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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Offerpad Solutions Inc | NYSE:OPAD | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.18 | -2.62% | 6.68 | 7.16 | 6.64 | 7.00 | 16,347 | 21:47:52 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
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(Commission File Number) |
(IRS Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code:
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 | Results of Operations and Financial Condition. |
On February 26, 2024, Offerpad Solutions Inc. issued a press release announcing its financial results for the quarter and fiscal year ended December 31, 2023 and a Shareholder Letter. A copy of the press release and the Shareholder Letter are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K.
The information in this Item 2.02, including the information contained in Exhibit 99.1 and Exhibit 99.2 of this Current Report on Form 8-K, is furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit |
Exhibit Description | |
99.1 | Press Release of Offerpad Solutions Inc. dated February 26, 2024 | |
99.2 | Offerpad Solutions Inc. Shareholder Letter dated February 26, 2024 | |
104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Offerpad Solutions Inc. | ||||||
Date: February 26, 2024 | By: | /s/ Benjamin A. Aronovitch | ||||
Benjamin A. Aronovitch | ||||||
Chief Legal Officer and Secretary |
Exhibit 99.1
Offerpad Reports Fourth Quarter and Full Year 2023 Results
Q4 2023 revenue of $240.5 million up sequentially and in-line with guidance
Full year 2023 revenue of $1.3 billion
Reiterates expectation to achieve sustainable Adjusted EBITDA profitability in 2024
CHANDLER, Ariz.(BUSINESS WIRE) Offerpad Solutions Inc. (Offerpad) (NYSE: OPAD), a leading tech-enabled platform for residential real estate, today released financial results for the three months ended and full year December 31, 2023.
We successfully navigated 2023 from a position of operational excellence, said Brian Bair, chairman and CEO. During the year, we acted decisively to streamline the business and reduce costs, setting us up to drive improved top line growth and profitability in 2024 and beyond. At the same time, our team remains focused on leveraging our foundational cash offering to grow Offerpads asset light services and diversify our revenue streams.
Looking at 2024, we will continue to prioritize our strategic imperatives, which include removing the friction from real estate, advancing our asset light product lines, and expanding our partner ecosystem. Were proactively optimizing our capital allocation across our highest performing and most efficient markets. We are particularly enthusiastic about the opportunity to build upon our Agent Partnership Program and strengthen our position as a trusted solutions center for customers and partners across the real estate landscape.
Highlights include:
| Improved Net Loss and delivered sequential improvement in key metrics of Homes Sold, Revenue, and Adjusted EBITDA, in line with guidance |
| Time to Cash for homes sold in 4Q23 improved to 97 days, down from 142 days in 4Q22 |
| Inventory owned 180+ days at year end improved to 4.4%, down from 35% in 2022 |
| Increased asset-light revenue streams, presenting 43% of unit transactions in 2023, versus 24% in 2022 |
| Increased closed renovation projects by 148% in 4Q23 sequentially |
| Expanded Offerpads Agent Partnership Program to more than 20% of overall requests in 4Q23 |
Q4 2023 Financial Results (quarter over quarter)
Q4 2023 | Q3 2023 | Percentage Change |
||||||||||
Homes acquired |
678 | 930 | (27 | %) | ||||||||
Homes sold |
712 | 703 | 1 | % | ||||||||
Revenue |
$ | 240.5M | $ | 234.2M | 3 | % | ||||||
Gross profit |
$ | 16.7M | $ | 24.0M | (30 | %) | ||||||
Net loss |
($ | 15.4M | ) | ($ | 20.0M | ) | 23 | % | ||||
Adjusted EBITDA |
($ | 7.0M | ) | ($ | 13.3M | ) | 47 | % | ||||
Diluted Net Loss per Share |
($ | 0.57 | ) | ($ | 0.73 | ) | 22 | % | ||||
Gross profit per home sold |
$ | 23,400 | $ | 34,100 | (31 | %) | ||||||
Contribution profit (loss) after interest per home sold |
$ | 10,200 | $ | 27,200 | (63 | %) | ||||||
Cash and cash equivalents |
$ | 76.0M | $ | 106.0M | (28 | %) |
Q4 2023 Financial Results (year over year)
Q4 2023 | Q4 2022 | Percentage Change |
||||||||||
Homes acquired |
678 | 539 | 26 | % | ||||||||
Homes sold |
712 | 1,865 | (62 | %) | ||||||||
Revenue |
$ | 240.5M | $ | 677.2M | (64 | %) | ||||||
Gross profit |
$ | 16.7M | ($ | 44.9M | ) | n.a. | ||||||
Net loss |
($ | 15.4M | ) | ($ | 121.1M | ) | 87 | % | ||||
Adjusted EBITDA |
($ | 7.0M | ) | ($ | 103.7M | ) | 93 | % | ||||
Diluted Net Loss per Share |
($ | 0.57 | ) | ($ | 7.35 | ) | 92 | % | ||||
Gross profit (loss) per home sold |
$ | 23,400 | ($ | 24,100 | ) | n.a. | ||||||
Contribution profit (loss) after interest per home sold |
$ | 10,200 | ($ | 32,800 | ) | n.a. | ||||||
Cash and cash equivalents |
$ | 76.0M | $ | 97.2M | (22 | %) |
2023 Financial Results (year over year)
2023 | 2022 | Percentage Change |
||||||||||
Homes acquired |
2,812 | 9,034 | (69 | %) | ||||||||
Homes sold |
3,674 | 10,635 | (65 | %) | ||||||||
Revenue |
$ | 1.3B | $ | 4.0B | (67 | %) | ||||||
Gross profit |
$ | 70.2M | $ | 182.4M | (62 | %) | ||||||
Net loss |
($ | 117.2M | ) | ($ | 148.6M | ) | 21 | % | ||||
Adjusted EBITDA |
($ | 82.4M | ) | ($ | 103.8M | ) | 21 | % | ||||
Diluted Net Loss per Share |
($ | 4.44 | ) | ($ | 9.09 | ) | 51 | % | ||||
Gross profit per home sold |
$ | 19,100 | $ | 17,200 | 11 | % | ||||||
Contribution profit (loss) after interest per home sold |
($ | 13,900 | ) | $ | 9,300 | n.a. | ||||||
Cash and cash equivalents |
$ | 76.0M | $ | 97.2M | (22 | %) |
Additional information regarding Offerpads fourth quarter and full year 2023 financial results and management commentary can be found by accessing the Companys Quarterly Letter to Shareholders on the Offerpad investor relations website.
