Hello, and welcome to the Offerpad Third Quarter 2021 Conference Call. My name is Brica, and I'll be your call operator today. After the presentation, we will have a Q&A session. I will now hand over the call to Stefanie Layton, Senior Director of Investor Relations at Offerpad. Stefanie, please proceed.

Thank you, and good afternoon, everyone. Welcome to Offerpad Solutions third quarter 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 quarterly report on Form 10-Q for the three months ended September 30, 2021 to be filed with the US Securities and Exchange Commission on/or about November 10, 2021 and subsequent filings Offerpad makes with the 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 adjusted net loss, contribution profit and margin, contribution profit and margin after interest, 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 statements of the third quarter 2021 quarterly report on Form 10-Q and earnings release on Offerpad’s website at investor.offerpad.com. I'll now turn the call over to Brian.

Thank you, Stefanie. It's great to be speaking with you all today. I'm excited to share details about the exceptional progress we made during our first quarter as a public company. I will also share more about our strategy going forward, and I will speak to some of the market dynamics we're seeing in the industry. Michael will cover our third quarter financial results and full year 2021 expectations. Our business model strategy and experience set us apart from others in the industry. In Offerpad, we've created a flexible business model designed to adapt in any real estate cycle. Our business model seeks to provide a full service solution centered for homeowners. This customer-centric solution center approach extends beyond the buying and selling transaction to provide easy access to other services such as mortgage, title and bundle rewards. It also provides options for individuals to create customizable solutions. Our EXPRESS cash offer and our FLEX listing services are great examples where customers can choose which solution is best for their needs. The end-to-end solution center approach to address the variety of homeowner needs creates a diversified platform. This in turn can increase our growth, our opportunity for multiple engagements with each customer and expand our margins. Our strategy is to grow our platform by expanding into new markets, increasing our penetration in existing markets and building the ancillary services we currently offer. Our focus is on growing rapidly in a responsible and disciplined manner that balances our goal of increasing market share with achieving long-term sustainable profitability. Our team's deep real estate knowledge and local real estate expertise sets us apart. We combine this expertise with data analytics and technology to better anticipate and account for changing market conditions. This approach has led to our rigorous underwriting and a strong track record for accurately estimating what our homes will ultimately sell for. I'm very proud that from the time we launched Offerpad in 2015 through the first half of this year, we've achieved less than 1% variance between our aggregate estimated prices and actual sales prices. We believe our proven ability to anticipate and adapt to changing market conditions, and to account for those changes in our underwriting is supported by our vast real estate depth in each local market. We are continuously assessing data such as interest in mortgage rates and household income fluctuations, in addition to settlement to ensure our underwriting is appropriately projecting, and adjusting for anticipated changes in market conditions. A great example of our proprietary insight comes from an automated weekly market report, summarizing real-time information from our local teams regarding individual market dynamics. This data is then reviewed by our leadership and analytics team and is used to adjust our underwriting algorithm and process to address increasing or decreasing risk. Our differentiated approach, including our diversified solution center model, our strategy for disciplined growth, and our deep real estate expertise is transforming the residential real estate experience for customers, providing an easier and more efficient way to buy and sell a home. Our financial results this quarter speak to the success we are already seeing from our team's ability to execute. During the third quarter, we launched four new markets: Indianapolis, St. Louis, Kansas City, and Columbia, with Columbus, Ohio launched in October. As of today, we have launched seven new markets in 2021, allowing us to operate in 21 markets in nearly 1,500 cities and towns across the country. Between 2021 and 2022 combined, we expect to add a total of approximately 15 new markets. We also expanded our mix of ancillary services in particular markets to include a customer rewards program. Offerpad bundle rewards allow customers to receive multiple discounts when both buying and selling a home with Offerpad and by obtaining their home loan through Offerpad home loans. Since launching this in the third quarter, customers in 10 out of our 21 markets have utilized this product offering. By bundling services, customers save money, and we increase our engagement with those customers. While the first three quarters of this year have exceeded expectations, driven in part by one of the hottest real estate markets in recent history, we recognize there are lingering challenges caused by the adjustments society has made to address the pandemic. In particular, like many, we've experienced supply chain constraints. To mitigate our exposure, we have adjusted our renovation plans on a home-by-home, market-by-market basis. This can, for example, prevent a particular backordered appliance from impacting our ability to finish renovating and listing a home for sale. We've also adjusted our acquisition strategy to limit purchasing homes where particular supplies are key to ensure a timely sale of the home; by adjusting our acquisition strategy and the scope of our renovations, we have been able to limit the time delays from supply chain constraints to about 5 to 10 additional days on average, depending on the market. Even with this expansion, as of September 30, 2021, our average time from acquisition to sale remained below our 100-day target. Our inventory of homes more than 180 days has remained low at less than 1%. We are also aware of the labor challenges present in the broader market. At Offerpad, we have been successful in attracting new talent across nearly all of our markets and functions, with recruiting challenges largely limited to our renovation crews. Our strategy to employ our renovation team members continues to be an advantage. Even as the pool for new members tightens, our year-to-year turnover rate within our renovation teams is less than half the 2020 average turnover rate in the construction industry, demonstrating the strength of our culture. Company-wide, our ability to attract new talent remains strong. In August alone, we hired more than 100 new team members. In the third quarter of 2021, we increased the size of our team by 25%, bringing our total team to more than 800 employees. While we're not immune to the challenges many are facing, our flexibility, adaptability and differentiated approach has proven invaluable in mitigating the uncertainties currently present in the macro environment. Looking forward, we expect the broader real estate market, including home price appreciation, will continue to normalize through the remainder of this year and in 2022. One of the benefits of our platform is the advantage of a cash offer. With no showings and control over the timing of the transaction becoming more apparent in a cooler market where the traditional model can take 90-plus days to sell a home. Our team has experience navigating all types of market cycles and we are confident in our ability to adapt going forward. In summary, our solution center model, disciplined growth strategy, and deep real estate expertise differentiate our tech-enabled platform and we believe are key to achieving long-term sustainable profitability and delivering shareholder value. Our distinctive qualities and exceptional team have already proven effective in meeting our goals. I'm confident that we will continue to execute and grow rapidly as we bring a simpler way to buy and sell a home to more customers. I'll now turn the call over to Mike.

