Good evening. Thank you for attending today’s Offerpad Fourth Quarter and Full Year 2021 Earnings Conference Call. My name is Bethany, and I will be your moderator for today’s call. All lines will be muted during the presentation portion of the call. [Operator Instructions] I would now like to pass the conference over to our host, Stefanie Layton, Senior Director of Investor Relations at Offerpad. Stefanie, please go ahead.

Thank you, and good afternoon, everyone. Welcome to Offerpad Solutions’ fourth quarter and full year 2021 earnings call. Our Chairman and Chief Executive Officer, Brian Bair; and Chief Financial Officer, Mike Burnett, are here with me today. During the call today, management will make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain, and events could differ significantly from management’s expectations. Please refer to the risks, uncertainties and other factors relating to the company’s business described in our filings with the U.S. Securities and Exchange Commission. Except as required by applicable law, Offerpad does not intend to update or alter forward-looking statements, whether as a result of new information, future events or otherwise. On today’s call, management will refer to certain non-GAAP financial measures, including contribution profit and margin, contribution profit and margin after interest, adjusted net income as well as adjusted EBITDA. These metrics exclude certain items discussed in our earnings release under the heading, Non-GAAP Financial Measures. The reconciliations of Offerpad’s non-GAAP measures to the comparable GAAP measures are available in the financial tables of the fourth quarter and full year 2021 earnings release on Offerpad’s website. I’ll now turn the call over to Brian.

Thank you, Stefanie. It’s great speaking with you all today. 2021 was our most successful year yet. I’m excited to provide details about our growth and accomplishments last year. I will also share more about our focus in 2022 and speak to some of the market dynamics we are seeing in the industry. Mike will cover our fourth quarter and full year 2021 financial results and first quarter 2022 expectations. In 2021, we delivered on our financial and operational goals and exceeded expectations. We nearly doubled our reach by expanding services to include a total of approximately 1,500 cities and towns, and we introduced Offerpad to customers across the Midwest. Our operations team led the way, acquiring 156% more homes in 2021 compared to the prior year. And our renovations team set a new record completing over 8,000 improvement projects, a 137% increase over 2020. Since Offerpad was founded, we have completed home renovations totaling nearly $300 million. This means new homeowners benefit from things like upgraded finishes, energy-efficient appliances and other improvements that extend the life of the home. Neighborhoods benefit from repairs and upgrades in their community. We are doing more than just buying and selling homes. We are revitalizing homes, increasing their longevity and creating welcoming environments for homeowners. The key to our continued success over the past year was growing in a responsible manner while maintaining high-quality, customizable and valuable service offerings for our customers. In 2021, we earned an outstanding customer satisfaction rating of 93%. Offerpad has seen market demand increase as more customers seek the convenience, certainty and control our offerings provide. We repeatedly hear from customers how our services and team members have improved their homeownership experience. With so many aspects of our daily life simplified from purchasing everyday products on our phone…

Thanks, Brian. Today, I will cover our fourth quarter and full year 2021 financial and operating results, discuss our recent financing activities, and also provide our outlook for the first quarter of 2022. We ended the year with a strong fourth quarter, continuing the trend we established at the beginning of 2021. Our fourth quarter revenue set a new record at $868 million, a 289% increase over the fourth quarter of 2020. Q4 gross profit increased 178% from the prior year and we reported positive adjusted EBITDA for the fifth consecutive quarter. Our net income this quarter was $12.8 million and includes a $15.6 million credit to mark-to-market the value of the warrant liability. Excluding this credit, our Q4 adjusted net loss was $2.8 million. In the fourth quarter, we acquired 3,049 homes, nearly a threefold increase from Q4 of 2020 and an 11% sequential increase from Q3. This growth pattern demonstrates our ability to quickly and smartly rebuild our inventory levels from the pandemic lows and to methodically manage that strong growth in a consistent serviceable manner, avoiding dramatic upward swings and pullbacks in acquisition activity. Our home sales in the fourth quarter of 2,423 units nearly tripled our Q4 2020 sales and increased 45% sequentially from Q3 with an average selling price of $357,000 per home. We generated $70 million of gross profit in the quarter, a 32% sequential increase from Q3 at a gross margin of 8.1% compared to 9.8% in the prior quarter. This is consistent with our expectation of margins normalizing from the prior high levels of home price appreciation. Our growth plans not only show the operational benefits of adding scale, but also our ability to leverage overhead. In the fourth quarter, total operating costs were 7.7% of revenue, a 340 basis point improvement…

Thank you. [Operator Instructions] The first question comes from the line of Dae Lee with JPMorgan. Please go ahead.

