Offerpad Solutions Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 4, 2025

Key Takeaways

  • Positive Sentiment: Completed a $21 million capital raise in July, boosting total liquidity to over $75 million and strengthening the balance sheet for growth and selective market-driven acquisitions.
  • Positive Sentiment: Delivered $160.3 million in Q2 revenue and sold 452 homes with an 8.9% gross margin, while cutting operating expenses by 30% YoY and improving adjusted EBITDA loss by 39% to $4.8 million.
  • Positive Sentiment: Officially launched HomePro in Q2 to offer in-person expert consultations and real-time platform solutions, aiming to capture more asset-light transactions and enhance seller flexibility.
  • Positive Sentiment: Achieved the second consecutive record quarter for the Renovate business with $6.4 million in revenue, expanding high-margin, asset-light services and deepening institutional partnerships.
  • Negative Sentiment: Market conditions remain challenging as rising inventory, affordability constraints, high interest rates and slower price appreciation led to an underwhelming spring selling season and longer days on market.
AI Generated. May Contain Errors.
Earnings Conference Call
Offerpad Solutions Q2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good afternoon. Thank you for attending the OfferPass Second Quarter twenty twenty five 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 if an opportunity for questions and answers at the end. I would like to pass the conference over to our host, Courtney Reed.

Operator

Courtney, please go ahead.

Speaker 1

Good afternoon, and welcome to Offerpad's second quarter twenty twenty five earnings call. I'm joined today by Offerpad's Chairman and Chief Executive Officer, Brian Baer and Chief Financial Officer, Peter Kanog. 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.

Speaker 1

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.

Speaker 1

The reconciliations of OperaPad non GAAP measures to the comparable GAAP measures are available in the financial tables of the first quarter earnings release on OperaPad's website. With that, I'll turn the call over to Brian.

Speaker 2

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 $21,000,000 in July. This brings our total liquidity to over 75,000,000 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.

Speaker 2

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 HomePRO 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.

Speaker 2

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 homebuyers in the country. For nearly a decade, Offerpad has helped sellers steer through any market.

Speaker 2

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.

Speaker 2

Now turning to the quarter itself. In Q2, we delivered $160,000,000 in revenue and sold four fifty two 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've 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.

Speaker 2

In Q2, we officially launched HomePro. This program brings specialized agents into the home through prescheduled 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 HomePros direct access to expert guidance and real time support.

Speaker 2

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 $6,400,000 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.

Speaker 2

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.

Speaker 2

In addition to expanding access, we 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, HomePro, 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.

Speaker 2

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.

Speaker 3

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.

Speaker 3

For the second quarter, we reported revenue of $160,300,000 with four fifty two 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 six sixty two homes in inventory with only 87 aged homes over one hundred and eighty 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 four forty three homes during the quarter with continued emphasis on strategic markets and properties aligned to our margin targets and overall business objectives.

Speaker 3

Gross margin was 8.9% resulting in $14,200,000 in gross profit. Operating expenses excluding property related costs totaled $17,000,000 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 $4,800,000 marking another quarter of sequential gains. We ended the quarter with $22,600,000 in unrestricted cash and over $55,000,000 in total liquidity, including the net value of our inventory.

Speaker 3

With July's $21,000,000 primarily non dilutive raise, total liquidity now exceeds $75,000,000 Also and importantly, thanks to our strategic approach and growing mix of asset light channels, we're able to operate with less cash on hand, giving us a comfortable runway as we continue progressing towards breakeven. 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 reductions 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.

Speaker 3

Looking ahead, we expect third quarter revenue in the range of 130,000,000 to $150,000,000 with three sixty to four ten 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.

Speaker 3

We appreciate your time and support. We're now ready to take your questions.

Operator

You. First question is from the line of Dave Lee with JPMorgan. Your line is now open.

Speaker 4

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 home right now, is it still with the assumption of higher spreads?

Speaker 4

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.

Speaker 2

I'll jump in. This is Brian. Hey, Dave. Good hearing from you. Renovate, several things happening there.

Speaker 2

You know, 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 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 and 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 be done from the cost, the efficiency and doing tens of thousands of homes on our own behalf leads to a lot of really good efficiencies there.

Speaker 2

So really happy what we're seeing the momentum around 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 earnings calls, as we continue to see a lack of buyer excitement, and, you know, the affordability is still an overhang of everything. And so, you know, we're we're still focused on, in areas. Like, there's pockets in every market that that are still working, that are decent transaction areas, And then there's definitely pockets that are not.

Speaker 2

And as as I mentioned before, outlying areas, next to new builds, those those are the kind of things that we're being very cautious of buying that. But, interior homes that have good transactions, we're 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 is 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 that's getting chased down by prices.

Speaker 2

Did I cover or Dave any follow ups on that or any you want to

Speaker 3

jump in? I 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 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.

Speaker 3

So the volume that we'll 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 offer 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 homes sold to total real estate transaction volume.

