Opendoor Technologies : 2Q23 Letter to Shareholders

Letter to Shareholders

2Q23

The Costanza Family Flower Mound, TX

A Note from Carrie

Opendoor's vision is to build the most trusted e-commerce platform for residential real estate where home sellers and buyers can transact with simplicity and certainty.

We exceeded the high end of our outlook for revenue and Adjusted EBITDA in the second quarter. We're leveraging the lessons we've learned over the past nine years and focusing on what we can control: strengthening our product offering, improving the customer experience, driving cost efficiencies, and enhancing risk management. Our healthy and growing new book of inventory demonstrates our ability to generate positive unit economics in what continues to be an uncertain time in the U.S. housing market. We expect to return to positive contribution margins in 3Q23. We remain committed to deliver at least 100 bps (basis points) of contribution margin improvement by 2024, increasing our annual target range to 5% to 7%, with a goal of eventually returning to positive Adjusted Net Income.

Selling and buying a home is one of life's most important transactions. For many, it is the largest financial commitment they'll make. It takes far more effort than the swipe of a credit card: it is complex, requires a high degree of trust, and stirs many emotions. A new home can symbolize new beginnings and possibilities, but it can also come at a time when our customers are most vulnerable. Regardless of the macro environment, life - and home transactions - continue. We are committed to being the first and most trusted place people look to when considering a move.

As we reinvent the home selling and buying experience, we have to deeply understand the mechanics of the traditional offline process, and also the macroeconomic factors that always play a role in our business. When a customer is making the important decision to sell or buy their home, being a reliable option regardless of how the market is behaving is paramount. We have had to internalize the many pain points inherent in the traditional selling process and build unique expertise in pricing, portfolio management, product innovation and operations. From that, we have built a product that people love, letting them transact with simplicity and certainty. For both sellers and buyers, demand has proven resilient over our nine years in business as we've grown to become one of the largest home sellers and buyers in the country. We see that in our growing customer base, strong Net Promoter Scores, and our customer testimonials.

We remain focused on making investments in durable growth levers, and in our pricing and operations platforms that will benefit us for years to come. As we've always done, we are leading with the customer experience as we innovate, build, and adapt Opendoor to be an all-weather product and the best option for the millions of people who want to sell or buy a home.

Carrie Wheeler, CEO

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Kathy and Jim Thousand

Sold: Cape Coral, FL

Kathy and Jim Thousand set their sights on a new construction home in the Babcock Ranch community, located in Southwest Florida. They had been through the new-build process before and knew that selling their existing home and moving into a rental property, while a new home was being built would be less than ideal. They wanted to find a simpler solution this time around.

Having discovered Opendoor in a builder packet at Babcock Ranch, they were eager to learn more about the process and requested a preliminary offer on their home. With a finalized Opendoor offer in hand, Kathy and Jim were able to begin the mortgage pre-approval process with a builder at the community.

The Thousands found a simpler solution with Opendoor. They took advantage of the same day closing, allowing them to continue to live in their existing home until the new one was completed - avoiding double-moves and double-mortgages. When the unexpected happened and Hurricane Ian devastated the area last fall, in the midst of a stressful period, Kathy appreciated the personalized support and prompt communication provided by her experience partner Chloe Sinohui. Opendoor quickly deployed a home inspector to examine their home and when it was determined that no damage was done by the hurricane, the Thousands were thrilled to learn that there would be no change to their Opendoor offer and closing would still accommodate the timeline for completion on their new home. In Kathy's words, there were "no worries, no trouble, no extra fees - it was almost too good to be true."

When asked what her favorite part of the experience was, Kathy had this to say about Opendoor: "My favorite part of the process was working with the people at Opendoor, from start to finish."

I wasn't expecting to have my hand held along the way but the exact opposite was true. I felt like I was more cared for [with Opendoor].

- Kathy Thousand

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Business Highlights

ENABLING MORE SELLERS TO CHOOSE OPENDOOR

We are focused on expanding and optimizing our customer acquisition channels so we can re-engage with registered sellers and reach new potential customers across all market conditions in the most efficient way possible.

Only around 1% of the approximately $1.9 trillion of U.S. residential real estate transactions are conducted online today despite the fact that the traditional process remains complex, uncertain, and broken. We know that customers value the certainty and convenience of Opendoor. By increasing awareness, growing our registered customer base, and expanding our buybox, we have demonstrated market share gains. The markets we launched prior to 2018, our longest tenure markets, achieved 3.8% market share by 2022. Within those markets, 39% of the homeowners in our buybox have come to us and entered their address and home details. In comparison, our 23 markets launched in 2021 had just 0.7% market share in 2022 and 20% of the homeowners in our buybox had come to us. As our markets mature and the housing market stabilizes, the potential for organic market share growth from our existing markets should provide meaningful tailwinds.

A continued source of growth is re-engagement with our base of registered sellers - individuals who have received an offer from Opendoor but have not yet sold their home. In the last nine years, we have sent millions of offers. Although some sellers are not immediately ready to act when they request an offer, we treat everyone as a potential seller. Our base of registered sellers gives us a way to proactively stay engaged with de minimis incremental cost until they do decide to sell their homes. Over the past two years, we have substantially improved our re-engagement strategies. Three-quarters of our acquisition contracts in 2Q23 were from sellers who did not act on their initial offer but subsequently acted on a refreshed offer. We believe that the power of our cash offer and the ability to grow our registered customer base - so that we are there when they are ready to sell - will continue to be an important source of acquisition growth.

Business Highlights

We have expanded our customer acquisition channels, allowing us to optimize between fixed and variable cost customer acquisition channels. Given above-average spreads our conversion is lower, creating higher customer acquisition costs for our direct-to-consumer paid marketing channels. As such, since the beginning of 2023 we have focused on expanding our partnership channels with homebuilders, agents, and online real estate platforms. Given their fixed customer acquisition cost profiles, these channels are highly efficient and represent durable, long-term partnerships for us. For our partners, Opendoor provides a differentiated and scaled offering for sellers that we alone can provide.

In 2Q23, our partnership channels represented 40% of total acquisition contracts (with direct-to-consumer providing the other 60%). Notably, acquisition contracts from our partnership channels saw 78% sequential growth in 2Q23. In April, we deepened our Agent Access program with agent incentives and expanded our agent referral program. We have national partnerships with the three largest online real estate platforms - Zillow, Redfin and Realtor.com - which collectively reach millions of unique monthly visitors. At the end of 2Q23, our exclusive partnership with Zillow was live in 25 markets and continuing to ramp.

Given the current environment, we are prioritizing our marketing investment on spend efficiency as well as sustaining brand awareness. Despite an 80% reduction in marketing spend in 2Q23 versus prior year, our aided brand awareness was consistent thanks to effective creative campaigns and brand media strategies. Moreover, building on our cost-efficient,high-impact consumer influencer program, in 2Q23 we expanded efforts to foster greater awareness and connections with our agent audience.

We remain committed to delivering the products that are best suited to each customer's needs, whether that is buying directly or connecting sellers and buyers through our marketplace product, Exclusives. During this period of lower market volumes, we continue to learn, iterate, and refine the customer and product experience for Exclusives in Plano, Texas and surrounding cities.

Acquisition Contracts from Partnership Channels in 2Q23

40%

Sequential Growth in Acquisition Contracts from Partnership Channels in 2Q23

78%

Historical Market Share and Address Entry Penetration by Market Launch Cohort

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