Opendoor posts big losses but aims for positive margins by Q3
The leading iBuyer lost $101 million in Q1, but that's a significant improvement over the previous quarter, and they are now "looking for stabilization."
Opendoor, the largest iBuyer — and one of the few left standing — announced a net loss of more than $100 million during its Q1 earnings call. The San Francisco-based company said it had revenue of $3.1 billion from selling 8,274 homes, but revenue, homes sold and net income were all down significantly compared to the same period last year.
The reason for the big net loss? Like its competitor Offerpad, which has been offloading old stock, Opendoor had still been working through inventory — dubbed the "Q2 cohort" — that it purchased between March and June last year when home prices were high, interim CFO Christy Schwartz told investors.
"Our first quarter results reflect the progress we've made in selling through our old book of homes while building into a new book of healthy inventory," she said. While the company ended last year with nearly 13,000 homes, Opendoor has dramatically reduced its inventory in the last three months, reporting a current balance of 6,261 homes.
Opendoor's margin on homes sold in the first quarter was -7.7%, which Schwartz said was largely due to losses on the resale of older inventory — 75% of the company's first-quarter sales were properties from its Q2 2022 cohort. By Q3 of this year, the company is aiming for positive margins between 4%-6%.
Wall Street appeared to be unphased by the Q1 results, as Opendoor's stock price spiked to $1.55/share immediately after closing and settled around $1.40/share at the end of the earnings call.
Revenue: $3.1 billion, which is down 39% compared to Q1 2022, and up slightly quarter-over-quarter.
Gross profit: $170 million, which Opendoor says "reflects an inventory valuation adjustment on homes remaining in inventory at quarter end of $23 million," and is up significantly from the previous quarter's $71 million.
Net loss: $101 million, which represents a steep decline from the positive $28 million in Q1 2022, but is well below the staggering loss of $399 million the previous quarter.
EBITDA (earnings before interest, taxes, depreciation and amortization): Negative $341 million, which was similar to last quarter, versus positive $176 million in Q1 2022.
Homes purchased: Opendoor closed on 1,747 homes in the first quarter, which is down 81% compared to Q1 2022.
Homes sold: 8,274 homes were sold in the first quarter of the year, a decline of 35% compared to Q1 2022, but still a significant portion of its total inventory.
Inventory balance: 6,261 homes, which Opendoor values at $2.1 billion. The company's inventory is down 55% compared to the same period a year prior.
What Opendoor had to say
"For us, acquisition pace has a lot to do with where we are on spreads, because that drives conversion for us," said CEO Carrie Wheeler. "And for us to decrease spreads, what we're really looking for is stabilization."
Wheeler said that a stabilization in mortgage rates could then lead to volume stabilization, and then ultimately, price stabilization — but inventory remains incredibly tight. Schwartz said that Opendoor is aiming to be on a pace of acquiring 1,000 per month for the rest of the year.
Wheeler, who marked her first full quarter as CEO after former CEO and co-founder Eric Wu stepped down in December, said the company has taken a number of steps to reduce overhead costs, including cutting 560 jobs in April — roughly 22% of its workforce — which Wheeler said could result in an annualized savings of $50 million. It was the second large round of cuts in six months.
The company has also reduced its marketing budget by 45% compared to the same period a year prior.
In an effort to attract more buyers and sellers, Opendoor announced in April that it was upping incentives for agents who bring clients to the iBuyer.
Opendoor is also promoting its channels for homebuilders. "We're seeing lots of activity in the homebuilder side where we're partnering with eight of the ten big ones," Wheeler said, also noting that Opendoor is partnering with over 90 homebuilders in total. "New builds is a pretty active part of the home category."