First Quarter 2024 Outlook
Offerpad is providing its first quarter outlook for 2024 as follows:
Q1 2024 Outlook | ||||
Homes Sold |
750 850 | |||
Revenue |
$245M $285M | |||
Adjusted EBITDA1 |
($10M) ($2.5M) |
1 | See Non-GAAP financial measures below for an explanation of why a reconciliation of this guidance cannot be provided. |
Conference Call and Webcast Details
Brian Bair, Chairman and CEO, and James Grout, Interim Principal Financial Officer, will host a conference call and accompanying webcast on February 26, 2024, at 4:30 p.m. ET. The webcast can be accessed on Offerpads Investor Relations website. Those interested can register here. Access to a replay of the webcast will be available from the same website address shortly after the live webcast concludes.
About Offerpad
Offerpads mission is to deliver the best home buying and selling experience. From cash offers and flexible listing options to mortgages and buyer services, Offerpad has been helping homeowners since 2015. We pair our local expertise in residential real estate with proprietary technology to put you in control of the process and help find the right solution that fits your needs. Visit Offerpad.com for more information.
#OPAD_IR
Contacts
Investors
Investors@offerpad.com
Media
Press@offerpad.com
Forward-Looking Statements
Certain statements in this press release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or Offerpads future financial or operating performance. For example, statements regarding Offerpads financial outlook, including homes sold and Adjusted EBITDA, for the fourth quarter 2023, and expectations regarding profitability, including the timing of reaching sustainable positive Adjusted EBITDA, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as pro forma, may, should, could, might, plan, possible, project, strive, budget, forecast, expect, intend, will, estimate, anticipate, believe, predict, potential or continue, or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may impact such forward-looking statements include, but are not limited to, Offerpads ability to respond to general economic conditions; the health of the U.S. residential real estate industry; Offerpads ability to grow market share in its existing markets or any new markets it may enter; Offerpads ability to manage its growth and its costs structure effectively; Offerpads ability to accurately value and manage real estate inventory, maintain an adequate and desirable supply of real estate inventory, and manage renovations; Offerpads ability to successfully launch new product and service offerings, and to manage, develop and refine its technology platform; Offerpads ability to maintain and enhance its products and brand, and to attract customers; Offerpads ability to achieve and maintain profitability in the future; the success of strategic relationships with third parties; and Offerpads failure to meet the New York Stock Exchanges continued listing standards. These and other important factors discussed under the caption Risk Factors in Offerpads Annual Report on Form 10-K for the year ended December 31, 2023 to be with the Securities and Exchange Commission on or about February 27, 2024, and Offerpads other reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by Offerpad and its management, are inherently uncertain. Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Offerpad undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
OFFERPAD SOLUTIONS INC.
Condensed Consolidated Statements of Operations
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
(in thousands, except per share data) (Unaudited) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenue |
$ | 240,458 | $ | 677,214 | $ | 1,314,412 | $ | 3,952,314 | ||||||||
Cost of revenue |
223,766 | 722,074 | 1,244,231 | 3,769,892 | ||||||||||||
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Gross profit (loss) |
16,692 | (44,860 | ) | 70,181 | 182,422 | |||||||||||
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Operating expenses: |
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Sales, marketing and operating |
17,932 | 48,761 | 116,558 | 238,931 | ||||||||||||
General and administrative |
8,775 | 13,300 | 50,091 | 58,718 | ||||||||||||
Technology and development |
1,236 | 2,978 | 7,945 | 12,090 | ||||||||||||
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Total operating expenses |
27,943 | 65,039 | 174,594 | 309,739 | ||||||||||||
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Loss from operations |
(11,251 | ) | (109,899 | ) | (104,413 | ) | (127,317 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Change in fair value of warrant liabilities |
(109 | ) | 3,360 | 68 | 23,522 | |||||||||||
Interest expense |
(5,154 | ) | (15,135 | ) | (18,859 | ) | (45,991 | ) | ||||||||
Other income, net |
1,065 | 861 | 6,149 | 1,532 | ||||||||||||
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Total other expense |
(4,198 | ) | (10,914 | ) | (12,642 | ) | (20,937 | ) | ||||||||
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Loss before income taxes |
(15,449 | ) | (120,813 | ) | (117,055 | ) | (148,254 | ) | ||||||||
Income tax benefit (expense) |
8 | (324 | ) | (163 | ) | (359 | ) | |||||||||
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Net loss |
$ | (15,441 | ) | $ | (121,137 | ) | $ | (117,218 | ) | $ | (148,613 | ) | ||||
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Net loss per share, basic |
$ | (0.57 | ) | $ | (7.35 | ) | $ | (4.44 | ) | $ | (9.09 | ) | ||||
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Net loss per share, diluted |
$ | (0.57 | ) | $ | (7.35 | ) | $ | (4.44 | ) | $ | (9.09 | ) | ||||
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Weighted average common shares outstanding, basic |
27,292 | 16,492 | 26,385 | 16,343 | ||||||||||||
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Weighted average common shares outstanding, diluted |
27,292 | 16,492 | 26,385 | 16,343 | ||||||||||||
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OFFERPAD SOLUTIONS INC.
Condensed Consolidated Balance Sheets
As of December 31, | ||||||||
(in thousands, except par value per share) (Unaudited) | 2023 | 2022 | ||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 75,967 | $ | 97,241 | ||||
Restricted cash |
3,967 | 43,058 | ||||||
Accounts receivable |
9,935 | 2,350 | ||||||
Real estate inventory |
276,500 | 664,697 | ||||||
Prepaid expenses and other current assets |
5,236 | 6,833 | ||||||
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Total current assets |
371,605 | 814,179 | ||||||
Property and equipment, net |
4,517 | 5,194 | ||||||
Other non-current assets |
3,572 | 5,696 | ||||||
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TOTAL ASSETS | $ | 379,694 | $ | 825,069 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities: |
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Accounts payable |
$ | 4,946 | $ | 4,647 | ||||
Accrued and other current liabilities |
13,859 | 28,252 | ||||||
Secured credit facilities and other debt, net |
227,132 | 605,889 | ||||||
Secured credit facilities and other debt - related party |
30,092 | 60,176 | ||||||
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Total current liabilities |
276,029 | 698,964 | ||||||
Warrant liabilities |
471 | 539 | ||||||
Other long-term liabilities |
1,418 | 3,689 | ||||||
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Total liabilities | 277,918 | 703,192 | ||||||
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Commitments and contingencies |
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Stockholders equity: |
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Class A common stock, $0.0001 par value; 2,000,000 shares authorized; 27,233 and 15,491 shares issued and outstanding as of December 31, 2023 and 2022, respectively |
3 | 2 | ||||||
Class B common stock, zero shares authorized, issued and outstanding as of December 31, 2023; and $0.0001 par value, 20,000 shares authorized; 988 shares issued and outstanding as of December 31, 2022 |
| | ||||||
Additional paid in capital |
499,660 | 402,544 | ||||||
Accumulated deficit |
(397,887 | ) | (280,669 | ) | ||||
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Total stockholders equity |
101,776 | 121,877 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 379,694 | $ | 825,069 | ||||
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OFFERPAD SOLUTIONS INC.