Thanks, Brian. Today, I will cover our third quarter 2021 financial and operating results, provide additional information regarding our unit economics and underwriting process, share details regarding our approach to renovations, and also provide an update to our full year 2021 financial guidance. During our exceptionally strong third quarter, we produced record revenue on a record number of homes sold, record gross profit, and a record number of acquisitions. We exceeded the high-end of our third quarter revenue guidance by $20 million, as we generated $540 million of revenue and our $6.1 million in adjusted EBITDA exceeded the high-end of our third quarter guidance range by $14.6 million. This marks our fourth consecutive quarter of positive adjusted EBITDA and year-to-date, we've generated adjusted EBITDA of $22.2 million. The reported net loss this quarter of $15.3 million includes a $13.2 million non-cash charge to mark-to-market the value of the warrant liability assumed in the business combination with Supernova. We will continue to record this non-cash valuation adjustment each quarter that the warrants are outstanding. Excluding that non-cash charge, our adjusted net loss was $2.1 million, an improvement of nearly $1 million compared to the third quarter of 2020. Our strong results for the third quarter were supported by our continued growth in homes acquired and sold, as well as continued strength in our unit economics, evidenced by a 48% year-over-year increase in contribution profit after interest per home sold. This quarter, we acquired 2,753 homes, a 36% sequential increase from Q2 and a 258% increase over Q3 of 2020, which was negatively impacted by the acquisition slowdown caused by pandemic conditions. Request volume and demand for our offers is increasing in part due to the seven new geographic markets we opened this year. In addition to expanding market penetration, this is driven by increased investments in marketing and greater consumer awareness of our value proposition. The accuracy of our acquisitions and our underwriting process are key components to maintaining positive contribution margins. Our underwriting process combines a unique mix of leading technologies, supporting our advanced asset valuation models and perspective from our in-house local real estate experts. We segment homes based on individual risk assessments and underwrite to a specific return on investment based on the level of risk. The components of our unit economics are incorporated into our underwriting process in addition to market dynamics and ancillary service offerings. The process is comprehensive and allows us to maintain a high level of underwriting accuracy even while navigating shifts in market dynamics, such as moderating home price appreciation. We believe our underwriting process is flexible enough to account for the geographic diversity of our markets and to proactively incorporate projected changes in each of those markets. This technology-powered approach, which drives efficiencies, automation, and improved accuracy, is designed to allow for light-touch real estate expertise that mitigates underwriting risk in a highly scalable manner. Another critical element in our business model is the renovations process. Our internal talent and nearly exclusive relationships with numerous specialty contractors across the country have allowed our renovations teams to continue executing despite the industry-wide supply chain and labor constraints Brian addressed. Our logistics systems and processes allow our internal teams to move between jobs, managing multiple projects of varying sizes simultaneously with maximum efficiency. The combination of in-house talent and an appetite to take on different types and sizes of renovation projects also directly impacts our financial performance by creating a larger Buy Box opportunity. We have been able to undertake a broader scope of renovation projects because our internal team structure, paired with our robust relationships with many specialty contractors, provides additional control, consistency, and predictability, allowing us to confidently navigate larger or less traditional renovation projects. Our proven ability to manage renovations efficiently creates an additional value stream for the overall transaction, supporting increased margins. In