Like most firms in the proptech space, Opendoor was hit by the swift market shift and subsequent slowdown during the second half of 2022 due to rapidly rising mortgage rates.
Despite a 94% year-over-year increase in revenue to $15.6 billion, and selling 39,962 homes or 80% more homes in 2022, the iBuyer still managed to record a net loss of $1.4 billion for the year, compared to a net loss of $664 million a year ago.
After turning its first profit in Q1 2022, things took a turn for Opendoor in the second half of the year. This culminated in a rough fourth quarter, which included a 25% annual decrease in revenue to $2.9 billion and a 23% yearly decrease in the number of homes sold — which dropped to 7,521 homes — resulting in a $339 million net loss.
Due to these challenges, executives expect the firm to return to adjusted net income in 2024.
“Navigating a major housing cycle has not been easy,” Carrie Wheeler, the CEO of Opendoor, told investors listening to the firm’s fourth-quarter earnings call Thursday evening. “As for right now, we are highly focused on stabilizing our core business and ultimately returning to positive free cash flow.”
While the firm continues to face market headwinds in 2023, executives are seeing a light at the end of the tunnel. As of December 31, 2022, Opendoor had sold approximately 66% of the inventory the firm had purchased between March and June of 2022 at the peak of the market, and the firm said it expects to have sold 85% by the end of the first quarter of 2023.
Once Opendoor has sold the rest of this inventory, which is predicted to happen in Q2, executives expect the firm to return to positive unit margins.
In addition to reducing costs by developing an inventory balance that is more in line with current market conditions, Opendoor has also scaled back its operational capacity. This included reducing its marketing spend by 65% compared to its Q2 2022 peak and cutting 18% of staff in November. Overall, the firm said these cuts resulted in roughly $110 million in cost savings from the firm’s 2022 cost peak.
Looking ahead, the firm is optimistic about the opportunities it has cultivated, including its partnership with Zillow and its Opendoor Exclusives platform.
“No matter the macro backdrop, sellers value the certainty and simplicity an Opendoor offer provides,” Wheeler said. “This year we are focused on diversifying our demand funnel so that more home sellers start their journey with Opendoor. The recent launch of our Zillow partnership is one key example set to substantially increase our reach in a scalable and efficient way.”
Opendoor’s interim CFO Christy Schwartz also noted the performance of the homes the firm has purchased since the onset of the housing market shift as a reason for positivity.
“Our new book of homes we offered on starting on in July of last year is performing well above our expectations and is off to a stronger start than acquisition cohorts from prior years,” Schwartz said. “This demonstrates the strength of our value proposition, which despite record spreads, still enables us to create attractive cohorts in a negative home price appreciation environment.”
While executives are well aware of the headwinds, they said they believe Opendoor is still on its way to becoming a “profitable market leader and generational firm.”