched HomePro. This program brings specialized agents into the home through pre-scheduled appointments to walk the sellers through every available solution. We spent years building this model to serve sellers in any market, and we were the first to bring it all together. Our infrastructure delivers a true end-to-end solution powered by both people and platform. Our tenured, highly trained customer solution team gives Home Pros direct access to expert guidance and real-time support. Behind the scenes, our proprietary technology creates a faster and more seamless experience. It's the blend of human expertise and smart automation that allows us to deliver high-quality service at scale. Operational excellence and scale remain core to our approach, driving impact beyond the seller experience and into other areas of the business. We achieved another record quarter for our Renovate business, delivering $6.4 million in revenue, our second consecutive record, and our strongest performance since launching the product. backed by experienced teams and proven workflows, we're helping investors and institutions turn distressed inventory into move-in ready homes and doing it at scale. This momentum in Renovate is part of our broader strategy to expand our asset light services and deepen relationships with institutional buyers. We continue to invest in Direct Plus, our asset light marketplace that drives demand by linking homes with institutional and individual investors. For sellers, this means greater exposure and more opportunities to receive competitive cash offers. Even amid historically low industry-wide acquisition volumes, especially from long-term holders, Direct Plus has delivered meaningful growth, driven by recent enhancements. Partners now have the flexibility to engage with homes at different points in the sales process, increasing buyer participation and leading to a notable Q2 uptick, clear momentum that directly benefits sellers. In addition to expanding access, we've broadened our marketplace to include more partners with varied acquisition strategies. This creates more competitive offers for sellers, allowing them to have the opportunity to a higher price point and the ability to close on a timeline that works for their unique situation. For OfferPad, it means greater asset light deal flow and stronger alignment with partner needs. Across the core initiatives, Home Pro, Renovate, Direct Plus, and our flagship cash offer program, we're building a balanced, agile, and efficient business. Each platform plays a vital role in enhancing customer experience, optimizing inventory management, and efficiently scaling our asset-light marketplace. Our recent progress demonstrates precise execution and lays a robust foundation for sustainable long-term growth. Looking ahead, our priorities remain clear, scale high margin, asset light services that drive predictable contribution profit, maintain cost discipline and operating leverage to support sustainable growth, and position OfferPad to accelerate as buyer activity and transaction volumes rebound. Finally, before I turn it over to Peter, I want to thank our team. Despite operating with leaner resources, they have continued to deliver strong results, a testament to the focus, grit, resilience, and outstanding execution across our organization.

Thank you. I want to reinforce Brian's message. Our team has been instrumental in driving this performance. Their discipline and focus has led to stronger margins, smarter inventory management, and more effective solutions for our sellers. As you just heard, we've been operating with greater efficiency and discipline, and that's reflected in our Q2 results. For the second quarter, we reported revenue of $160.3 million with 452 homes sold. This reflects a measured approach to inventory management aligned with our goal of driving contribution profit, maintaining capital discipline, and responding to ongoing market dynamics. At the end of the quarter, we held 662 homes in inventory with only 87 aged homes over 180 days and not under contract. This compares favorably to prior quarters and reflects continued progress in both our acquisition targeting and pricing strategy. We acquired 443 homes during the quarter with continued emphasis on strategic markets and properties aligned to our margin targets and overall business objectives. Gross margin was 8.9%, resulting in 14.2 million in gross profit. Operating expenses, excluding property-related costs, totaled 17 million, down 30% compared to the same quarter last year. This continued improvement reflects the structural cost reductions we've made across the business, including advertising efficiencies, platform improvements, and organizational streamlining. Adjusted EBITDA loss improved 39% to 4.8 million, marking another quarter of sequential gains. We ended the quarter with 22.6 million in unrestricted cash and over 55 million in total liquidity, including the net value of our inventory. With July's $21 million primarily non-dilutive raise, total liquidity now exceeds $75 million. Also, and importantly, thanks to our strategic approach and growing mix of asset-like channels, we're able to operate with less cash on hand, giving us a comfortable runway as we continue progressing towards break-even. To support that strategy, we also established new lending facilities with Genesis and Ascent. These facilities increase our operational agility and reduce committed capacity, giving us greater control over costs. In Q2, as mentioned, we achieved further reduction through headcount optimization, tighter management of third-party spend, and improved lending terms that lowered our cost of capital. We expect these changes to drive additional sequential improvements into Q3 and beyond. Looking ahead, we expect third-quarter revenue in the range of $130 to $150 million, with 360 to 410 homes sold. However, as we move through the back half of the year, our revenue mix will shift with a higher percentage coming from asset-light services led by the HomePro program. In addition, we also anticipate continued sequential improvement in adjusted EBITDA as we maintain emphasis on contribution margin and operating leverage. Our focus remains clear. Operate with discipline, scale solutions, and stay positioned to capture more opportunity as the market evolves. We're building a stronger, more efficient business one that's built to last and built to lead. We appreciate your time and support. We're now ready to take your questions.