Speaker 2

Yes. 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, they're the the people that are selling in this environment are selling they they wanna the cash offer is extremely valuable to them. They have the certainty of the cash, but also the the closing date. But we also with our HomePro, we also wanna give them different alternatives with, you know, our the ability to get some of the cash now and and and then the benefit of some of the upside, and then the the a listing if they wanna choose to to to list their house in the open market as well. So so it's it's it's just interesting because of the timing of of the individuals right now is is we're seeing a lot of urgency and more, I would say, people that are in, like I said, a life moment that they need to sell than we've seen in quite a while.

Speaker 4

Got it. Thank you. And if I could just ask a quick follow-up on 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 just but you also talked about HomePro becoming bigger.

Speaker 4

So I was curious, like, when you look ahead, like, do you feel like HomePro is going to be a bigger, piece of the overall asset light offering? Or, like, how should we think about that mix shifting going forward?

Speaker 2

Yeah. And I I would say definitely. Again, the the idea and and the goal for when we started Offerpad was to to be a one stop solution center for customers, 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, especially in 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.

Speaker 2

And I think that's where you're gonna see a lot of opportunity over time as as the market starts to get back to a normalized and you see 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 wanna test the market by listing. And so, you know, 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 our mission statement is let's figure out what the best path forward is. And some of the questions we we 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.

Speaker 2

You know, right now, our renovate product is just a b to b bit, and, you know, it's not b to c yet. A lot of the other things we're doing is more b to c. Won't stay that way forever, but but but so, yeah, you're definitely gonna see HomePro definitely have more of an impact as as customers have more choice in in in the path that they wanna choose.

Speaker 4

Got it. Thank you.

Speaker 3

Thank you for your question.

Operator

Next question is from the line of Ryan Tomasello with KBW. Your line is now open.

Speaker 5

Hi, everyone. This is Juan Chung on 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?

Speaker 3

I think the volume was pretty low, but I think you're asking about the economics on HomePro. And what I'd I'd stress there and thanks for the question. It's an important question. The the as we move towards a revenue mix and a and a transaction volume mix that's heavier weighted towards the asset light HomePro 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 into institutions.

Speaker 3

In the HomePro services, we recognize net revenue, which is the same or very similar to gross profit. So you're going to

Speaker 2

see a

Speaker 3

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, of whether we're selling, 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 that's what I'd focus you on.

Speaker 5

Okay. Great. Thank you. And just a quick The

Speaker 2

one thing I'll I'll I'll just add there from oh, sorry. Did you have another question?

Speaker 5

Yeah. Would just say the the one the one thing after your comment.

Speaker 2

Okay. Sorry. I was just gonna say the the one thing I would tell you with with HomePro as we look at it is, you know, the idea is that our request volume has has stayed strong over the last, you know, really after over the last several years considering all the market conditions, lack of you know, the 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 have one if you just have a cash offer, the cash offer works yes or no. It's the right price, yes or no.

Speaker 2

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 to all of our funnel. And whether people are ready to 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 whatever product is. So a lot of it is from the the the margin that Peter mentioned, but also from a conversion perspective, is to make sure that that we can find a home and what works right for that for that seller.

Speaker 5

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

Speaker 3

Yes. We are comfortable in fact our total liquidity at the end of this quarter was and is around $55,000,000 between our cash and the net equity in our homes. At the end of first quarter, was around $60,000,000 So we moderated but not by a tremendous amount. We've really made a lot of big strides on our fixed cost as identified in the prepared remarks. Our fixed expense is $17,000,000 and based on continued cost outs that's going to come down continue to come down into third quarter and beyond.

Speaker 3

So our fixed cost 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 perspective 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.

Speaker 3

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. And then 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.

Speaker 3

And until we concluded it on that basis.

Speaker 5

Got it. Thank you.

Operator

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

Speaker 6

Hey, thanks for taking the question. This is Vincent on for John H. Jefferies. So you've historically talked about 1,000 homes per quarter as sort of the North Star for the point at which scale should combine with the mix shift to asset light services to help you deliver breakeven EBITDA and cash flow. 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 increased focus on asset light transactions.

Speaker 6

And if not, whether there's a new target to keep in mind, 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.

Speaker 3

Thank you, Vincent. Yes, for the 1,000 homes, we're hoping we'd 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, 1,000 real estate transactions continues to be our North Star. It's just a shift.

Speaker 3

Still we will do directionally fewer asset or balance sheet based cash offer purchases where we take the home into our inventory, but we'll be adding on transactions with partner cash offers as well as with financial institutions through our Direct Plus product and through participating in the traditional list. 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 breakeven. And I think you mentioned cost outs as well. We've come a long way not quite but almost 150,000,000 in cost outs over the last two years. We're at $17,000,000 in quarterly OpEx.

Speaker 3

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 into 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.

Speaker 2

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, 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 know, we started testing HomePro mid to later last year in just various markets and and and different variations. But the the product and technology lift of HomePro is really allowing us to scale different, be able to provide a range offer instantly, the the way that we are scaling some of the other some of our other products.

Speaker 2

So I think technology, we're getting a lot better and smarter on how we're gonna go. So as as we scale the business again, we're gonna scale it much much much smarter. Quite honestly, I think much faster too from from some of the efficiencies we're seeing on the on the technology side. So definitely leveraging that and as we continue to build out HomePro.

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