Offerpad offers the ‘right sizes’ to navigate the changing market
Brian Bair, Offerpad’s chairman and CEO, told analysts and investors listening to Wednesday’s full-year 2022 earnings calls Wednesday evening that 2022 was “a tale of two halves.” This theme was evident in the firm’s financial results for the year.
Offerpad reported its first ever profit quarter in Q4 2021. It then reported profits again in Q1 2022, and Q2 2022. The firm suffered a serious setback in Q3, reporting a net loss $80.0 million.
Offerpad posted a net loss for the quarter of $121.1 million in Q4. Its revenue fell from $867.5 million to $677.2 millions in the fourth quarterly of 2021, to $677.2 million for the fourth quarter 2022.
Overall, Offerpad reported a net loss totaling $148.6 millions for the year. This is down from a $6.5million net income in 2021. However, revenue increased 91% year-over-year to $4.0 billion.
Offerpad’s 2022 revenue was not its only bright spot. The firm also sold 10,635 houses, an increase of 67% annually — the first year that more than 10,000 homes were sold in a single year. Offerpad’s total listing buyer and mortgage transactions increased by 90%. Cash offer requests from the firm’s Agent Partnership Program rose 80%.
These bright spots, however, were not enough for the firm to overcome the challenges posed by the market.
Bair stated that the historic interest rate rise and declining affordability presented two major challenges for the fourth quarter. “First, we had to sell inventory that was acquired before the market shift. The second was to secure additional capital to strengthen the balance sheet.
Offerpad’s fourth quarter gross loss per home sold was $24,100. This is a significant decrease from the $29,000 gross profit in Q4 2021. The firm did however record an average gross profit per home of $17,200 for the entire year, a decrease of 47% from the previous year.
Despite these challenges Bair remains optimistic about the future. The firm currently has 225 homes that it acquired before September 1, 2022, a decrease of the peak of more than 4,000 homes. The executives expect that all of this inventory will have been sold by the end Q1 2023.
Although this positive news has encouraged executives, they still take action to reduce costs and preserve Offerpad’s bottom line.
The firm announced in February its second round of layoffs from September. Executives informed investors that the firm had cut its workforce by approximately 50% since August 2022, when it reached its peak.
Michael Burnett, Bair and Offerpad’s CFO, stated that the firm was reducing its “buy box” in order to purchase more homes at the median price. Bair also stated that Offerpad would suspend all California acquisitions at the moment.
Bair stated that in 2023, “we expect to accelerate our acquisition volumes with a focus upon increased penetration in more affordable market markets.” “In response to the slower real estate market, we have slowed down the pace of our acquisitions and reduced the size of the team.”
Bair stated that the firm will also be focusing on developing its business-tobusiness partnerships and services, including Offerpad Renovations and Offerpad Direct Plus for Investors.
Burnett stated, “With the business now being right-sized and more in line to our expectations for 2023 we are positioned efficiently and effectively to execute against our operating plans.”