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 ask that you limit yourselves to one question and one follow-up, and then re-enter the queue if you have additional questions. 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. First question is from the line of Day Lee with JPMorgan. Your line is now open.

Great. Thanks for taking my questions. I have two. First one, on home acquisition pace for the remainder of the year, could you tell us how it's pacing so far in 3Q and how you're thinking about home acquisition for the back half of the year. And when you're underwriting homes right now, is it still with the assumption of higher spreads? Or do you feel like you have enough visibility where the spreads can normalize a little bit? And then secondly, you're seeing very strong momentum in Renovate. I'm just curious what's been driving that and how you're thinking about the pace of Renovate growth back in the back half of the year.

I'll jump in. This is Brian. Hey, Dave. Good hearing from you. Renovate, several things happening there. We continue to sign more and more customers up to the program and deliver good results on that end of it. So our efficiency is still strong. And even in this environment where a lot of the large institutions are on the sidelines or at lower volumes, we've really focused on down the pipeline a little bit with the mid to small investors that we could do renovations for. And so the team has done a fantastic job there. And so, you know, one of the things we say all the time is that if somebody likes the renovation person that they're using, I would say put a side by side. And we normally will beat them from the cost, the efficiency, and, you know, doing tens of thousands of homes on our own behalf, you know, leads to a lot of a lot of really good efficiencies there. So really happy with what we're seeing, the momentum on that end of it. As far as the pricing, how we're underwriting the spread side, we're still having a very disciplined approach there. As I've mentioned the last several earning calls, as we continue to see a lack of buyer excitement and the affordability is still an overhang of everything. You know, we're still focused on in areas like there's pockets in every market that are still working that are decent transaction areas. And then there's definitely pockets that are not. And as I mentioned before, outlying areas next to new builds. Those are the kind of things that we're being very cautious of buying that. But interior homes that have good transactions, we're still buying and focused on that type of product. And we're still focused on spread. And the way we look at spread, it's just a risk metric for us of what we're seeing in the environment. And so as we see more actives and more for sale signs going up in areas, we want to be really careful from a supply and demand issue of just that our home, one, shows well that it's going to sell before some of the other ones. But also we're not buying a home, even if it's the lowest price in the area with a lot of supply issues. getting chased down by crisis. So did I cover or day any follow-ups on that or any or could you want to jump in?

I'll just add to that on transactions we're guiding this quarter to somewhere in the neighborhood of 400 cash offer transactions in 3Q and that's along the lines as Brian was getting to and we've talked about in prior quarters we're underwriting a at higher spreads, so intentionally coming down in volume for our cash offer. But importantly, you're going to see a revenue mix shift that along the lines of what we've talked about and Brian has also talked about in prior quarters towards a higher percentage of asset light transactions. So the volume that will be focused on will not be only the cash offer. moving across the back half and into next year, it'll be the total real estate transaction volume that includes with HomePro, which launched in June, includes continued focus on underwriting and selling into institutional, large financial institutions, SFRs and smaller investors, but also selling into partner cash offers that don't go onto our balance sheet And then finally, and this is new, not new to us, we've done this in other forms previously, but selling it new with HomePro, selling into a traditional list. So those are all going to be factors as you look at volume. And as we, in a quarter, when we get into next quarter, we'll likely shift our guidance from cash offer home sold to total real estate transaction volume.

