Opendoor posts $399M loss in Q4 but sees growth ahead
Despite losses on home sales, CEO Carrie Wheeler said the company believes in its value proposition and sees "significant runway" via its Zillow partnership.
Opendoor Technologies reaffirmed its commitment Thursday to making cash offers to sellers, although the real estate company ended 2022 with just 1,011 homes under contract — a drop of 81% compared to the last quarter of 2021.
The company, in a Q4 earnings call to investors, reported a net loss of $399 million for the fourth quarter of 2022, more than twice their loss in Q4 of 2021.
Opendoor lost money on sales of homes it bought last year as inflation and rising costs for home loans put a damper on the market. Opendoor’s loss for the full year was $1.4 billion, which roughly doubled the size of its loss over the previous year.
Carrie Wheeler, in her first earnings call as Opendoor CEO, told investors that “we have not lost sight of our vision. … It is clear to me what our value proposition is for customers.”
Describing the traditional home buying process as “broken,” she said that Opendoor will continue to provide “the certainty of cash offers that consumers cannot get anywhere else.” And it will do so via its just-launched partnership with Zillow, which will allow home sellers on Zillow to request a cash offer from Opendoor.
The other major player in the iBuying sphere is Offerpad, which despite selling more than 10,000 homes in a year for the first time reported a Q4 loss of $121 million and a 2022 loss of $148.6 million (vs. a $6.5 million profit the year before).
Revenue:$2.9 billion in Q4, down 25% vs. 2021. Full-year revenue increased 94% to $15.6 billion.
Homes sold: 7,512 in Q4, down 23% vs. Q4 2021; 39,183 in 2022, up 80% year over year.
Total home inventory: 12,788 homes in Q4, worth an estimated at $4.5 billion (down 27% vs. Q4 2021).
Gross profits: $71 million, which reflects homes remaining in inventory at year end valued at $73 million, for a gross margin of 2.5%, compared to 7.1% in the fourth quarter of 2021.
Cash and cash equivalents: $1.1 billion for Dec. 31, 2022, versus $1.7 billion on Dec. 31, 2021.
GAAP net loss: $399 million in Q4 vs. $191 million in Q4 2021. For the full year, Opendoor had a net loss of $1.4 billion, compared to a loss of $662 million in 2021.
EBITDA (earnings before interest, taxes, depreciation and amortization): Adjusted EBITDA for the full year was a loss of $168 million, compared to $58 million in the black for 2021. For Q4, the adjusted EBITDA was a loss of $351 million compared to a $400,000 gain in Q4 2021.
What Opendoor had to say
Wheeler said the second half of 2022 was impacted by “macro-economic challenges” that started in the middle of the second quarter. The company then sold a higher volume of homes at a lower price.
“In response, we placed our focus on risk management and overall inventory health, and accelerated our resale velocity and realized lower acquisition volumes,” Wheeler said.
“We have continued to prioritize selling those homes we made offers on between March and June of last year before the housing market reset,” Wheeler said. “Once the old book is behind us, we expect to return to positive unit margins by the second half of 2023.”
Opendoor’s new partnership with Zillow provides a “significant runway for future growth,” Wheeler said, “while stabilizing core business.”
The company also debuted Exclusives, which enables Opendoor to directly connect buyers and sellers. Opendoor launched in nine additional markets in 2022, bringing the total number of market to more than 50.
Wheeler said the homes the company is now acquiring have outperformed expectations. But the company has lowered expectations for acquisitions until the real estate market stabilizes.