Condensed Consolidated Statements of Cash Flows
Year Ended December 31, | ||||||||
($ in thousands) (Unaudited) | 2023 | 2022 | ||||||
Cash flows from operating activities: |
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Net loss |
$ | (117,218 | ) | $ | (148,613 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation |
728 | 1,022 | ||||||
Amortization of debt financing costs |
4,343 | 2,948 | ||||||
Real estate inventory valuation adjustment |
8,937 | 93,810 | ||||||
Stock-based compensation |
7,915 | 8,307 | ||||||
Change in fair value of warrant liabilities |
(68 | ) | (23,522 | ) | ||||
Gain on sale of derivative instruments |
(2,124 | ) | | |||||
Loss on disposal of property and equipment |
76 | | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(7,585 | ) | 3,815 | |||||
Real estate inventory |
379,260 | 374,064 | ||||||
Prepaid expenses and other assets |
3,733 | (275 | ) | |||||
Accounts payable |
299 | (1,752 | ) | |||||
Accrued and other liabilities |
(16,664 | ) | (4,402 | ) | ||||
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Net cash provided by operating activities |
261,632 | 305,402 | ||||||
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Cash flows from investing activities: |
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Purchases of property and equipment |
(127 | ) | (1,070 | ) | ||||
Purchases of derivative instruments |
(2,569 | ) | | |||||
Proceeds from sale of derivative instruments |
4,681 | | ||||||
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Net cash provided by (used in) investing activities |
1,985 | (1,070 | ) | |||||
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Cash flows from financing activities: |
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Borrowings from credit facilities and other debt |
875,559 | 3,178,033 | ||||||
Repayments of credit facilities and other debt |
(1,286,795 | ) | (3,540,466 | ) | ||||
Payment of debt financing costs |
(1,948 | ) | (646 | ) | ||||
Borrowings from warehouse lending facility |
25,193 | | ||||||
Repayments of warehouse lending facility |
(25,193 | ) | | |||||
Proceeds from issuance of pre-funded warrants |
90,000 | | ||||||
Proceeds from exercise of pre-funded warrants |
11 | | ||||||
Issuance cost of pre-funded warrants |
(784 | ) | | |||||
Proceeds from exercise of stock options |
53 | 4,898 | ||||||
Payments for taxes related to stock-based awards |
(78 | ) | (285 | ) | ||||
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Net cash used in by financing activities |
(323,982 | ) | (358,466 | ) | ||||
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Net change in cash, cash equivalents and restricted cash |
(60,365 | ) | (54,134 | ) | ||||
Cash, cash equivalents and restricted cash, beginning of period |
140,299 | 194,433 | ||||||
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Cash, cash equivalents and restricted cash, end of period |
$ | 79,934 | $ | 140,299 | ||||
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Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet: |
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Cash and cash equivalents |
$ | 75,967 | $ | 97,241 | ||||
Restricted cash |
3,967 | 43,058 | ||||||
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Total cash, cash equivalents and restricted cash |
$ | 79,934 | $ | 140,299 | ||||
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Supplemental disclosure of cash flow information: |
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Cash payments for interest |
$ | 24,730 | $ | 59,732 |
Non-GAAP Financial Measures
In addition to Offerpads results of operations above, Offerpad reports certain financial measures that are not required by, or presented in accordance with, U.S. generally accepted accounting principles (GAAP). These measures have limitations as analytical tools when assessing Offerpads operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net income.
Offerpad may calculate or present its non-GAAP financial measures differently than other companies who report measures with similar titles and, as a result, the non-GAAP financial measures Offerpad reports may not be comparable with those of companies in Offerpads industry or in other industries. Offerpad has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted net income (loss) within this press release because Offerpad is unable to calculate certain reconciling items without making unreasonable efforts. These items, which include, but are not limited to, stock-based compensation with respect to future grants and forfeitures, could materially affect the computation of forward-looking net income (loss), are inherently uncertain and depend on various factors, some of which are outside of Offerpads control.
Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest (and related margins)
To provide investors with additional information regarding Offerpads margins, Offerpad has included Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest (and related margins), which are non-GAAP financial measures. Offerpad believes that Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest are useful financial measures for investors as they are used by management in evaluating unit level economics and operating performance across Offerpads markets. Each of these measures is intended to present the economics related to homes sold during a given period. Offerpad does so by including revenue generated from homes sold (and ancillary services) in the period and only the expenses that are directly attributable to such home sales, even if such expenses were recognized in prior periods, and excluding expenses related to homes that remain in real estate inventory as of the end of the period presented. Contribution Profit provides investors a measure to assess Offerpads ability to generate returns on homes sold during a reporting period after considering home acquisition costs, renovation and repair costs, and adjusting for holding costs and selling costs. Contribution Profit After Interest further impacts gross profit by including interest costs (including senior and mezzanine secured credit facilities) attributable to homes sold during a reporting period. Offerpad believes these measures facilitate meaningful period over period comparisons and illustrate Offerpads ability to generate returns on assets sold after considering the costs directly related to the assets sold in a presented period.
Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest (and related margins) are supplemental measures of Offerpads operating performance and have limitations as analytical tools. For example, these measures include costs that were recorded in prior periods under GAAP and exclude, in connection with homes held in real estate inventory at the end of the period, costs required to be recorded under GAAP in the same period.
Accordingly, these measures should not be considered in isolation or as a substitute for analysis of Offerpads results as reported under GAAP. Offerpad includes a reconciliation of these measures to the most directly comparable GAAP financial measure, which is gross profit.
