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Opendoor rebounds with profitable Q2 despite steep revenue decline

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Thanks to a softer real estate market iBuying giant Opendoor saw revenue and the number of homes it sold plummet in the second quarter of this year — but in an unexpected twist, the company also managed to turn a profit.

In total, Opendoor brought in $2 billion in revenue between April and June, according to an earnings report Thursday. That’s down 53 percent compared to the same period in 2022. The company also sold 5,383 homes, which represents a dip of 35 percent compared to the second quarter of last year.

The numbers reflect a market that looks very different today — rates are higher, inventory is sparse, etc. — compared to the earlier months of 2022.

But despite the harsher landscape, Opendoor also managed to turn a net profit of $23 million in the second quarter of 2023. That’s a reversal from a loss of $54 million in the second quarter of 2022.

Carrie Wheeler

In Thursday’s report, Opendoor CEO Carrie Wheeler celebrated the fact that Opendoor beat its own forecasts in Q2.

“Our results reflect the progress we’ve made in strengthening our offering, driving cost efficiencies and managing risk,” she said.

During a call with investors Thursday afternoon, Wheeler went on to say that Opendoor is “building a healthy new book of inventory” and that the company has “intentionally moderated” the pace of its home acquisitions.

“We remain focused on making investments on durable growth levers,” she said.

Opendoor last reported earnings in May, at which time it revealed that its revenue during the first quarter of 2023 dipped 39 percent year over year. Losses in the first quarter totaled $101 million, up from a profit of $28 million in the first quarter of 2022. However, while those numbers were lackluster compared to one year prior, they were a marked improvement over the fourth quarter of 2022, when the company suffered a net loss of $399 million.

During the day heading into Thursday’s earnings report, shares in Opendoor were trading for just under $5. That was up for the day. It also represents a staggering improvement of more than 300 percent since the beginning of 2023 — when shares were barely staying above the $1 threshold companies have to reach lest they risk getting booted from the stock market.

Following the publication of the company’s earnings report Thursday, shares in Opendoor fell in after-hours trading.

Credit: Google

The dip may have been a response to falling revenue or to the fact that despite positive net income the company also had an adjusted net loss of $197 million, compared to an adjusted net profit of $122 million in Q2 of 2022. Adjusted EBITDA — or, earnings before income, taxes, depreciation and amortization — also notched a loss of $168 million, down from a profit of $218 million one year earlier.

Adjusted net income and EBITDA are both metrics that give investors a more nuanced view of a company’s profitability and value.

The company’s Q3 forecast that it would earn between $950 million to $1.0 billion in revenue, with EBITDA losses of between $60 million and $70 million, also likely weighed on investors’ minds.

Even with Thursday’s after-hours dip, however, Opendoor stock is still way up for the year.

A number of real estate companies such as Redfin and Compass have also watched as their share prices made huge gains this year. But Opendoor’s stock market rally over the last seven months has outpaced any other firm that Inman regularly covers.

And that rally couldn’t have come at a more critical time; late last year as both Opendoor and competitor Offerpad struggled with low inventory and a stockpile of homes they bought when the market was hotter, some observers raised questions about the iBuying business model’s viability.

But the fact that Opendoor’s shares have risen so much in 2023 suggests investors’ concerns are evaporating. As of Thursday afternoon, Opendoor had a market cap of $3.12 billion.

Aside from revenue and profit numbers, Thursday’s report also shows that Opendoor purchased 2,680 homes during the second quarter. That’s down 81 percent year over year but up 53 percent compared to the first quarter of 2023.

During a call with Inman Thursday afternoon, Wheeler said Opendoor will eventually scale back up so that its acquisitions and sales look more similar to what was happening in previous years. But the company will take its time and “do it in a measured way.”

For each home that Opendoor sold in Q2, it lost an average of $17,000. That’s an improvement over the first quarter of this year when it lost $29,000. But it’s not as good as the second quarter of last year when the company made an average of $40,000 on each home sold.

Wheeler told Inman that the profit and losses per house should begin improving going forward, because homes purchased at higher prices last year are now basically all sold — meaning the company is presently working with inventory it bought at lower prices. The company has also improved its renovation process, Wheeler said, meaning it can rehab homes more efficiently and get them back on the market faster.

During Thursday’s investor call, Wheeler also discussed Exclusives, Opendoor’s asset-light marketplace that aims to connect homesellers with would-be buyers. Though she offered few new specifics about the marketplace, Wheeler said that “right now, the company is “continuing to focus on perfecting the consumer experience.” She also said “we’re encouraged by some of the early signs.”

In a call with Inman Thursday afternoon, Wheeler also said that Opendoor is trying to be “measured” while growing Exclusives, though the platform has already hit year-end volume targets.

“Nail it before you scale it,” she said of the company’s Exclusives strategy, adding that “we’ve been mostly focused on how the consumer experience is something people want to say yes to.”

Opendoor is “ramping the Zillow relationship” — a reference to a partnership that puts Opendoor cash offers on the portal giant’s website, Wheeler additionally said during the call. The company is also partnering with both homebuilders and agents.

“This is a big market and we think we can be partners and a solution for agents,” Wheeler said.

A shareholder letter the company published Thursday further reveals that the partnership with Zillow was active in 25 markets by the end of June.

In Thursday’s report, Wheeler ultimately characterized the present as “an uncertain time in the U.S. housing market,” but added that Opendoor’s “new book of inventory is generating positive unit economics.”

“We believe,” Wheeler ultimately concluded, “the actions we are taking will allow us to emerge from this cycle more resilient and positioned for market leadership and long-term profitability.”

Update: This story was updated after publication with information from Opendoor’s earnings report, from a call company leaders held with investors and from a call Inman conducted with CEO Carrie Wheeler.

Email Jim Dalrymple II