The iBuying startup Offerpad reported its second-quarter results on Wednesday, revealing that the company remained profitable for the third straight quarter despite a challenging market.
Offerpad recorded a gross profit of $93 million, an 83 percent annual increase, it said in an earnings report Wednesday afternoon, while its net income increased 26 percent to $11.6 million, or $0.04 per share.
The company was able to remain profitable despite a more challenging environment for home sellers compared to previous quarters, one marked by high mortgage rates and more buyer reluctance.
Offerpad CEO Brian Bair said the company’s iBuying model was well-suited for uncertain markets due to the relative ease it offers sellers.
“It’s in difficult markets like today where the speed and certainty we provide are welcomed by home sellers,” Bair said in a statement. “Our high customer satisfaction rates make it clear homebuyers and sellers value the simplicity of our solutions. Increasing customer awareness and interest in our products gives me confidence in our ability to drive profitable growth over the long term.”
The company recorded an adjusted net loss of $1 million, compared to $9.2 million a year ago, and its adjusted EBITDA increased 5 percent to $13.7 million, according to the earnings report. Its profit margin per home sold increased 10 percent annually, to $31,500 in the second quarter.
The second quarter saw Offerpad sell 2,888 homes, purchase 3,792 homes, and complete 3,500 renovation projects. It also kept its average time between home acquisition and sale below 100 days.
Offerpad leadership said they were entering an unstable period that may prove challenging for the firm, but they were confident they would be able to capitalize on the market regardless of the direction it took — even if it heads for a downturn.
“Probably the question I’ve been asked more in the history of Offerpad is ‘what happens in a downturn?’ and the answer I’ve always given is a downturn doesn’t bother me,” Bair said. “A downturn is actually an opportunity to be a buyer in a buyers market, a good place to be. The hardest place to be is when it transitions from a sellers to buyers market and that transition period, the very top, that’s where it gets more foggy than ever before and that’s exactly where we’re at in this cycle right now.”
“We expect price adjustments to impact our earnings in the near term,” Offerpad Chief Financial Officer Mike Burnett added on the call. “But as the market shifts from a sellers to buyers market, we expect our margins will improve.”
While the market is in its adjustment phase, Bair said the company would be slowing its acquisitions in markets that have seen the largest share of price decreases in recent months — namely Western markets such as Phoenix, Austin, and Las Vegas that saw the most dramatic explosions in home prices during the pandemic.
Prior to the Wednesday earnings release, the iBuyer had been on a hot streak, having posted its first two consecutive quarters of profitability in the waning months of 2021 and the opening months of 2022. CEO Brian Bair said in May that the first three months of the year were the “best quarter in company history.”
The company’s nearly $1.4 billion in first-quarter revenue was nearly four times what it made over the same period last year. And its $41 million in first-quarter profits demonstrated it could scale this type of expansion while remaining profitable.
In the first three months of the year, Offerpad sold 3,602 homes, the company reported in a shareholder letter. It bought 2,856 homes during that same time.
The company also said it spent an average of $17,000 per home renovation in the first quarter, a process that took 23 days to complete on average.
Offerpad’s recent profitability and growth — like that of its competitor Opendoor — have occurred even as one of their chief rivals, Zillow, exited the iBuying business and has continued to sell off its remaining inventory. Based on their recent earnings reports, the appear to have been able to avoid the stumbling blocks that plagued the Seattle-based listings giant in this space.
The release of Wednesday’s report came two days after Opendoor was fined $62 million by the Federal Trade Commission for allegedly “tricking” consumers by feeding them information that implied they would make more money selling to Opendoor than selling on the open market.
Opendoor disagreed with the allegations of the case but agreed to settle the case.
In a call with investors in May, Bair said that the company was well positioned to continue expanding its business even in a slowing market.
“I would tell you Offerpad is built for this,” he said at the time.