Offerpad posted gross profit of $93 million, an 83% year-over-year increase and its third consecutive profitable quarter, according to a second-quarter earnings report released Wednesday afternoon.
Startup iBuying Offerpad released its second-quarter results on Wednesday, revealing the company remained profitable for the third straight quarter despite a tough market.
Offerpad posted gross profit of $93 million, a year-on-year increase of 83%, it said in an earnings report on Wednesday afternoon, while its net profit rose 26% to 11.6 million, or $0.04 per share.
The company was able to remain profitable despite a tougher environment for home sellers compared to previous quarters, marked by high mortgage rates and greater buyer reluctance.
Offerpad CEO Brian Bair said the company’s iBuying model is well suited to uncertain markets because of the relative ease it offers sellers.
“It’s in tough markets like today that the speed and certainty we provide is welcomed by door-to-door sellers,” Bair said in a statement. “Our high customer satisfaction ratings clearly show that buyers and sellers appreciate the simplicity of our solutions. Increasing customer awareness and interest in our products gives me confidence in our ability to generate profitable growth over the long term.
The company posted an adjusted net loss of $1 million, from $9.2 million a year ago, and its adjusted EBITDA rose 5% to $13.7 million, according to the report. results. Its profit margin per home sold increased 10% annually, to $31,500 in the second quarter.
In the second quarter, Offerpad sold 2,888 homes, purchased 3,792 homes and completed 3,500 renovation projects. It also kept its average time between buying and selling a home below 100 days.
Offerpad management said it was entering an unstable period that could prove difficult for the company, but was confident it would be able to capitalize on the market no matter which direction it took. , although it was headed for a downturn.
“Probably the question I’ve been asked the most in Offerpad’s history is ‘what happens when there’s a slowdown? and the answer I’ve always given is I don’t mind a slowdown,” Bair said. “A downturn is actually an opportunity to be a buyer in a buyer’s market, a good place to be. The hardest place to be is when it’s going from a seller’s market to a of buyers and this transition period, all the way up, this is where it gets foggier than ever and this is exactly where we are in this cycle right now.
“We expect the pricing adjustments to impact our earnings in the near term,” Offerpad Chief Financial Officer Mike Burnett added on the call. “But as the market shifts from a seller’s market to a buyer’s market, we expect our margins to improve.”
While the market is in its adjustment phase, Bair said the company will slow down its acquisitions in the markets that have seen the largest share of price declines in recent months – namely Western markets such as Phoenix, Austin and Las Vegas which has seen the most dramatic home price booms during the pandemic.
Prior to Wednesday’s earnings release, iBuyer was on a roll, having posted its first two consecutive quarters of profitability in the final months of 2021 and early 2022. CEO Brian Bair said in May that the first three months of the year was the “best quarter in company history”.
The company’s first-quarter revenue of nearly $1.4 billion was nearly four times that of the same period last year. And its $41 million in first-quarter profits demonstrated that it could scale that kind of expansion while remaining profitable.
In the first three months of the year, Offerpad sold 3,602 homes, the company said in a letter to shareholders. He bought 2,856 homes during the same period.
The company also said it spent an average of $17,000 per home renovation in the first quarter, a process that took an average of 23 days.
Offerpad’s recent profitability and growth – like that of competitor Opendoor – has come even as one of their main rivals, Zillow, exited the iBuying business and continued to sell its remaining inventory. Based on their recent earnings reports, they appear to have been able to avoid the stumbling blocks that have plagued the Seattle-based roster giant in this space.
On a call with investors in May, Bair said the company was well positioned to continue to grow its business even in a slowing market.
“I would tell you that Offerpad is designed for that,” he said at the time.
Wednesday’s release of the report came two days after Opendoor was fined $62 million by the Federal Trade Commission for allegedly ‘misleading’ consumers into providing information that implied they would earn more. more money selling to Opendoor than selling on the open market.
Opendoor disagreed with the allegations in the case but agreed to settle the case.
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