Opendoor, like many other proptech firms, was affected by the rapid market shift and subsequent slowdown in the second half 2022 due to rapidly rising interest rates.
Despite a 94% increase in revenue year-over-year to $15.6 billion and the sale of 39,962 homes, or 80% more homes in 2020, the iBuyer still recorded a net loss in the year of $1.4 billion, compared with a net loss in 2016 of $664 million.
Opendoor turned its first profit in Q1 2022 and things changed in the second half. This led to a difficult fourth quarter that saw a 25% decrease in revenue to $2.9Billion and a 23% decrease in the number sold. The net loss was $339 million.
These challenges have led to executives expecting the firm to return in 2024 to adjusted net income.
Opendoor CEO Carrie Wheeler told investors Thursday night that “navigating a major housing cycle was not easy.” “As of right now, we’re very focused on stabilizing the core business and eventually returning to positive free liquidity.”
Although the firm is still facing market headwinds in 2023 the executives are beginning to see the light at the end. Opendoor had sold 66% of its inventory between March and June 2022 at the peak market. The firm stated that it expects to sell 85% by the end 2023.
Opendoor will be able to sell the remaining inventory once it has been sold, which is expected to happen in Q2.
Opendoor has reduced its operational capacity and also reduced costs by creating an inventory balance more in line with current market conditions. Opendoor has also reduced its marketing spend by 65%, compared to its Q2 2022 peak, and cut 18% of its staff in November. These cuts, according to the firm, resulted in $110 million in cost savings compared to the firm’s 2022 cost peak.
The firm is optimistic about the future, and its partnership with Zillow as well as its Opendoor Exclusives platform.
Wheeler stated that no matter what the macro backdrop, sellers appreciate the simplicity and certainty Opendoor offers. “This year, we are focusing on diversifying the demand funnel so that more home owners start their journey with Opendoor. Our Zillow partnership was just launched. This partnership will significantly increase our reach in a scalable, efficient manner.
Christy Schwartz, interim CFO at Opendoor, also pointed out the positive performance of the homes that the firm had purchased since the beginning of the housing market shift.
Schwartz stated that “our new book of homes, which we started in July last year, is performing well beyond our expectations and is offto a stronger start to acquisition cohorts than previous years.” “This is a testament to the strength of our value proposition which, despite record spreads allows us to create attractive cohorts even in a negative home price appreciation climate.”
Although executives are aware of the headwinds they face, they stated that they believe Opendoor is still on track to become a “profitable market leader” and a “generational company.”