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Following a shaky fourth quarter in which it posted a $121.1 million fourth-quarter loss, struggling iBuyer Offerpad improved its net loss by 51 percent in the first quarter of 2023, the company reported on Wednesday.
Revenue fell 10 percent from the previous quarter to $609.6 million while posting a gross profit of $7.3 million following a quarter in the red at the end of 2022, according to a first-quarter earnings call. On an annual basis, revenue fell by 56 percent.
Offerpad’s net loss clocked in at $59.4 million in the first quarter compared to a dramatic loss of $121.1 million a quarter earlier. Its adjusted earnings before income, taxes, depreciation and amortization (EBITDA) stood at negative $44.8 million, a 57 percent improvement from the prior quarter, while gross profit per home sold hovered at $4,500.
The company sold 99 percent of its “legacy” inventory, with 1,609 homes sold during the first quarter, and kept acquisitions to a minimum, purchasing 364 homes.
The first-quarter results were an improvement from the fourth quarter of 2022, which closed out in a rough way for the iBuyer. During that quarter, Offerpad sold 1,865 homes, a decline of 23 percent year over year. The figures per home were also grim — the iBuyer lost an average of $24,100 on each home sold during the fourth quarter.
“We are pleased to see the expected sequential improvement in our quarterly results materialize,” Offerpad Chairman and CEO Brian Bair said in a statement. “Net Loss improved 51 percent and Adjusted EBITDA improved 57 percent over the fourth quarter of 2022. Acquisition volume has also steadily increased each month in 2023, with homes acquired after the market shift showing positive performance.”
During its fourth-quarter earnings call, Offerpad said it anticipated bringing in revenue during the first quarter of the new year between $480 and $540 million, which it beat, and EBITDA of negative $35 to negative $55 million, which it ended up matching.
As it has adjusted to the shifting market over the last several months, Offerpad has made known its plans to reduce the inventory of its legacy homes to meet the new needs of the market.
“During the last three quarters we have acted decisively to responsibly sell through our legacy inventory,” Bair added. “We are now focused entirely on our go-forward plans to simplify residential real estate and build an extensive suite of solutions.”
During an investors call on Wednesday, Bair said the company would continue to “acquire new homes at a cautious pace,” in order to test markets’ cohesion with its products.
He also said that Offerpad would be reducing costs and raising equity capital to adjust to today’s market dynamics. Bair also pointed out that the company does not believe its ability to achieve profitability is in any way contingent on home price appreciation in the market.
For the full year of 2022, Offerpad saw a loss of $148.6 million, which included $93.8 million in inventory impairments. Revenue during the fourth quarter of 2022 fell 22 percent year over year to $677.2 million.
As the company closed out the year, it curbed acquisitions of new homes by 82 percent, buying just 539 homes.
Forward-looking projections show that the company estimates it will sell 400 to 550 homes during the second quarter of 2023, earn revenue between $140 to $200 million, and have an adjusted EBITDA between negative $25 and negative $40 million. Mike Burnett, Offerpad’s chief financial officer, also said he anticipates adjusted EBITDA and other metrics would continue to improve through the end of the year.
“With the business being rightsized to reflect current transaction volumes, we expect to achieve positive Adjusted EBITDA again in the fourth quarter of this year,” Burnett said. “We also expect the second quarter to reflect quarter-over-quarter increases in acquisitions, inventory and contribution margin and improvement in our time from acquisition to sale.”
In February 2023, Offerpad announced plans to raise $90 million from existing investors — including Bair, Roberto Sella and First American Financial Corp — while simultaneously announcing an unspecified number of layoffs.
As of about one hour after trading had ended for the day as earnings results came in, Offerpad’s stock had risen about 2.8 percent to $0.44 per share.