Adjusted Gross Profit / Margin
Offerpad calculates Adjusted Gross Profit as gross profit under GAAP adjusted for (1) net real estate inventory valuation adjustment plus (2) interest expense associated with homes sold in the presented period and recorded in cost of revenue. Net real estate inventory valuation adjustment is calculated by adding back the real estate inventory valuation adjustment charges recorded during the period on homes that remain in real estate inventory at period end and subtracting the real estate inventory valuation adjustment charges recorded in prior periods on homes sold in the current period. Offerpad defines Adjusted Gross Margin as Adjusted Gross Profit as a percentage of revenue.
Offerpad views this metric as an important measure of business performance, as it captures gross margin performance isolated to homes sold in a given period and provides comparability across reporting periods. Adjusted Gross Profit helps management assess performance across the key phases of processing a home (acquisitions, renovations, and resale) for a specific resale cohort.
Contribution Profit / Margin
Offerpad calculates Contribution Profit as Adjusted Gross Profit, minus (1) direct selling costs incurred on homes sold during the presented period, minus (2) holding costs incurred in the current period on homes sold during the period recorded in sales, marketing, and operating, minus (3) holding costs incurred in prior periods on homes sold in the current period recorded in sales, marketing, and operating, plus (4) other income, net which is primarily comprised of interest income earned on our cash and cash equivalents and fair value adjustments of derivative financial instruments. The composition of Offerpads holding costs is described in the footnotes to the reconciliation table below. Offerpad defines Contribution Margin as Contribution Profit as a percentage of revenue.
Offerpad views this metric as an important measure of business performance as it captures the unit level performance isolated to homes sold in a given period and provides comparability across reporting periods. Contribution Profit helps management assess inflows and outflow directly associated with a specific resale cohort.
Contribution Profit / Margin After Interest
Offerpad defines Contribution Profit After Interest as Contribution Profit, minus (1) interest expense associated with homes sold in the presented period and recorded in cost of revenue, minus (2) interest expense associated with homes sold in the presented period, recorded in costs of sales, and previously excluded from Adjusted Gross Profit, and minus (3) interest expense under Offerpads senior and mezzanine secured credit facilities incurred on homes sold during the period. This includes interest expense recorded in prior periods in which the sale occurred. Offerpads senior and mezzanine secured credit facilities are secured by their homes in real estate inventory and drawdowns are made on a per-home basis at the time of purchase and are required to be repaid at the time the homes are sold. Offerpad defines Contribution Margin After Interest as Contribution Profit After Interest as a percentage of revenue.
Offerpad views this metric as an important measure of business performance. Contribution Profit After Interest helps management assess Contribution Margin performance, per above, when fully burdened with costs of financing.
The following tables present a reconciliation of Offerpads Adjusted Gross (Loss) Profit, Contribution (Loss) Profit and Contribution (Loss) Profit After Interest to Offerpads Gross (Loss) Profit, which is the most directly comparable GAAP measure, and Contribution (Loss) Profit Per Home Sold and Contribution (Loss) Profit After Interest Per Home Sold to Offerpads Gross (Loss) Profit Per Home Sold, which is the most directly comparable GAAP measure, for the periods indicated:
Three Months Ended December 31, |
Year Ended December 31, |
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(in thousands, except percentages and homes sold, unaudited) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Gross profit (loss) (GAAP) |
$ | 16,692 | $ | (44,860 | ) | $ | 70,181 | $ | 182,422 | |||||||
Gross margin |
6.9 | % | (6.6 | %) | 5.3 | % | 4.6 | % | ||||||||
Homes sold |
712 | 1,865 | 3,674 | 10,635 | ||||||||||||
Gross profit (loss) per home sold |
$ | 23.4 | $ | (24.1 | ) | $ | 19.1 | $ | 17.2 | |||||||
Adjustments: |
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Real estate inventory valuation adjustment - current period (1) |
565 | 44,075 | 837 | 58,413 | ||||||||||||
Real estate inventory valuation adjustment - prior period (2) |
(713 | ) | (25,469 | ) | (58,125 | ) | (1,205 | ) | ||||||||
Interest expense capitalized (3) |
964 | 3,081 | 7,234 | 12,660 | ||||||||||||
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Adjusted gross profit (loss) |
$ | 17,508 | $ | (23,173 | ) | $ | 20,127 | $ | 252,290 | |||||||
Adjusted gross margin |
7.3 | % | (3.4 | %) | 1.5 | % | 6.4 | % | ||||||||
Adjustments: |
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Direct selling costs (4) |
(5,829 | ) | (20,584 | ) | (35,225 | ) | (97,381 | ) | ||||||||
Holding costs on sales - current period (5)(6) |
(742 | ) | (1,251 | ) | (3,357 | ) | (8,342 | ) | ||||||||
Holding costs on sales - prior period (5)(7) |
(285 | ) | (1,209 | ) | (2,166 | ) | (918 | ) | ||||||||
Other income, net (8) |
1,065 | 861 | 6,149 | 1,532 | ||||||||||||
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Contribution profit (loss) |
$ | 11,717 | $ | (45,356 | ) | $ | (14,472 | ) | $ | 147,181 | ||||||
Contribution margin |
4.9 | % | (6.7 | %) | (1.1 | %) | 3.7 | % | ||||||||
Homes sold |
712 | 1,865 | 3,674 | 10,635 | ||||||||||||
Contribution profit (loss) per home sold |
$ | 16.5 | $ | (24.3 | ) | $ | (3.9 | ) | $ | 13.8 | ||||||
Adjustments: |
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Interest expense capitalized (3) |
(964 | ) | (3,081 | ) | (7,234 | ) | (12,660 | ) | ||||||||
Interest expense on homes sold - current period (9) |
(2,041 | ) | (5,858 | ) | (15,289 | ) | (32,022 | ) | ||||||||
Interest expense on homes sold - prior period (10) |
(1,466 | ) | (6,943 | ) | (13,924 | ) | (3,737 | ) | ||||||||
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Contribution profit (loss) after interest |
$ | 7,246 | $ | (61,238 | ) | $ | (50,919 | ) | $ | 98,762 | ||||||
Contribution margin after interest |
3.0 | % | (9.0 | %) | (3.9 | %) | 2.5 | % | ||||||||
Homes sold |
712 | 1,865 | 3,674 | 10,635 | ||||||||||||
Contribution profit (loss) after interest per home sold |
$ | 10.2 | $ | (32.8 | ) | $ | (13.9 | ) | $ | 9.3 |
(1) | Real estate inventory valuation adjustment current period is the real estate inventory valuation adjustments recorded during the period presented associated with homes that remain in real estate inventory at period end. |
(2) | Real estate inventory valuation adjustment prior period is the real estate inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented. |
(3) | Interest expense capitalized represents all interest related costs, including senior and mezzanine secured credit facilities, incurred on homes sold in the period presented that were capitalized and expensed in cost of sales at the time of sale. |
(4) | Direct selling costs represents selling costs incurred related to homes sold in the period presented. This primarily includes broker commissions and title and escrow closing fees. |
(5) | Holding costs primarily include insurance, utilities, homeowners association dues, property taxes, cleaning, and maintenance costs. |
(6) | Represents holding costs incurred on homes sold in the period presented and expensed to Sales, marketing, and operating on the Condensed Consolidated Statements of Operations. |
(7) | Represents holding costs incurred in prior periods on homes sold in the period presented and expensed to Sales, marketing, and operating on the Condensed Consolidated Statements of Operations. |
(8) | Other income, net principally represents interest income earned on our cash and cash equivalents and fair value adjustments of derivative financial instruments. |
(9) | Represents both senior and mezzanine interest expense incurred on homes sold in the period presented and expensed to interest expense on the Condensed Consolidated Statements of Operations. |
(10) | Represents both senior and mezzanine secured credit facilities interest expense incurred in prior periods on homes sold in the period presented and expensed to interest expense on the Condensed Consolidated Statements of Operations. |
Adjusted Net Income (Loss) and Adjusted EBITDA
Offerpad also presents Adjusted Net Income (Loss) and Adjusted EBITDA, which are non-GAAP financial measures, which the management team uses to assess Offerpads underlying financial performance. Offerpad believes these measures provide insight into period over period performance, adjusted for non-recurring or non-cash items.
