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A return to profitability remains a waiting game for iBuyer Offerpad, which scaled back its third quarter acquisitions and posted a $13.5 million loss Monday as both revenue and homes sold slipped 17 percent from Q2.
“During the third quarter, we delivered revenue at the high end of our guidance,” Offerpad CEO Brian Bair said in a statement. “We’ve expanded our asset-light services, strengthened partnerships, and optimized our organization. This positions Offerpad well as we return to normalized acquisition levels in our cash offer business with a streamlined cost structure.”
Shares in Offerpad, which in the last year have traded for as little as $2.57 and as much as $11.22, closed at $3.27 Monday before earnings were released, up 5 percent from Friday’s close of $3.12.
Homes acquired down 49 percent from Q2 to Q3
Source: Offerpad earnings releases.
The 615 homes Offerpad sold during Q3 helped generate $208 million in revenue, down 11 percent from a year ago. The company’s renovation division closed 227 projects, up 43 percent from a year ago, generating $4 million in revenue.
During that period, the Chandler, Arizona-based iBuyer managed to trim $17.4 million in operating expenses, helping shrink its $20 million Q3 2023 net loss by 32 percent.
Homes acquired dropped 49 percent from Q2 to Q3, to 422 — fewer than half the 930 homes Offerpad bought in Q2 2023, and the slowest pace of acquisitions since Q1 2023.
Offerpad executives said they’re expecting to sell between 480 and 540 homes in Q4 and expect to generate revenue of between $160 million and $185 million.
“We are proud of the cost control maintained during this period of market dislocation, focusing steadily on profitability and building a resilient, sustainable business for any real estate environment,” Offerpad CFO Peter Knag said in a statement. “As we enter the final quarter of 2024, we’re observing shifts in the market that open up opportunities for disciplined growth.”
On a call with investment analysts, Knag said Offerpad anticipates eventually getting back to acquiring 1,000 homes every quarter.
“We’re really excited about what that’s going to bring us, from a financial perspective, when we put that volume … back on top of our lower cost structure,” Knag said.
Offerpad launched a new “Powered by Offerpad” portal in Q2 for agents and agent teams who are part of the company’s Pro and Max agent programs. The agent partner programs now account for one-third of all acquisitions, the company said.
During Q3, Offerpad announced a new integration with Realtor.com allowing homeowners in select markets to request an instant estimated cash offer through Realtor.com’s Seller’s Marketplace.
Offerpad pays agents a 3 percent referral fee on Offerpad cash sales and a listing fee of up to 1 percent on Offerpad-owned homes.
Offerpad reins in losses
Source: Offerpad earnings releases.
Offerpad put together four profitable quarters in 2021 and 2022, bringing in more than $1 billion in revenue in Q1 and Q2 2022. But rising mortgage rates slowed sales and made flipping homes at a profit a tougher proposition, and Offerpad has dialed back home purchases and sales.
Over the last six quarters, Offerpad has generated an average of $242 million in revenue per quarter. Over the same period, Offerpad has slashed expenses and brought quarterly net losses down to an average of $17.1 million per quarter, down from $121.1 million in Q4 2022.
At $26.1 million, Q3 operating expenses were down 40 percent from a year ago. That cost-cutting included laying off an undisclosed number of employees in sales, marketing and operations in a bid to regain profitability.
“For more than two years, we have focused on returning to positive earnings and cash flow while adapting to unprecedented market conditions,” Bair said in a letter to shareholders Monday. “We diversified our revenue among four lines of business, adjusted our buy-box, and reorganized our cost structure to thrive in any real estate environment.”
“We’re observing shifts in the market that open up new opportunities. Early signs of rate relief, easing inflation, a stable labor market and improving consumer confidence are expected to bring buyers and sellers back to the marketplace, and we’re ready to meet our customers when they’re prepared to transact.”