Good afternoon. Thanks for taking the question. First one for Brian. I’m just curious to hear your thoughts on the low inventory levels that we’re seeing in real estate right now, and if you’re seeing anything or expecting any impact to your ability to acquire homes. And then secondly, for Mike, revenue per home continues to lot higher, and you won’t to guiding by further growth. So curious to hear how you – we should think about that line as we move through 2022?

Sure. I’ll jump in first. Thanks, Dae. Yes. The inventory is still very, very low. It’s still definitely heavily on the seller side of it, market-wise. One of the things I have been – might even mentioned this last call, very excited about as the traditional way of selling your home is easier than it’s really ever been. Just as far as the risk tolerance as well, you’re not going to have the marketing time you normally have, days on market. And still, we’re seeing more and more people coming to Offerpad every month. I think the consumer is getting smarter as well of understanding it’s not just putting the house under contract, but it’s also closing the home as well during the mortgage process and insurance process, a bunch of other processes the home can fall out. So I think our model has been great for that to benefit the consumer on that end. But yes, inventory is still very low. It picked up a little bit at the end of last year, but we’re seeing definitely supply issues out there again.

And then Dae, on your second question on the average revenue per home. Yes, we have increased significantly over the past year. Q4, our average selling price was about $262,000, that’s risen to $357,000. And really, it’s a direct reflection of the home price appreciation that we’ve been talking about over the past 12 months. I do see that leveling out. I would not expect that to continue to rise certainly at that pace. I think there will be some of depreciation, but I think we’re going to start seeing that more normalized a little bit. The other thing that will impact that is as we’re entering new markets, we tend to play around the average, the median home sales price in each particular market. So there’ll be a little bit of fluctuation there as we go into California, but we also will be gaining volume from our recent entry into the Midwest and then have a little bit of a lower average price point there. So I don’t think that’s going to be a big needle mover, but it will be another impact point.

Got it. Thank you.

Thank you, Mr. Lee. The next question comes from the line of Andrew Boone with JMP Securities. Please go ahead.

Hi, guys. Thanks for taking the questions. I’d like to begin with expanding the buy box. Can you just talk about the implications as you address more of home purchases within a market? And then secondly, as I think about that same kind of point, how do more markets get Greensboro and Phoenix up 10%? And where are you in terms of being able to drive more awareness of Offerpad overall? Like, where do you think brand awareness is today?

I think brand awareness is definitely by market specific. Our brand awareness is pretty strong in our more legacy markets that we’ve been in for a while, Phoenix and Charlotte, Atlanta. Some of those brand awareness in some of our newer markets is not what it needs to be. So there’s still work to do on that as we educate the consumer on that end. But I would think in more seasoned markets, we have pretty strong brand awareness. I’m sorry, what was the first question, Andrew?

First, just as we think about expanding the buy box and covering more of an area. As I think through the implications of that, does that imply kind of higher conversion, that you guys can target more customers? What does that mean as you guys go up in the buy box in terms of renovations? Like just help us think through kind of the knock-on effects of the buy box extended.

Yes. Great question. And that’s exactly what it is. As we expand our buy box, as our logistics operations get stronger and our ground game gets stronger in the markets that we’re in, we’re able to expand those into buy higher-priced homes. And one, there’s not as much competition in those price points. And two, it plays very well into us because – for our model because normally, as you expand buy box or price points, renovations is also higher as well. And so that plays very well into our hands as well. So as we do that, we want to get – there’s – the market penetration. And to do that, you can do that obviously through price point and then the type of product that you buy. And so as we expand buy box, we’re going to attack both those.

And if I can sneak one more in. Can you just talk about the impact of Zillow exiting the market, like, what’s the competitive set look like? And what have been the implications as they exit? Thank you so much.

Yes. No problem. And still little too early to tell from a – it was a big impact to the iBuying world and the market and different things. The consumer wasn’t – we just – it’s hard to gauge how impactful it was to them at this point. What we – what I can speak to is we are seeing more and more people come to us every day, every week, every month. And I’m sure there’s some impact of Zillow exiting the market in there. But overall, we’re obviously pushing brand awareness as well in there, too. So a little early to tell. I’ll probably have more information on that next quarter of what we’re seeing out there, but it’s definitely impactful.