Offerpad calculates Adjusted Net Income (Loss) as GAAP Net Income (Loss) adjusted for the change in fair value of warrant liabilities. Offerpad defines Adjusted Net Income (Loss) Margin as Adjusted Net Income (Loss) as a percentage of revenue.
Offerpad calculates Adjusted EBITDA as Adjusted Net Income (Loss) adjusted for interest expense, amortization of capitalized interest, taxes, depreciation and amortization and stock-based compensation expense. Offerpad defines Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of revenue.
Adjusted Net Income (Loss) and Adjusted EBITDA are supplemental to Offerpads operating performance measures calculated in accordance with GAAP and have important limitations. For example, Adjusted Net Income (Loss) and Adjusted EBITDA exclude the impact of certain costs required to be recorded under GAAP and could differ substantially from similarly titled measures presented by other companies in Offerpads industry or companies in other industries. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of Offerpads results as reported under GAAP.
The following table presents a reconciliation of Offerpads Adjusted Net Income (Loss) and Adjusted EBITDA to their GAAP Net Income (Loss), which is the most directly comparable GAAP measure, for the periods indicated:
Three Months Ended December 31, |
Year Ended December 31, |
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(in thousands, except percentages, unaudited) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net loss (GAAP) |
$ | (15,441 | ) | $ | (121,137 | ) | $ | (117,218 | ) | $ | (148,613 | ) | ||||
Change in fair value of warrant liabilities |
(109 | ) | (3,360 | ) | (68 | ) | (23,522 | ) | ||||||||
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Adjusted net loss |
$ | (15,332 | ) | $ | (124,497 | ) | $ | (117,286 | ) | $ | (172,135 | ) | ||||
Adjusted net loss margin |
(6.4 | )% | (18.4 | )% | (8.9 | )% | (4.4 | )% | ||||||||
Adjustments: |
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Interest expense |
5,154 | 15,135 | 18,859 | 45,991 | ||||||||||||
Amortization of capitalized interest (1) |
964 | 3,081 | 7,234 | 12,660 | ||||||||||||
Income tax expense (benefit) |
(8 | ) | 324 | 163 | 359 | |||||||||||
Depreciation and amortization |
172 | 258 | 728 | 1,022 | ||||||||||||
Amortization of stock-based compensation |
2,000 | 2,014 | 7,915 | 8,307 | ||||||||||||
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Adjusted EBITDA |
$ | (7,050 | ) | $ | (103,685 | ) | $ | (82,387 | ) | $ | (103,796 | ) | ||||
Adjusted EBITDA margin |
(2.9 | )% | (15.3 | )% | (6.3 | )% | (2.6 | )% |
(1) | Amortization of capitalized interest represents all interest related costs, including senior and mezzanine secured interest related costs, incurred on homes sold in the period presented that were capitalized and expensed in cost of sales at the time of sale. |
DEAR SHAREHOLDERS, Reflecting on the past year, we view 2023 as a watershed period for our company, marked by strong execution across the organization. Against the backdrop of a challenging macro environment, we honed our focus, advanced our strategic priorities and established a new paradigm of financial and operational rigor. We concluded the year with strong fourth quarter performance, delivering results in line with our expectations across our key metrics of Homes Sold, Revenue and Adjusted EBITDA. Additionally, Q4 reflected our third consecutive quarter of sequential increases in revenue and our fourth consecutive quarter of Net Loss and Adjusted EBITDA margin improvement. From an operational perspective, 2023 brought notable wins. We expanded our partnership and ecosystem networks, particularly within our Agent Partnership Program (APP); we continued to diversify our revenue streams, with higher margin, asset-light solutions comprising more than 35 percent of contribution margin after interest in the second half of 2023; and most importantly, we established a clear path to achieving sustained Adjusted EBITDA profitability in 2024. Looking ahead, our strategic roadmap is clear, underpinned by refined roles and responsibilities across key functions as the trusted solution center for customers and partners across the real estate landscape. In 2024, our teams will focus on scaling our asset-light businesses, including the expansion of our partnership programs, and evolving our marketing strategies to potentially maximize returns and capitalize on market opportunities. All of this is built upon our foundational product, our cash offer, which continues to enable our growth and expansion. To that end, our partner network is a key lever in our growth strategy. Our Agent Partnership Program in particular has been instrumental to fostering long-term relationships and driving revenue for both Offerpad and our partner agents. Recent enhancements, including tiered structures and exclusive benefits, are expected to expand our reach even further. Our extended services, from APP to Direct Plus, to Offerpad’s Renovate, accounted for 43 percent of unit transactions in 2023, driving higher margins and customer satisfaction. We continue to build out our tech stack to enable end-to-end, real-time insights for our asset-light services, from data insights for our real estate agent partners to detailed renovation progress tracking for all stakeholders. As we continue to navigate dynamic market conditions, we are maintaining an unwavering focus on our three strategic imperatives: taking the friction out of real estate, advancing Offerpad’s asset-light businesses and expanding our partner ecosystem. In closing, I want to express gratitude to the Offerpad team, our partners and shareholders for their ongoing support. We move forward with confidence in our strategic vision, operational strength, and commitment to increasing shareholder value. Brian Bair | Chairman and CEO Exhibit 99.2
NET INCOME (LOSS), ADJ. NET INCOME (LOSS) & ADJ. EBITDA ($M) Net Income (Loss) Adj. Net Income (Loss) Adj. EBITDA See Appendix for a reconciliation to the most directly comparable GAAP measure and additional information. TOTAL REVENUE ($M) & HOMES ACQUIRED RETURNS PER HOME SOLD
See Appendix for a reconciliation to the most directly comparable GAAP measure and additional information. 1H’23 TOTAL CONTRIBUTION MARGIN AFTER INTEREST PER HOME SOLD Net Sale Proceeds Holding Costs Selling Costs Contribution Margin Contribution Margin After Interest Other Services Total Contribution Margin After Interest ($7k) ($5k) ($14k) ($25k) ($37k) $3k ($34k) $30k ($3k) ($10k) $17k $12k $7k $19k Net Sale Proceeds Holding Costs Selling Costs Contribution Margin Contribution Margin After Interest Other Services Total Contribution Margin After Interest 2H’23 TOTAL CONTRIBUTION MARGIN AFTER INTEREST PER HOME SOLD
FIRST QUARTER 2024 OUTLOOK HOMES SOLD 750 – 850 REVENUE $245M – $285M ADJUSTED EBITDA1 ($10)M – ($2.5)M 1 See Non-GAAP financial measures in Appendix for an explanation of why a reconciliation of this guidance cannot be provided.
