Offerpad Solutions Inc (OPAD) 2021 Q2 法說會逐字稿

Good afternoon, everyone, and welcome to the Offerpad inaugural earnings call covering second quarter of 2021 financial results. My name is Hannah, and I will be the event specialist running today's event. I will now hand over to our host, James Grout, VP of Finance and Investor Relations to begin. James, please go ahead when you are ready.

Thank you. Good afternoon, and welcome to the Offerpad Second Quarter 2021 Earnings Call. With me today are Chief Executive Officer and Founder, Brian Bair; and Chief Financial Officer, Mike Burnett. In a moment, we'll hear brief remarks from both discussing our second quarter 2021 results.

During the call today, management will be making forward-looking statements defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain, and events could differ significantly from management's expectations. Please refer to the risks, uncertainties and other factors relating to the company's business described in the S-4 registration statement filed by Supernova Partners Acquisition Company with the U.S. Securities and Exchange Commission and relating to the proposed business combination transaction between Offerpad and Supernova. Except as required by applicable law, Offerpad does not intend to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

On today's call, management will refer to contribution profit and margin, contribution profit and margin after interest, both on a total and per unit basis as well as adjusted EBITDA. These metrics exclude certain items discussed in our news release under the heading non-GAAP financial measures. The reconciliations of Offerpad's non-GAAP measures to the comparable GAAP measures are available in the financial tables of the Q2 2021 results news release on Offerpad's website.

I'll now turn the call over to Brian.

Thanks, James, and good afternoon, everyone.

On behalf of the entire Offerpad team, thanks for joining us on our first earnings call to discuss Offerpad's second quarter financial results.

In 2015, we founded Offerpad, after having spent decades in residential real estate, buying, renovating and selling tens of thousands of homes across the country, and experiencing firsthand the difficulties that home buyers and sellers faced on a day-to-day basis. Recognizing that the industry was ripe for disruption, we set out to offer a new process, with the focus on providing the customer total control and certainty.

At Offerpad, it's all about the customer. It's about homes, not houses. Pairing advanced real estate technology with fundamental industry expertise, we create our real estate solutions center, where sellers can receive a strong competitive purchase offer for their home, select their own closing dates, and avoid the stress and uncertainty of selling their home the traditional way.

We have since expanded our platform to offer a suite of services. These include Offerpad providing moving services for home sellers, to Offerpad paying for and managing the renovation of the seller's home while we ready it for sale through our FLEX program. We also offer an extended stay option that allows homeowners to remain in their home after closing. This is a highly valued service to customers that provides them immediate liquidity and freedom to buy their next home. We continue to focus on putting customers at the center of everything we do.

Turning now to the quarter. We're excited to report record revenue and profit. Revenue was at an all-time high, coming in at $379 million, up 32% year-over-year. Adjusted EBITDA grew for the sixth consecutive quarter, coming in at $13.1 million, up 332% from the prior quarter and 458% year-over-year. And we're proudly reporting earnings per share of $0.31.

HPA, or home price appreciation, climate was clearly a favorable tailwind in the quarter. That said, underlying that rising tide was an exceptional operational execution by the Offerpad team across 6 key areas.

First, in one of the toughest markets for the buying homes in recent history, we acquired a record number of homes, 2,025 homes in the quarter, outpacing our home acquisitions in Q1 by 69%.

Second, our team was able to attract 39% more home sellers to the Offerpad platform than in Q1, even in one of the strongest sellers markets we've seen in decades. We've demonstrated to these customers how they could have certainty and control. And we did this while maximizing their convenience with the ability to skip the chaotic open houses and showings and move 100% on their own schedule. This has been a particularly valuable feature given the current market conditions, where it's easier to sell a home, but finding your next home to move to can be very challenging.

Third, we priced our homes right and conducted strategic renovations to maximize value. This is where Offerpad excels within the industry. We sold 1,259 homes in the quarter. And our contribution margin after interest per home was $31,500, an increase of over 2,000% year-over-year.

Fourth, we are exceeding our previous plans for new geographic market expansions, with the announcement of plans to open 4 new markets in the second half of this year, in addition to the 3 markets launched through July. This will bring us to 7 total new markets for the year and give us a national footprint of 21 markets, representing nearly 1,500 cities and towns.

Fifth, this quarter, we continued innovating, announcing Offerpad Bundle Rewards, a new program that rewards our customers with great savings when they combine more than one of our services together. Also in Q2, we completed our first 24-hour close. The homeowner came to Offerpad to buy their home. The next day, they had all their closing proceeds. We continue to challenge the old way of doing things.

And sixth, we delighted our customers with customer satisfaction scores of 95%. Our Net Promoter Score was above 80. Customers are incredibly happy with our offerings.

Let me give you just one example of a customer we served recently. Lisa was set on buying a new construction home in suburban Atlanta, but needed to sell her current home first. She chose to sell through Offerpad after learning about us through her home builder.