Yeah, one of the things I'll just add there too, David, this is a really interesting time because a lot of the sellers that are coming to us, the people that are selling in this environment are selling, the cash offer is extremely valuable to them. They get the certainty of the cash, but also the closing date. But we also, with our home pro, we also want to give them different alternatives with Um, you know, our, uh, the ability to get some of the cash now and, and, uh, and then the benefit of some of the upside and then the listing, if they want to choose to list her house in the open market as well. So, um, so it's, it's, it's just interesting because of the timing of, of the individuals right now is, is, um, we're seeing a lot of urgency and more, I would say people that are in, uh, like I said, a life moment that they need to sell than we've seen in quite a while.

Thank you. If I could just ask a quick follow-up on the asset-light offering mix going forward. You did talk about mix shifting towards more of those offerings. But right now, Renovate is the biggest piece of the other services revenue. But you also talked about HomePro becoming bigger. So I was curious, when you look ahead, do you feel like HomePro is going to be a bigger piece of the overall asset-light offering? Or how should we think about that mix? Shifting one chord.

And I would say definitely, um, again, the, the idea and the goal for when we started offer pad was to be a one-stop solution center for customers, um, that they can come and get exactly whatever the real estate needs is done. And so obviously the foundation is our cash offer, but also, you know, that necessarily, um, especially environments like this, even if our, our cash offer for whatever reason doesn't work, we can provide another cash offer through our direct plus channel. And I think that's where you're going to see a lot of opportunity over time as the market starts to get back to a normalized and you start seeing more of the institutions and those jumping in, you'll see more of the direct plus side. But also you'll see a lot of sellers that want to test the market by listing. And so our ability to get into the living room and having face time with the customer and figure out what is the best solution for them, that's always been kind of our mission statement is let's figure out what the best path forward is and Vincent Cerce, MD, Some of the questions we get is or you know we've had before is what's the perfect perfect mixture I don't know if there ever is a perfect mixture and i'd love to see it completely blended across all of our products. Vincent Cerce, MD, You know, right now, our renovate product is just a B2B bit and you know it's not be to see yet. Vincent Cerce, MD, A lot of the other things we're doing is more B2C won't stay that way forever but. But so, yeah, you're definitely going to see Home Pro definitely have more of an impact as customers have more choice in the path that they want to choose.

Got it. Thank you.

Thank you for your question. Next question is from the line of Ryan Tomasello with KBW. Hi, everyone.

This is for Ryan Tomasello from KBW. Thank you for taking questions. On the HomePro offering, could you please elaborate a little bit on how the economics are like with HomePro compared to a traditional cash offer?

I think the volume was pretty low, but I think you're asking about the economics on HomePro. And what I'd stress there, and thanks for the question. It's an important question. As we move towards a revenue mix and a transaction volume mix that's heavier weighted towards the asset light home pro services, the gross profit will be important. From a revenue recognition perspective for cash offer, we recognize gross revenue with a single digits margin for the asset light services for selling to institutions in the home pro services, we recognize net revenue, which is the same or very similar to gross profit. So you're going to see a shift in our revenue mix and our gross profit mix that drives increasing gross profit but decreasing revenue just because the margin profile is going to change. From a transaction, the most important thing is from a transaction value perspective, regardless of whether we're taking a mid-single-digit fee on a cash offer product or selling into institutions, the total value to the bottom line is in the same ballpark, is similar per transaction. And so that's what I'd focus you on.

Okay, great. Thank you. And just a quick.

The one thing I'll just add there from. Oh, sorry. Did you have another question? Yeah, I would just say the one.

I'll ask it after your comment.

Okay, sorry. I was just going to say the one thing I would tell you with Home Pro, As we look at it, the idea is that our request volume has stayed strong over the last several years, considering all the market conditions, the lower transaction volume, everything else. We still have a lot of our markets, people coming to us first to figure out what they can sell their home for and get a cash offer for and then figure out other solutions. And so the idea of HomePro is to capture those customers, even if the cash offer before, if you just have a cash offer, the cash offer works, yes or no, it's the right price, yes or no. But to really be able to provide the customer with other solutions. Also, we're really indexed on our conversion and our overall conversion to all of our funnel. And whether people are ready to transact now or in the next few months, we're really focused on being part of them or with them through that journey. And whatever product is. So a lot of it is from the margin that Peter mentioned, but also from a conversion perspective is to make sure that we can find a home and what works right for that seller.