APPENDIX Forward-Looking Statements Certain statements in this shareholder letter may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or Offerpad’s future financial or operating performance. For example, statements regarding Offerpad’s financial outlook, expectations regarding profitability, and anticipated market conditions in the industry in which Offerpad operates are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “might,” “plan,” “possible,” “project,” “strive,” “budget,” “forecast,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue,” or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may impact such forward-looking statements include, but are not limited to, Offerpad’s ability to respond to general economic conditions; the health of the U.S. residential real estate industry; Offerpad’s ability to grow market share in its existing markets or any new markets it may enter; Offerpad’s ability to manage its growth and its costs structure effectively; Offerpad’s ability to accurately value and manage real estate inventory, maintain an adequate and desirable supply of real estate inventory, and manage renovations; Offerpad’s ability to successfully launch new product and service offerings, and to manage, develop and refine its technology platform; Offerpad’s ability to maintain and enhance its products and brand, and to attract customers; Offerpad’s ability to achieve and maintain profitability in the future; the success of strategic relationships with third parties; and Offerpad’s failure to meet the New York Stock Exchange’s continued listing standards. These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 to be filed with the Securities and Exchange Commission on or about February 27, 2024, and our other reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made in this shareholder letter. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by Offerpad and its management, are inherently uncertain. Nothing in this shareholder letter should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Offerpad undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
OFFERPAD SOLUTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended December 31, Year Ended December 31, (in thousands, except per share data) (Unaudited) 2023 2022 2023 2022 Revenue $ 240,458 $ 677,214 $ 1,314,412 $ 3,952,314 Cost of revenue 223,766 722,074 1,244,231 3,769,892 Gross profit (loss) 16,692 (44,860 ) 70,181 182,422 Operating expenses: Sales, marketing and operating 17,932 48,761 116,558 238,931 General and administrative 8,775 13,300 50,091 58,718 Technology and development 1,236 2,978 7,945 12,090 Total operating expenses 27,943 65,039 174,594 309,739 Loss from operations (11,251 ) (109,899 ) (104,413 ) (127,317 ) Other income (expense): Change in fair value of warrant liabilities (109 ) 3,360 68 23,522 Interest expense (5,154 ) (15,135 ) (18,859 ) (45,991 ) Other income, net 1,065 861 6,149 1,532 Total other expense (4,198 ) (10,914 ) (12,642 ) (20,937 ) Loss before income taxes (15,449 ) (120,813 ) (117,055 ) (148,254 ) Income tax benefit (expense) 8 (324 ) (163 ) (359 ) Net loss $ (15,441 ) $ (121,137 ) $ (117,218 ) $ (148,613 ) Net loss per share, basic $ (0.57 ) $ (7.35 ) $ (4.44 ) $ (9.09 ) Net loss per share, diluted $ (0.57 ) $ (7.35 ) $ (4.44 ) $ (9.09 ) Weighted average common shares outstanding, basic 27,292 16,492 26,385 16,343 Weighted average common shares outstanding, diluted 27,292 16,492 26,385 16,343
OFFERPAD SOLUTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS As of December 31, (in thousands, except par value per share) (Unaudited) 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 75,967 $ 97,241 Restricted cash 3,967 43,058 Accounts receivable 9,935 2,350 Real estate inventory 276,500 664,697 Prepaid expenses and other current assets 5,236 6,833 Total current assets 371,605 814,179 Property and equipment, net 4,517 5,194 Other non-current assets 3,572 5,696 TOTAL ASSETS $ 379,694 $ 825,069 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 4,946 $ 4,647 Accrued and other current liabilities 13,859 28,252 Secured credit facilities and other debt, net 227,132 605,889 Secured credit facilities and other debt - related party 30,092 60,176 Total current liabilities 276,029 698,964 Warrant liabilities 471 539 Other long-term liabilities 1,418 3,689 Total liabilities 277,918 703,192 Commitments and contingencies Stockholders’ equity: Class A common stock, $0.0001 par value; 2,000,000 shares authorized; 27,233 and 15,491 shares issued and outstanding as of December 31, 2023 and 2022, respectively 3 2 Class B common stock, zero shares authorized, issued and outstanding as of December 31, 2023; and $0.0001 par value, 20,000 shares authorized; 988 shares issued and outstanding as of December 31, 2022 — — Additional paid in capital 499,660 402,544 Accumulated deficit (397,887 ) (280,669 ) Total stockholders’ equity 101,776 121,877 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 379,694 $ 825,069
OFFERPAD SOLUTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, ($ in thousands) (Unaudited) 2023 2022 Cash flows from operating activities: Net loss $ (117,218 ) $ (148,613 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 728 1,022 Amortization of debt financing costs 4,343 2,948 Real estate inventory valuation adjustment 8,937 93,810 Stock-based compensation 7,915 8,307 Change in fair value of warrant liabilities (68 ) (23,522 ) Gain on sale of derivative instruments (2,124 ) — Loss on disposal of property and equipment 76 — Changes in operating assets and liabilities: Accounts receivable (7,585 ) 3,815 Real estate inventory 379,260 374,064 Prepaid expenses and other assets 3,733 (275 ) Accounts payable 299 (1,752 ) Accrued and other liabilities (16,664 ) (4,402 ) Net cash provided by operating activities 261,632 305,402 Cash flows from investing activities: Purchases of property and equipment (127 ) (1,070 ) Purchases of derivative instruments (2,569 ) — Proceeds from sale of derivative instruments 4,681 — Net cash provided by (used in) investing activities 1,985 (1,070 ) Cash flows from financing activities: Borrowings from credit facilities and other debt 875,559 3,178,033 Repayments of credit facilities and other debt (1,286,795 ) (3,540,466 ) Payment of debt financing costs (1,948 ) (646 ) Borrowings from warehouse lending facility 25,193 — Repayments of warehouse lending facility (25,193 ) — Proceeds from issuance of pre-funded warrants 90,000 — Proceeds from exercise of pre-funded warrants 11 — Issuance cost of pre-funded warrants (784 ) — Proceeds from exercise of stock options 53 4,898 Payments for taxes related to stock-based awards (78 ) (285 ) Net cash used in by financing activities (323,982 ) (358,466 ) Net change in cash, cash equivalents and restricted cash (60,365 ) (54,134 ) Cash, cash equivalents and restricted cash, beginning of period 140,299 194,433 Cash, cash equivalents and restricted cash, end of period $ 79,934 $ 140,299 Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet: Cash and cash equivalents $ 75,967 $ 97,241 Restricted cash 3,967 43,058 Total cash, cash equivalents and restricted cash $ 79,934 $ 140,299 Supplemental disclosure of cash flow information: Cash payments for interest $ 24,730 $ 59,732