Here is a quick note that Lisa sent to us. Thanks so much to the Offerpad team. This was by far the easiest process I've ever experienced in selling a home. From start to finish, everything went exactly as I was told it would. I am a natural skeptic, and I kept waiting for something to go wrong. It just never did. I am truly impressed with the team here in Atlanta and have told all my friends about Offerpad. Thank you again for turning something that is normally very stressful into a worry-free experience. I highly recommend selling a home through Offerpad.

With the above execution, the current market environment, led by our operation and real estate logistics, I am very happy to announce a profitable quarter for Offerpad.

Internally, we enhanced governance, training and investor relation processes to ensure excellence as we prepare to become a publicly traded company. Notably, we announced plans to strengthen Offerpad's Board of Directors with 4 additional independent board members. The Board members who will be appointed once Offerpad is public are accomplished entrepreneurs and investors, current and former CEOs, seasoned executives and strategic advisers. They have a proven track record. They are leaders at best-in-category tech and real estate companies, such as realtor.com, Taylor Morrison Home Corporation and First American Financial Corporation. These leaders were selected based on the relevant operational and industry experience and will guide Offerpad as we continue to revolutionize real estate.

The special meeting of Supernova stockholders is scheduled to take place on August 31, 2021. And we would expect to be in a position to close the transaction with Supernova and list on the New York Stock Exchange under the ticker OPAD shortly thereafter.

Mike will take you through the details of the financials in a moment. But from a bigger picture perspective, it's clear the quarter pricing was strong. As the market finds its new water line on price appreciation, it will favor participants able to capture acquisition volume with the right unit economics.

Real estate markets are fluid, constantly changing. With our operational excellence, we are laser-focused on being successful in all market conditions and have consistently performed well quarter-after-quarter in all market types. We also have a significant advantage there as we're able to go deeper into regional housing pools thanks to our ability to strategically and cost-effectively renovate. We are able to actively expand the inventory of highly valued desirable homes in great locations, providing us with higher-margin properties to sell.

So when the real estate market returns to a more normalized pricing and margin environment, we believe Offerpad will continue to be able to capitalize on our strengths in real estate technology and real estate logistics. The services we provide home sellers from an immediate cash offer to our listing product where we renovate the home listed through Offerpad's FLEX and still provide a backup offer to the seller speak to our large total market opportunity.

Our services are game changing. We remove the points of friction that sellers trying to sell their home in the old way face. They have to fix up their home to get it in the list-ready condition, hosting disruptive showings and open houses, trying to time their closing with the closing of their new home, and overall, remaining uncertain of when and if their home will sell. Offerpad gives them that certainty and control.

Given the resources and flexibility we offer our customers and the difficulty of traditional home buying and selling, we believe we're at the early stages of tipping the market towards the new and better model. We are excited about the tremendous opportunity ahead of us, and more and more buyers and sellers opt for our digital-first experience.

And now I'll turn the call over to our CFO, Mike Burnett. Mike?

Thanks, Brian.

Offerpad had a strong second quarter, and I'm happy to be with you this afternoon to discuss our results.

First, I'll discuss our key strategic drivers that we expect will continue to fuel our growth going forward. Second, I'll review some highlights from our results from Q2, generally providing both sequential and year-over-year comparisons, recognizing that in the year ago quarter, Offerpad proactively took measures to protect the company during the onset of the pandemic. And finally, I'll share some thoughts around the third quarter and the rest of fiscal 2021.

Let's get right into our strategic growth drivers.

First is the nearly $2 trillion U.S. residential real estate market opportunity. Second, there are changes in consumer buying patterns that favor ease, convenience, personalization and digitization to which Offerpad's business is well aligned. Third are the anticipated changes to consumer mobility and freedom of movement due to iBuyer innovations, which are expected to accelerate the historical pace at which consumers transact homes. Fourth, we're seeing the need for quality housing inventory that plays into Offerpad's strength and renovations. And finally, the opportunity to further serve customers with incremental services surrounding residential property ownership, such as mortgage, insurance, and title and escrow services. Those factors served us well during the second quarter, and we believe will drive growth for Offerpad for the long term.

Turning to highlights for the quarter. Though demand for housing inventory exceeded supply throughout Q2, Offerpad acquired 2,025 homes in the quarter, which was ahead of our internal plan. For reference, this is a nearly 70% increase from Q1 of this year and more than a fourfold increase from the prior year's second quarter when we acquired 460 homes.

During the onset of the pandemic last year, we temporarily reduced our inventory. We have now reversed that and have over 1,700 homes in inventory as of the end of Q2.

The ability to acquire homes, create new and exciting ancillary services and leave our customers delighted are core competencies of Offerpad. It's clear we're agile, confident in our market approach and ready to broadly address the legacy real estate market on multiple fronts.

