Opendoor Technologies : reaches first profitable quarter in Q1 with $28M net income

Opendoor, the largest iBuyer in the U.S., reported its first-ever quarter of profitability on Thursday, an impressive reversal from the previous quarter when the company's losses more than doubled year over year.

The California-based company earned a record-breaking $5.2 billion in revenue during the first quarter of 2022 as its sales volume increased 415 percent annually to 12,669 homes sold. Opendoor also logged net income of $28 million, versus a $270 million net loss the previous year.

Eric Wu | Photo credit: Opendoor

"We are proud to report our first quarter of positive net income as we exceeded our expectations across all of our key metrics," Opendoor co-founder and CEO Eric Wu said in a prepared statement. "For the past eight years, we have been working on the rare opportunity to transform the $2.3 trillion housing industry."

"We have made significant progress toward reshaping a broken, offline process into a digital, seamless experience for our customers," he added.

The company's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) increased for the fourth consecutive quarter, bouncing back from a $2 million negative EBITDA in Q1 2021 to a positive EBITDA of $176 million.

Much like Q4, the company cut through market headwinds with several market expansions in some of the nation's priciest markets, despite the record boom in median home prices. From January to March, Opendoor increased its buy-side transactions 151 percent year over year to 9,020.

As of March 31, Opendoor has an inventory balance of 13,360 homes, which represents $4.7 billion in current market value.

"We have focused on building a durable, generational company," Wu said of Opendoor's standing. "This means we align our goals and teams against both growing customers and driving sustainable margin expansion, operating with a focus on building the lowest cost structure and having a culture of discipline around pricing and risk management across periods of uncertainty."

Opendoor's quarterly earnings are not only a win for the company - "The result of this hard work is the capability to grow and protect margins across economic cycles," Wu said - but a win for the iBuying industry that has faced skepticism on its ability to ride out potentially unfavorable market conditions.

Offerpad - Opendoor's nearest competitor - reached profitability in Q4 2021 and maintained it in Q1 with a net income of $41 million on Wednesday.

In March, iBuyer expert Mike DelPrete said Opendoor still had plenty to prove to investors as real estate continued to take a lashing on the stock market.

"Opendoor, the original iBuyer and undisputed category leader, is laser-focused on scaling nationally and proving that it has a winning model," he said. "Opendoor needs to demonstrate to investors that it has a credible path to profitability, and that as it grows it isn't just losing money faster. It needs economies of scale."

DelPrete said Opendoor was on the right track to profitability, but still needed to become more efficient in how it scaled while dampening ballooning losses. "If durable profitability is the goal, reaching it depends on further economies of scale, attaching adjacent services, and a favorable macro environment - all of which are uncertain and only some within Opendoor's control," he said.

Opendoor's investor deck, which they released alongside their earnings, revealed the company was able to find that balance over the past several years through improved home valuations, a more streamlined offer request process, robust market awareness and an increase in repeat customers that boosted market share in its oldest cohorts (2014 to 2017) to 3.1 percent.

From 2017 to 2021, Opendoor said it increased its home valuation model accuracy by 24 percent, while it boosted its buybox coverage from approximately $165 billion in 2019 to more than $590 billion in 2021.

"For home sellers, we are seeing adoption accelerate with another quarter of record offer requests, up nearly three-fold versus prior year," Wu said. "At the same time, we have maintained a real seller conversion of over 35 percent and NPS north of 80."

Looking forward, Opendoor expects a Q2 revenue upwards of $4.3 billion (+254 percent YoY) and an adjusted EBITDA guidance of at least $170 million (+604 percent YoY).

"These metrics strengthen our conviction that getting an offer from Opendoor is well on its way to becoming a mainstream behavior to start a move," Wu said.

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