Got it. And just to quickly follow up, following the recent equity raise in a new credit facility, How comfortable are you with the company's current capital position and the ability to self-fund a path to break even cash flow?

Yeah, we are comfortable. In fact, our total liquidity at the end of this quarter was and is around $55 million between our cash and the net equity in our homes. At the end of first quarter, it was around $60 million. So we TAB, Mark McIntyre, We moderated but, but not by but not by a tremendous amount we've really. TAB, Mark McIntyre, made a lot of big strides on our fixed cost as identified in the prepared remarks are fixed expenses 17 million and based on continued cost outs that you're going to that's going to come down continue to come down into third quarter and beyond. TAB, Mark McIntyre, So our fixed cost is. is getting really, really low at a nice level that we're very comfortable with. At the same time, our gross profit is improving. So what I'd say is we have a path. We had a path without the capital raise, but we're excited about the flexibility that the capital raise gives us from a number of different perspectives, including making some changes operationally around how we fund homes, giving us some additional flexibility with the additional liquidity with our warehouse facilities, and then importantly, improving our cost of capital. We've moved to a place where historically we had some significant commitment fees from financial institutions, and we've taken those down to a very, very low level, which has helped us with our cost outs. The last thing that I'd say on the capital raise is I want to stress that it was primarily non-dilutive. And that was our goal. We raised about roughly the level of cash that we were looking for. We did it in a primarily non-dilutive structure. We met with a lot of different investors and with a group of investors that were across the two tranches. of equity and debt that we're excited about until we concluded it on that basis.

Got it. Thank you.

Thank you for your question. Next question is from the line of John Colentoni with Jefferies. Your line is now open.

Hey, thanks for taking the question. This is Vincent on for John at Jefferies. So you've historically talked about a thousand homes per quarter as sort of the North star for the point at which scale should combine with the mix shift to asset life services to help you deliver breakeven EBITDA and cashflow. So maybe just talk about how you view the path to a thousand homes from here or whether that's even still a relevant goal now that there's clearly this increase focus on asset-light transactions. And if not, whether there's a new target to keep in mind, whether that pertains to acquisitions in the traditional sense or whether it's total real estate transactions and what the timeline looks like at this point. And then just a quick one on following the cost outs under one in April. Just curious to know how you're thinking about runway on those initiatives in the back half. Thanks.

Thank you, Vincent. Yeah, for the 1,000 homes, we're hoping we get that question. That is something that we've been thinking a lot about as far as what we do, in particular from a guidance perspective there. And as I alluded to earlier, the 1,000 real estate transactions continues to be our North Star. It's just a shift. We will do TAB, Mark McIntyre, directionally fewer asset head or balance sheet based cash offer purchases, where we take the home into our inventory but will be adding on transactions with with partner cash offer cash offers, as well as with financial institutions who are direct plus. TAB, Mark McIntyre, Product and through participating in the traditional list so. You know, the aggregate impact to the bottom line across all those transactions, even though the revenue recognition is different, is similar, and we're still heading towards 1,000 transactions, and that's still roughly where we hit break even. And I think you mentioned cost outs as well. We've come a long way, not quite, but almost $150 million in cost outs over the last two years. We're at $17 million in quarterly OpEx. That's going to come down more as the second quarter. Cost-out initiatives across both employee costs as well as third-party spend come in to the actual results in third quarter. And very focused on managing cost creep, so we're going to keep the cost out that we already took out, and then we're going to always continue to look at additional opportunities.

Yeah, the one thing I'll add on that, just from a practical operational standpoint, too, from the cost out, because how do you achieve, obviously, if you're making reductions, how can you achieve what we need to achieve? And I will tell you, we are getting, like with HomePro, the efficiency we've seen since, you know, we started testing HomePro mid to later last year, in just various markets and different variations. But the product and technology lift of Home Pro is really allowing us to scale different, be able to provide a range offer instantly, the way that we are scaling some of our other products. So I think technology, we're getting a lot better and smarter on how we're going to go. So as we scale the business again, we're going to scale it much smarter. Um, quite honestly, I think much faster too, from, from some of the efficiencies we're seeing on the, on the technology side. So, um, definitely leveraging that. Um, and, uh, as, as we continue to, to build that home pro.

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