Offerpad chairman and CEO Brian Bair told investors and analysts listening to the firm’s fourth-quarter and full-year 2022 earnings call Wednesday evening that 2022 was a “tale of two halves.” This theme was clearly reflected in the firm’s financial results for the year.
After reporting its first ever profitable quarter in Q4 2021, Offerpad went on to report profits again in Q1 2022 and Q2 2022. However, things certainly took a turn in Q3, when the firm reported a net loss of $80.0 million.
This trend continued in Q4, as Offerpad recorded a net loss of $121.1 million for the quarter. Its revenue dropped from $867.5 million in the fourth quarter of 2021 to $677.2 million in the fourth quarter of 2022.
Overall, Offerpad reported a net loss of $148.6 million for the year, down from a $6.5 million net income in 2021. However, revenue was up 91% year over year to $4.0 billion.
Revenue was not the only bright spot for Offerpad in 2022. The firm also sold 10,635 homes, a 67% annual increase — marking the first time the firm sold more than 10,000 homes in a year. In addition, Offerpad’s total listing buyer and mortgage transactions grew by 90%, and cash offer requests from the firm’s Agent Partnership Program were up 80%.
But these bright spots were not enough to overcome the challenges the market threw at the firm.
“The historic interest rate increase and declining affordability left us with two significant challenges in the fourth quarter,” Bair said. “First was selling inventory acquired prior to the market shift. Second was securing additional capital to strengthen our balance sheet.”
During the fourth quarter, Offerpad recorded an average gross loss per home sold of $24,100, a significant drop compared to a gross profit of $29,000 in Q4 2021. However, for the full year, the firm did record an average gross profit of $17,200 per home, down 47% year over year.
Despite these challenges, Bair was optimistic about the future, as the firm has only 225 homes acquired prior to September 1, 2022 remaining on its balance sheet, down from a peak of over 4,000 homes. Executives expect all of this inventory to have been sold by the end of Q1 2023.
While executives are bolstered by this positive news, they are still taking action to cut costs and preserve Offerpad’s bottom line.
In early February, the firm announced its second round of layoffs since early September —and executives told investors that the firm had now cut its work force by roughly 50% from its peak in August of 2022.
In addition, Bair and Offerpad CFO Michael Burnett said that the firm was shrinking its “buy box” to focus on purchasing more median priced homes. Bair also noted that Offerpad would be pausing all California acquisitions at this time.
“In 2023, we expect to accelerate our acquisition volume with a focus on increased penetration in more affordable markets,” Bair said. “In response to the broader real estate market slow down, we reduced the pace of our acquisition and the size of our team.”
Bair said the firm will also focus on further developing its business-to-business partnerships and services, including Offerpad Renovations and Offerpad Direct Plus for investors.
“With the business now right-sized and more in line with our expectations for 2023, we are positioned to efficiently and effectively execute against our operating plan,” Burnett said.