Thank you.

Thank you, Mr. Boone. The next question comes from the line of Ryan Tomasello with KBW. Please go ahead.

Good evening, everyone. Thanks for taking the questions and congrats on the strong finish to the year. Realizing, you haven’t provided a full year outlook, but maybe you can provide some commentary to put some guideposts around the trajectory of home sales margins on a gross and EBITDA basis through the year? I guess, looking at the first quarter guidance, nice to see the expectation of continued profitability but curious how we should be thinking about that level of profitability continuing through 2022. Or if you expect benefits from current inventory dynamics in HBA to – weighing through the year and result in more normalized profitability beyond the first quarter?

Yes. Ryan, you’re right. I’m not giving full year guidance. What I can tell you is from our first quarter, we are seeing continued solid and supportive conditions that we’re operating under and have a positive view beginning of the year for this year. How long that maintains, it’s really hard to tell. I mean – so we still think there’s going to be a continuation of a lack of supply, good demand. Nobody is expecting the level of home price appreciation to continue in 2022 that we saw last year. But either way, I mean, we’ve got a model that’s built to operate in both of those conditions, more normalized, which we do think is going to occur. We think there will be a normalization over the next 12 months certainly. What’s been difficult to predict is the glide path as it comes down there. So it’s definitely one that we’re excited about 2022. We like our positioning, where we’re at, and we’re obviously off to a really good start.

Yes. The one thing I would like to add in there, there’s a lot of talk about home price appreciation, especially what we saw last year. I mean, it’s definitely a big factor, and you’re seeing home prices. But I also feel like I don’t want to overplay home price appreciation as well. Remember, we own these homes for 90 to 100 days. I mean there’s only so much home price appreciation. What really we’re talking about the segmentation and the risk of the home, that goes into how we’re underwriting the home and the type of assumptions that we have to make. For example, in a seller’s market, when we own the home, we can underwrite less assumptions of closing costs to the buyer, co-broke fees. There’s different things that you can underwrite in there. So it’s not just based upon home price appreciation. We expect the home to be priced – to sell more than it is that we own it today. It’s all the assumptions that we do in underwriting to our people on the ground and tied with our data analytics, just something up going there as well.

Great. And then as a follow-up, as you continue to build out the capabilities of the solution center, can you discuss how you’re prioritizing, say, adding new products versus expanding adoption and attachment rates on existing products? In your prepared remarks, you commented on becoming more relevant with buyers. Maybe if you can just elaborate on really the strategy for really drawing in more traffic into the platform and maybe, I guess, versus peers that have other products catered to buyers like a cash offers product to power buyers, if that’s something that you could potentially look at to bolster the product set? Thanks.

Yes. And we’re exploring everything right now. But to that point, there are some solutions that we’re definitely emphasizing over others. One is definitely mortgage with the launch of OPHL and then the buy side. What we know is there’s about a 70% likelihood when someone sells their home to Offerpad that they’re going to buy another home. And when they buy the other home and use other services of our vessel, what we call, that’s our bundled services. So there is a major opportunity there to, one, it’s a great win for Offerpad as we can – and – but two, it’s also a major win for the consumer because they don’t have the friction of what you normally see in the transaction because we can close the time they buy their next house. There’s only one closing the mortgage. And we can really wind everything up to make it really, really seamless for the consumer. And so mortgage and the buy side. The other thing that important to note is we have thousands of homes that we own that are on the market that we can use as simple centers as we drive a lot of traffic as we talk about, and I mentioned the instant access opportunity we have there. Just like homebuilders have been doing for years, but their model home centers are driving traffic. But we’re in a very unique position to have thousands of homes that hit the market that we can drive traffic through and basically have a 24/7 open house. People go in there and offer us directly and do different things. So there’s a lot of different things that we’re attacking. But mortgage and buyer representation are going to be the two highlights you’re going to see us on that end. And then obviously, the Flex side of where if somebody doesn’t – for whatever reason, doesn’t accept our cash offer, they can choose to partner with us on the listing end of it. And we can help them market their home on the open market, just like Offerpad owns it, but we just partner with them. And then they’ll use other services there as well.

Great. Thanks for taking the questions.

Thank you, Mr. Tomasello. Our next question comes from the line of David Lustberg with Jefferies. Please go ahead.