our model, the service fee, increased renovation value, home price appreciation, and ancillary services all contribute to our return on investment and support our long-term goal of sustainable profitability. This quarter, we sold a record 1,673 homes, representing a 123% increase over the third quarter of 2020 and a 33% sequential increase over the second quarter. Our track record for buying homes at the right price, efficiently renovating, and selling homes profitably was reinforced by this quarter's financial results. Turning to our efficiency and profitability metrics, gross profit in the third quarter increased 169% to $53 million compared to Q3 2020. Gross margin in the current quarter came in at 9.8% compared to 10.6% in the prior year quarter when we were underwriting homes more conservatively and had fewer numbers to account for the increased uncertainty due to the pandemic conditions. Contribution profit after interest per home is the metric we use for calculating unit economics. In the third quarter, this metric increased 48% to $22,700 per home compared to Q3 of the prior year. Our unit economics through the first three quarters of 2021 were augmented by strong market tailwinds in the form of unusually high levels of home price appreciation. As we discussed in our second quarter call and incorporated into our Q3 and Q4 guidance, the level of home price appreciation has begun to moderate and is expected to normalize as we close out 2021 and head into 2022. Consistent with this prior assumption, both gross profit and contribution margin metrics declined sequentially from the second quarter, in line with our expectations. We continuously adjust our operating assumptions to adapt to the constantly changing real estate environment as we navigate the business across each of our geographic markets. We continue to exercise strong discipline with our cost structure while making prudent investments to support our growth initiatives. Because of this approach, once again this quarter, we have demonstrated our ability to leverage our operating cost base as we grow our revenue. Total operating costs as a percent of revenue improved 240 basis points to 9.2% year-over-year, showing the value of our overall growth strategy. Turning to our debt capital structure, we completed a third senior secured credit facility in September, diversifying our lender base while increasing our aggregate senior borrowing capacity to over $1 billion and our mezzanine capacity to a total of $125 million. Through these sources of loan, our total borrowing capacity has increased by over $650 million since the beginning of this year. While we are growing rapidly, our access to competitively priced capital has improved substantially as we continue to effectively execute against our business plan. We remain confident that the precision and efficiency of our operational execution, thoughtful and proactive financial management, and our focus on disciplined growth will position us to further expand and improve our capital structure and deliver long-term shareholder value. Lastly, as we update our full-year outlook, I'm pleased to share that we are increasing our 2021 guidance once again. Specifically, we increased the midpoint of our range for the number of homes sold by about 100 to 5,900 units. This, along with an increase in average selling prices, is driving an increase of $100 million to the midpoint of our revenue range. Additionally, demonstrating our execution of profitable topline growth, we increased the midpoint of the range of our gross profit by $5 million and increased the midpoint of our adjusted EBITDA range by $15.5 million, setting the expectation of generating positive adjusted EBITDA for the full year. We expect the strength of our operational execution through the first three quarters of this year to continue, while partially offsetting the impact from higher operating costs in the fourth quarter, reflecting our first full quarter of public company expenses and normalization of the HPA environment. In conclusion, our third quarter results highlight the success of our differentiated business model and position us well to capitalize on the growth potential in the nearly $2 trillion residential real estate market. I'll now turn the call over to the operator to begin the question-and-answer session.

