IBuying giant Opendoor has logged another strong quarter as its revenue jumped 91 percent quarter-over-quarter to $2.3 billion, according to the company’s fourth-ever earnings report released on Wednesday.
Perhaps more importantly, in light of Zillow sunsetting its Zillow Offers program last week and the resulting doubt the move has cast on the iBuying industry, CEO Eric Wu said he continues to be confident in Opendoor’s strategy and path.
Opendoor CEO Eric Wu. Credit: Opendoor
The company’s net losses slid from $144 million in Q2 2021 to $57 million in the third quarter, as its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) increased 34 percent quarter-over-quarter percent to $35 million. The company’s contribution profit also increased 32 percent from Q2 2021 to $170 million.
“Our third-quarter results are the byproduct of our focus on the consumer experience and strong, consistent execution,” Wu said in a prepared statement before the company’s earnings call.
Opendoor supersized its inventory in Q3, with a 79 percent increase in home purchases (+15,181) as the company surpassed its 42-market expansion goal set at the beginning of 2021. The result was a 130 percent increase in the iBuyer’s inventory balance, which represents a whopping $6.3 billion in residential housing stock.
Wu stressed that he remains confident in the company’s business model.
“Over the years, I am often asked whether our vision and strategy has changed. The short answer is no — we have always been focused on making it possible to buy, sell, and move at the tap of a button,” he said. “In our view, the end state for the real estate marketplace will inevitably be a simple, certain, and fast transaction powered by technology. It is just a matter of when.”
“So we have been consistently focused on investing in that future experience, piece by piece, with the consumer in mind at every step,” he added. “We take great pride in doing the hard work to execute with excellence in our consumer experience, technology, business performance, and company culture. This is what sets us apart.”
Carrie Wheeler
In the company’s earnings call, Opendoor Chief Financial Officer Carrie Wheeler echoed Wu’s statements and focused on her confidence in their pricing capabilities — a subtle hint at Zillow’s failure to accurately price homes for its iBuying operations.
“We have prioritized our investments in our pricing capabilities across acquisition valuation, forecasting and resale systems since our inception, these investments pair with a strong risk management DNA that’s embedded in our pricing, our operations and our finance teams,” she said. “Our philosophy for growth has always been and will continue to be anchored in disciplined unit economics.”
Wheeler said the platform’s “robust operational capabilities” enable them to expertly navigate market shifts, including seasonal drops in buyer demand and the current normalization of home price growth from record highs.
“We are rigorously back-testing our models every day,” she said. “They’re highly responsive, they have fast feedback loops, and we can react to changing market conditions. Our forecasting accuracy was what allowed us to manage the business within a reasonable range of outcomes, and deliver margins within that 4 percent to 6 percent contribution margin range.”
“What’s important is that our model really works in up markets, it’s going to work in flat markets [and] it’s going to work in down markets,” she added while noting Opendoor experienced an 11 percent increase in revenue per home in Q3. “We’ve talked about this before, but we are a market maker. That means we’re serving our customers, we’re pricing [with] certainty and we’re taking a spread; we’re getting paid for that.”
With a solid business model, a prime competitor out of the way, and growing consumer interest in iBuying serving as the company’s tailwinds, Wu said he’s focused on expanding Opendoor’s market reach and driving growth with the platform’s newest option, Opendoor Complete.
“We often cite externally that two-thirds of sellers are also buyers, but we rarely detail the complexity and timing of managing to transactions, all balancing the realities of life,” he said of Opendoor Complete. “These realities include the forming of a new family, the pressures of work, the hardship of a pandemic, the death of a family member, or the drive for a better school district. This is why our work matters.”
“I would just say that the value proposition is resonating,” he added. “It’s resonated before Zillow was in the category, and it will continue to resonate as we expand nationwide and drive deepening market share.”
Opendoor’s post-earnings pop hints analysts and investors are equally as confident as Wu in the company’s path forward. The company’s stock increased nearly 18 percent from $19.49 at market close on Wednesday, to the $23-range in after-hours trading.
The company’s market cap stands at $12.7 billion.
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