Hi guys, this is David Lustberg on for John Colantuoni. Can you hear me?

Yes. Hi, David.

Great. Thanks, guys. Thanks for taking the questions. I know you said in the prepared remarks that you expect the market to remain strong in 2022. Could you provide any additional color on your expectations for the housing market over the next few years with mortgage rates on the rise? Are there any adjustments that you think you might need to make to navigate a changing market?

Yes. And so we watch and how we say since we started Offerpad and that the market is always doing something. And real estate market is always cycling and there’s always something going on in the real estate market. So we watch that closely every minute of every day of what the market conditions are doing. As we look forward, and there’s a lot of talk about mortgage interest rates increasing. And that’s definitely going to be impactful to an extent. I don’t think there’s as much. That’s one big issue. But the lack of supply out there, we have way too many buyers not in the homes on the market right now. That’s going to play more of a factor than rising interest rates because even the interest rates, with the acceleration of the job market and pain and those things, interest rates are going to factor into that. But remember, even if they go jump up, they’re still at all-time low. I mean they’re still very, very low from what they’ve been. But I think it’s more impactful of just a supply and demand issue with the inventory of homes out there. I think it’s going to affect – and I don’t see that changing any time rapidly, anytime quickly. I think that, that will take a while to normalize.

Got it. That’s helpful. And then a quick follow-up if I can. Is there any color you could provide to how much Flex contributed to revenue and gross profit in the fourth quarter? Thanks.

Yes. We’re still at a point where that represents about less than 1% of our revenue, and that’s where we’re getting good sequential growth quarter-by-quarter, so there is gaining momentum there. We’re growing our core business, too, obviously, with the growth of Express and the iBuying side of things. So not to imply that we’re not seeing good growth there, but it – coming through the end of the year, not yet a big component of it but big focus for 2022, good momentum sequentially and a big focus both, as Brian said, on the buying side of the transaction through Flex and continuation on the sell side.

Awesome. Thanks, guys. Appreciate it.

Thank you.

Thank you, Mr. Lustberg. Our last question comes from the line of Ben Sherlund with Cantor Fitzgerald. Please go ahead.

Hey guys, thanks for taking my questions. Maybe a follow-up on Flex. Could you kind of talk through what investments on your side or what kind of market dynamics are really going to help to increase the mix shift of Flex as a percentage of revenue?

Yes. I’ll talk high level on that end of it, and if Mike wants to add something in. What’s important to understand about Flex is the key to Flex is being able to be able to operate our Express, the iBuying model very well. That’s what opens up the opportunity. Fundamentally, what we see, and I believe this is that the best thing for the consumer because they can have complete control and of the transaction is a cash offer that they can choose their closing date doesn’t go through that. But if they want to choose and explore other options, you’ll be allow them to do that. But being able to perform on the iBuying side of it and to buy and renovate and have a home in 100 days, what that allows us to do is attach other products on that, like we talked about with mortgage and title and some of the other things that we’ve talked about. And so – but that’s the game point from a high level. And – but it all really starts with being able to submit a strong catch offer to a homeowner because they don’t – the traditional way is really tough. There’s a lot of friction for them. And so they’re looking for a one-stop solution. And somebody you talked about earlier about brand awareness and things that’s one of our focuses for 2022. I think we’ve done a pretty darn good job over the last four or five years of telling the world what an iBuyer is and kind of real estate as a service. The next thing that we need to do is educate the world about what a solution center is and the other products that we have to offer because we know the consumers highly engaged there. We just have some work and some education to go tell the world more about it as we get market by market.

Yes. And the only thing I’d add to that is – it is about being able to offer whatever the customer, whatever that best fit is over time. And then for us as an organization, too, it’s very complementary to the iBuying side of things, too. And it’s a higher-margin capital-light business that fits into the existing business very well. And so we think the tandem approach there, along with other ancillary products is really a good path to success.

Okay. Great. That’s helpful. And then maybe a follow-up on the mortgage solutions, you guys have previously talked about moving that – at least part of that in-house in more of a captive solution. If you could just kind of talk about how that might change the unit economics of the initiative and kind of what is required to get there? Do you have to reach a certain scale or any color there would be helpful?