Non-GAAP Financial Measures In addition to our results of operations above, we report certain financial measures that are not required by, or presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). These measures have limitations as analytical tools when assessing our operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net income. We may calculate or present our non-GAAP financial measures differently than other companies who report measures with similar titles and, as a result, the non-GAAP financial measures we report may not be comparable with those of companies in our industry or in other industries. We have not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted net income (loss) or Contribution Profit After Interest to Gross profit within this shareholder letter because we are unable to calculate certain reconciling items without making unreasonable efforts. With respect to Adjusted EBITDA, these items include, but are not limited to, stock-based compensation with respect to future grants and forfeitures, and with respect to Contribution Profit After Interest, these items include, but are not limited to, inventory valuation adjustments, inventory sales timing or product mix, which could materially affect the computation of forward-looking net income (loss) and Gross Profit, respectively, and are inherently uncertain and depend on various factors, some of which are outside of our control. Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest (and related margins) To provide investors with additional information regarding our margins, we have included Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest (and related margins), which are non-GAAP financial measures. We believe that Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest are useful financial measures for investors as they are used by management in evaluating unit level economics and operating performance across our markets. Each of these measures is intended to present the economics related to homes sold during a given period. We do so by including revenue generated from homes sold (and ancillary services) in the period and only the expenses that are directly attributable to such home sales, even if such expenses were recognized in prior periods, and excluding expenses related to homes that remain in real estate inventory as of the end of the period presented. Contribution Profit provides investors a measure to assess Offerpad’s ability to generate returns on homes sold during a reporting period after considering home acquisition costs, renovation and repair costs, and adjusting for holding costs and selling costs. Contribution Profit After Interest further impacts gross profit by including interest costs (including senior and mezzanine secured credit facilities) attributable to homes sold during a reporting period. We believe these measures facilitate meaningful period over period comparisons and illustrate our ability to generate returns on assets sold after considering the costs directly related to the assets sold in a presented period. Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest (and related margins) are supplemental measures of our operating performance and have limitations as analytical tools. For example, these measures include costs that were recorded in prior periods under GAAP and exclude, in connection with homes held in inventory at the end of the period, costs required to be recorded under GAAP in the same period. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is gross profit.
Adjusted Gross Profit / Margin We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1) net real estate inventory valuation adjustment plus (2) interest expense associated with homes sold in the presented period and recorded in cost of revenue. Net real estate inventory valuation adjustment is calculated by adding back the real estate inventory valuation adjustment charges recorded during the period on homes that remain in real estate inventory at period end and subtracting the real estate inventory valuation adjustment charges recorded in prior periods on homes sold in the current period. We define Adjusted Gross Margin as Adjusted Gross Profit as a percentage of revenue. We view this metric as an important measure of business performance, as it captures gross margin performance isolated to homes sold in a given period and provides comparability across reporting periods. Adjusted Gross Profit helps management assess performance across the key phases of processing a home (acquisitions, renovations, and resale) for a specific resale cohort. Contribution Profit / Margin We calculate Contribution Profit as Adjusted Gross Profit, minus (1) direct selling costs incurred on homes sold during the presented period, minus (2) holding costs incurred in the current period on homes sold during the period recorded in sales, marketing, and operating, minus (3) holding costs incurred in prior periods on homes sold in the current period recorded in sales, marketing, and operating, plus (4) other income, net which is primarily composed of interest income earned on our cash and cash equivalents and fair value adjustments of derivative financial instruments. The composition of our holding costs is described in the footnotes to the reconciliation table below. We define Contribution Margin as Contribution Profit as a percentage of revenue. We view this metric as an important measure of business performance as it captures the unit level performance isolated to homes sold in a given period and provides comparability across reporting periods. Contribution Profit helps management assess inflows and outflow directly associated with a specific resale cohort. Contribution Profit / Margin After Interest We define Contribution Profit After Interest as Contribution Profit, minus (1) interest expense associated with homes sold in the presented period and recorded in cost of revenue, minus (2) interest expense associated with homes sold in the presented period, recorded in costs of sales, and previously excluded from Adjusted Gross Profit, and minus (3) interest expense under our senior and mezzanine secured credit facilities incurred on homes sold during the period. This includes interest expense recorded in prior periods in which the sale occurred. Our senior and mezzanine secured credit facilities are secured by our homes in real estate inventory and drawdowns are made on a per-home basis at the time of purchase and are required to be repaid at the time the homes are sold. We define Contribution Margin After Interest as Contribution Profit After Interest as a percentage of revenue. We view this metric as an important measure of business performance. Contribution Profit After Interest helps management assess Contribution Margin performance, per above, when fully burdened with costs of financing.
