Opendoor Technologies, Inc. Q3 FY2024 earnings call

• Welcomed new leaders: Selim Freiha as CFO and Shrisha Radhakrishna as CTO; thanked Christy Schwartz for her service as Interim CFO.
• Progress on seller-focused products: List with Opendoor and Exclusives are being developed to address sellers wanting price discovery, less macro-dependent, and capital light. Observed increase in net promoter score with these options.
• Impact of NAR settlement: Transitioning from directly paying buyer broker commissions to providing concessions to buyers, adapting strategy to market needs.
• Housing market challenges: Challenged housing market with low existing home sales, elevated spreads prioritized for risk management, but impacting acquisition volumes.
• Cost reductions: Announced headcount reduction of about 300 people (17% of workforce) and separation of Mainstay expected to provide $35 million in annual cost savings; expecting $50 million in annualized savings from headcount reduction and $35 million from Mainstay separation, with $17 million in restructuring expenses in Q4.

In the third quarter, Opendoor delivered $1.4 billion of revenue, exceeding the high-end of guidance. Acquisition volumes were 3,504 homes, down 27% sequentially due to elevated spread levels and pullback in marketing spend. Contribution margin was 3.8%, ahead of guidance. For the fourth quarter, revenue is expected to be between $925 million and $975 million, contribution profit between $15 million and $25 million (implying contribution margin of 1.6% to 2.6%), and adjusted EBITDA loss between $70 million and $60 million. Adjusted operating expenses are expected to be approximately $85 million. The midpoint of revenue and margin guidance for the full year implies a contribution margin of 4.5%, close to the annual target margin range.

• Q4 revenue expected between $925 million and $975 million.
• Q4 contribution profit expected between $15 million and $25 million.
• Q4 adjusted EBITDA loss expected between $70 million and $60 million.
• Anticipates $50 million in annualized savings from headcount reduction and $35 million from Mainstay separation.
• Full-year contribution margin expected to be 4.5%, close to annual target margin range despite difficult housing market.

• Housing market remains under pressure with low existing home sales, mortgage rates rebounding, and buyer affordability constraints.
• Elevated spreads impact acquisition volumes and can pressure margins.
• Macroeconomic uncertainties and market signals (clearance rates, delisting rates) can impact spread decisions and business performance.

Q: On cost efficiencies and reaching adjusted net income breakeven, what's the plan?

A: Actions like headcount reduction and Mainstay separation are to reduce cost structure, but macro environment, spreads, and CM performance impact breakeven; will continue looking for efficiencies.

Q: Color on asset-light products like List with Opendoor?

A: List with Opendoor is nationwide, performing within expectations, incremental to core business; customers wanting market value potential with cash offer assurance; goal to diversify business mix to be less capital intensive.

Q: On NAR settlement and direct selling costs, how is Opendoor approaching concessions and direct selling costs?

A: Transitioning to offering concessions to buyers instead of blanket buyer broker commissions; direct selling costs came down Q2 to Q3, but concession impact on costs is not yet fully visible as it offsets revenue differently.

Q: On List with Opendoor engagement and marketing?

A: List with Opendoor is used by home sellers wanting assurance and to test market value; marketing will continue to invest in brand as it drives trust and conversion; pulled back on marketing spend in Q3 due to spread levels, may invest opportunistically in Q4 for spring season.