Yes. So we are in process of bringing that into more of a non-delegated lender format. And what that will allow us to do is to capture better economics on that. We’re in the process of getting all of our licensing across all of our states. We’re about halfway through that right now and expect to be complete certainly in the first half of this year. And so that will also then pair very well with our focus on Flex and on the buy side because there’s much higher attach rates on the buy side, and it’s more logical connection there. And so that will be the next step there. We’ll have a small warehouse line associated with that to do kind of the overnight funding on that. But that’s in progress, and we’re taking good steps there.

And the one thing I’ll just add on that is back to the bundle conversation. What’s really important there is as we talk about the friction on the bundle side, but there’s also a cost savings for the homeowner on that side as well by selling us their home, using our mortgage product and finding their next home through Offerpad, whether it’s one of our homes that we have in inventory or outside of our inventory. They can save 1% to 2% depending on the situation. So there’s also a cost savings. So we’re not already not just given them the ease of the transaction, but there’s also savings to be had there as well. And customers seem to be very engaged with that. And we’re going to be spending a lot more time and resources on that in 2022.

Great. Thank you.

Thanks.

Thank you, Mr. Sherlund. We do have one follow-up from the line of Ryan Tomasello with KBW. Please go ahead.

Hey guys, thanks for taking a follow-up here. Mike, I appreciate the comments around the balance sheet in the prepared remarks. But maybe you can just put a finer point around the current liquidity position and your comfort with funding your growth plans for the rest of the year?

Sure, Ryan. Yes. We did a lot of work on the balance sheet last year and really did a lot of putting new additional debt capital in place as well as refinancing some existing facilities to take advantage of rate improvements and term and condition improvements. And so a lot of this was done late in the year into December. But we ended the year with about $1.7 billion of total capacity out there. We think that’s a good place for us to be. We’ve got the opportunity now with for four large institutional lenders, very good relationships that we can continue to grow with and have good access to additional debt capital there. So we’re feeling very good about the capacity on the debt capital side of things where we are at and where we can grow. On the cash side of things, we ended up with about $170 million of cash on the balance sheet at the end of the year. We think that positions us well to execute against the plan in 2022. And then we’ll see how we go as it moves forward from there.

Great. And then just a final one, I’ll squeeze in here. I love the color around the homebuilder partnerships, including Taylor Morrison. Maybe you can just elaborate on the benefit you are getting from those partnerships in terms of customer acquisition. And if there are any other opportunities that look interesting outside homebuilders, and I guess based on those 50 partnerships you have today on the home building side, can you say if that will be driving a material portion of your acquisition volume today? Thanks.

Yes, and it is. And the builder relationships are fantastic. We talked about Taylor Morrison. They’ve been a fantastic partner. But it’s really one of those win-win wins for everyone because as a potential buyer walks into a Taylor Morrison model center. They want to buy Taylor Morrison home, but they have to sell their current home. And they have to try to time the closing out of all those things. So when they walk into a model – a builder model center, we can give them a cash offer with builders within an hour. So they know their house is sold. They can choose their closing date. We can work around the builders. So the builder can sell their current home. The homeowners have sold their current home and then we can time of the transaction. So it’s one of our highest conversion channels that we have in the company is with our builder partners. And so Mike said it’s really a triple win across the Board there. We’re exploring partnerships across the Board. And so we’re very specific of the partnerships that we engage and but builders is great. We also have the partnerships with the real estate community. We call an agent a partnership program that we partner with real estate agents that will sell us – that will bring us their home before the house hits MLS. And their customer wants a cash offer. So we have – that’s a big channel as well – agents bring it to us. As Mike said, at Offerpad, we want to be a solution center to everyone that we can. We feel – win for everyone involve. So we have different partnerships, and we’re always exploring others.

Thanks for taking the follow-ups.

Thank you.

Thank you, Mr. Tomasello. There are no additional questions waiting at this time. The question-and-answer session has concluded. I will now turn the call over to Brian Bair, Chairman and CEO, for closing remarks.

Thanks, everyone. We are incredibly excited about the future. We grew nearly 100% year-over-year with a positive adjusted EBITDA of $30 million. Customer awareness is growing and the benefits over the traditional way to buy and sell a home are tangible and meaningful. iBuying ramped in 2021, and we believe this momentum will continue. Feel free to reach out to Stefanie if you have any questions, and thanks so much for joining us today.

That concludes the Offerpad fourth quarter and full year 2021 earnings conference call. I hope you all enjoy the rest of your day. You may now disconnect your lines.