The following tables present a reconciliation of our Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest to our Gross (Loss) Profit, which is the most directly comparable GAAP measure, and Contribution Profit (Loss) Per Home Sold and Contribution (Loss) Profit After Interest Per Home Sold to Offerpad’s Gross (Loss) Profit Per Home Sold, which is the most directly comparable GAAP measure, for the periods indicated: Three Months Ended (in thousands, except percentages and homes sold, unaudited) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Gross profit (loss) $16,692 $23,973 $22,231 $7,285 $ (44,860) Gross margin 6.9% 10.2% 9.7% 1.2% -6.6% Homes sold 712 703 650 1,609 1,865 Gross profit (loss) per home sold 23.4 34.1 34.2 4.5 (24.1) Adjustments: Inventory valuation adjustment - current period 565 918 169 7,285 44,075 Inventory valuation adjustment - prior period (713) (318) (13,679) (51,515) (25,469) Interest expense capitalized 964 235 1,358 4,677 3,081 Adjusted gross profit (loss) 17,508 24,808 10,079 (32,268) (23,173) Adjusted gross margin 7.3% 10.6% 4.4% -5.3% -3.4% Adjustments: Direct selling costs (5,829) (5,593) (5,743) (18,061) (20,584) Holding costs on sales - current period (742) (453) (269) (1,248) (1,251) Holding costs on sales - prior period (285) (72) (567) (1,886) (1,209) Other income, net 1,065 3,837 965 282 861 Contribution profit (loss) 11,717 22,527 4,465 (53,181) (45,356) Contribution margin 4.9% 9.6% 1.9% -8.7% -6.7% Homes sold 712 703 650 1,609 1,865 Contribution profit (loss) per home sold 16.5 32.0 6.9 (33.1) (24.3) Adjustments: Interest expense capitalized (964) (235) (1,358) (4,677) (3,081) Interest expense on homes sold - current period (2,041) (2,622) (1,292) (5,498) (5,858) Interest expense on homes sold - prior period (1,466) (553) (3,708) (12,032) (6,943) Contribution profit (loss) after interest 7,246 19,117 (1,893) (75,388) (61,238) Contribution margin after interest 3.0% 8.2% -0.8% -12.4% -9.0% Homes sold 712 703 650 1,609 1,865 Contribution profit (loss) after interest per home sold 10.2 27.2 (2.9) (46.9) (32.8)
Adjusted Net (Loss) Income and Adjusted EBITDA We also present Adjusted Net Income (Loss) and Adjusted EBITDA, which are non-GAAP financial measures, which our management team uses to assess our underlying financial performance. We believe these measures provide insight into period over period performance, adjusted for non-recurring or non-cash items. We calculate Adjusted Net Income (Loss) as GAAP Net Income (Loss) adjusted for the change in fair value of warrant liabilities. We define Adjusted Net Income (Loss) Margin as Adjusted Net Income (Loss) as a percentage of revenue. We calculate Adjusted EBITDA as Adjusted Net Income (Loss) adjusted for interest expense, amortization of capitalized interest, taxes, depreciation and amortization and stock-based compensation expense. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of revenue. Adjusted Net Income (Loss) and Adjusted EBITDA are supplemental to our operating performance measures calculated in accordance with GAAP and have important limitations. For example, Adjusted Net Income (Loss) and Adjusted EBITDA exclude the impact of certain costs required to be recorded under GAAP and could differ substantially from similarly titled measures presented by other companies in our industry or companies in other industries. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. The following table presents a reconciliation of our Adjusted Net Income (Loss) and Adjusted EBITDA to our GAAP Net Income (Loss), which is the most directly comparable GAAP measure, for the periods indicated: (1) Amortization of capitalized interest represents all interest related costs, including senior and mezzanine interest related costs, incurred on homes sold in the period presented that were capitalized and expensed in cost of sales at the time of sale. Three Months Ended (in thousands, except percentages, unaudited) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Net loss (GAAP) $ (15,441) $ (19,986) $ (22,344) $ (59,447) $ (121,137) Change in fair value of warrant liabilities 109 (131) (435) 389 (3,360) Adjusted net loss $ (15,332) $ (20,117) $ (22,779) $ (59,058) $ (124,497) Adjusted net loss margin (6.4%) (8.6%) (9.9%) (9.7%) (18.4%) Adjustments: Interest expense 5,154 4,406 1,867 7,432 15,135 Amortization of capitalized interest (1) 964 235 1,358 4,677 3,081 Income tax (benefit) expense (8) 6 43 122 324 Depreciation and amortization 172 175 178 202 258 Amortization of stock-based compensation 2,000 2,017 2,055 1,843 2,014 Adjusted EBITDA (7,050) (13,277) (17,278) (44,782) (103,685) Adjusted EBITDA margin (2.9%) (5.7%) (7.5%) (7.3%) (15.3%)
investor.offerpad.com
Document and Entity Information |
Feb. 26, 2024 |
---|---|
Cover [Abstract] | |
Amendment Flag | false |
Entity Central Index Key | 0001825024 |
Document Type | 8-K |
Document Period End Date | Feb. 26, 2024 |
Entity Registrant Name | Offerpad Solutions Inc. |
Entity Incorporation State Country Code | DE |
Entity File Number | 001-39641 |
Entity Tax Identification Number | 85-2800538 |
Entity Address, Address Line One | 2150 E. Germann Road |
Entity Address, Address Line Two | Suite 1 |
Entity Address, City or Town | Chandler |
Entity Address, State or Province | AZ |
Entity Address, Postal Zip Code | 85286 |
City Area Code | (844) |
Local Phone Number | 388-4539 |
Written Communications | false |
Soliciting Material | false |
Pre Commencement Tender Offer | false |
Pre Commencement Issuer Tender Offer | false |
Security 12b Title | Class A common stock, $0.0001 par value per share |
Trading Symbol | OPAD |
Security Exchange Name | NYSE |
Entity Emerging Growth Company | false |
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