In the second quarter, Offerpad sold 1,259 homes and generated revenue of $375 million, which was up from $287 million in Q2 of 2020, representing a year-over-year increase of 32%. The results were driven by our operational excellence, our ability to match the right customers to the right homes and the overall favorable market conditions. Gross profit in the second quarter was a record $50.9 million or 13.4% of revenue. This was a 720 basis point improvement from Q2 of 2020 and a 160 basis point increase from the first quarter, as we continue to combine operational excellence with the current favorable market conditions.

Additionally, during the second quarter, we significantly increased our investment in advertising from the amount we spent in the highly constricted second quarter of 2020. Our investment in advertising during the quarter also represented a more than 50% increase from Q1. This helped drive more qualified traffic to our site and is setting us up for a successful second half of the year. We continue to demonstrate strong discipline with our cost structure while making prudent investments to support our growth initiatives.

Moving on to some additional financial metrics.

Offerpad reported its first-ever positive quarterly net income of $9.2 million versus a net loss of $7.4 million in the second quarter of 2020. Fully diluted EPS for the quarter was $0.31 per share compared to a loss per share of $0.96 in Q2 of 2020. Our adjusted EBITDA in the quarter was a record $13.1 million compared to a negative $3.7 million in Q2 of 2020. This marks our third consecutive quarter of positive adjusted EBITDA and equates to nearly $17 million of adjusted EBITDA on a trailing 12-month basis.

Turning to unit economics. Our contribution margin per home after interest came in at a record $31,500, rising more than 36% from Q1 of this year and increased $30,000 year-over-year from $1,400 in the same quarter from the prior year, when despite the worst of the pandemic, we were still able to maintain positive unit economics. Though unit economics were boosted by rapid home price appreciation this year, we remain realistic about the market dynamics looking forward as we do expect the pace of home price appreciation to normalize. That said, Offerpad's business model is built to be both flexible and resilient. And we do not view normalizing price appreciation to be a material headwind against our long-term business plan.

From a capital structure standpoint, during the second quarter, we entered into a $30 million credit agreement for working capital and general corporate purposes to continue to execute the business plan in the current favorable market conditions as we head towards the anticipated closing of the merger with Supernova. Additionally, in July, we successfully upsized one of our secured credit facilities from $250 million to $400 million of capacity and are pursuing additional credit opportunities for attractive financing to continue to support our future growth.

Looking ahead to the third quarter, we are providing the following financial outlook regarding Q3. For Q3, we are expecting revenue to be in the range of $460 million to $520 million, representing an increase of about 163% year-over-year. And third quarter adjusted EBITDA is expected to be between a loss of $15 million and a loss of $8.5 million. We anticipate incurring incremental new public company costs, new market start-up costs. And we'll continue to invest in our marketing, product and engineering teams in the second half of this year.

Finally, turning to our full year outlook for 2021. Offerpad anticipates selling between 5,600 and 6,000 homes for the full year, an increase of 36% year-over-year at the midpoint of the range. Full year revenue is projected to be between $1.7 billion and $1.85 billion, an increase of 67% year-over-year at the midpoint of the range. Gross profit is expected to be between $170 million and $180 million, nearly a 100% increase year-over-year at the midpoint of the range. And we're guiding for 2021 adjusted EBITDA to be in the range of a loss of $15 million to a loss of $6 million.

With that, I'll now turn the call back over to our CEO and Founder, Brian Bair. Brian?

Thanks, Mike.

In summary, we're taking home buying and selling from chaotic to controlled, from expensive to efficient and from the past straight into the future. We see the massive transformation we are ushering in as above and beyond online home buying and selling just as Uber led a transformation from taxis to an age of digital transportation and Carvana reimagined buying and selling cars into a platform that creates ease for the consumer while crafting incremental services such as financing and warranties. Digitization and trust are the first steps.

Next are the additional services and offerings to build a comprehensive new ecosystem of ease and innovation that optimizes tech and personalization to benefit the customer experience and increase the value of their #1 asset, their home.

At Offerpad, we're growing our company in a huge market with a relevant and disruptive business model. We have a superior team, with strong technology and real estate backgrounds, experienced in every real estate cycle. We're proud of our skills and vision to operate as the most capital-efficient company in our industry.

In closing, I'd like to thank the nearly 700 Offerpad team members across the country. None of our innovative services, game-changing technology, and ultimately, our many successes over these past 6 years would be possible without their teamwork and their dedication to Offerpad's mission.

Thank you all for being with us today. We are very appreciative you took the time to listen to our call. And we look forward to launching a 2-way dialogue with you as soon as we are public. We trust the fact that we are conducting this call prior to being public conveys a priority we are placing on communication and candor with investors. We very much look forward to hearing your questions and insights and being able to share more business updates in future earnings calls.

Thank you.

Thank you for joining Offerpad's Q2 FY 2021 Earnings Call. This concludes today's call, and you may now disconnect.