Thank you. Brian, maybe for you just to talk a little bit about the overall dynamics in your market and obviously those decisions to leave. Can you just walk us through kind of your view on the overall industry dynamics? And as a follow-up from Mike, really good profitability, maybe if you can kind of walk through the levers there of why you're continuing to see such good upside on the bottom line?

Yes, hey Brent, I'll jump in first. But, I think up until about a week ago, I would have told you there was a pendulum change in what we've seen in the iBuying; more and more people starting their journey coming to an iBuyer. So, I think the news that came out was shocking to a lot of people, but what I keep saying and have tried to shout this from the rooftops for years is, it comes down to execution and operations. Logistics is as much of a part of this business as it is a real estate technology company. And so like any business, the execution is going to be key. Overall from a market perspective, what we've seen nationally is that the last six to eight months was massive home price appreciation, which we've talked about. We're starting to see that normalize in most markets; you're still seeing a lack of supply in most of our markets—less than two months of supply. So if you price a home right on the market and it's a good-quality home, it's going to sell; it's going to sell fairly quickly. Instead of getting 10 offers, you might get one or two offers on that home. Overall, the strength of the market has been strong. I think as far as this model, we're seeing more and more customers reach out to us every day, every month, wanting this, and I don't think anyone can argue this is the best option for the consumer—you that control and certainty. So, I am very bullish on the industry and where we're going.

Yeah, this is Mike. In terms of the levers on profitability, I would say that we've done a nice job of creating and managing a solid portfolio of inventory as we've acquired over the last three months. We spent a lot of time on the underwriting side. We knew going into the latter part of this year that we were going to see some cooling conditions, or at least we suspected that and underwrote accordingly. We also spent a lot of time managing what we call our retail properties, and keeping an eye on the aged inventory and doing a good job of keeping that in line as well. In terms of the OpEx side of the business, one thing that I'm pleased with is that we've been able to contain costs from an operating expense standpoint very well as we've gone through the quarter. So the top-line revenue increases that we're gathering are showing better metrics as a percentage of revenue on each of those operating lines except for sales and marketing where we continue to invest, and definitely on a year-over-year basis, we’ve increased the investment in marketing, and I think it's really paid off for us.

Hi, guys, thanks for taking my questions. Two please. The first, I'd love to hear any response that you're seeing from consumers as you guys moved to a 5% fee this summer. So just what are you guys seeing on consumer adoption? And then, can you just talk about your plans in terms of combating labor market challenges and whether you're seeing any headwinds there? Thanks so much.

Yeah. And I'll take the second one first. Yeah, as far as what we're seeing in the markets, supply and labor challenges have been very helpful that we internalize a lot of those operations. Our renovation teams—from the renovation directors, project managers, and foreman—are employees of Offerpad, so that has been very much helpful. A lot of the people down swinging the hammers are also employees of Offerpad, which has been beneficial. We are also getting smart with what we're buying. For example, there's a window shortage in a certain market; we're getting smart with data and technology and saying let's not buy that if it’s going to be a longer hold time or if it's going to slow down our process. Obviously, what we're highly focused on is buying, renovating, and selling in 100 days, so we want to make sure that we're executing on every one of those metrics. So that’s that. On the fee, we have seen good adoption to it. Obviously, we're testing various things and variations to that fee a lot. It's still a little too early to tell because we're trying to balance that with home price appreciation and the low-risk offers that we had during the home price appreciation tailwind. So, overall, adoption has been good. We're seeing more and more people coming and a lot of signed contracts being executed, which is great.

Hey, guys. This is Killian Clarke from Cantor on behalf of Ben Sherlund. Congrats on the great numbers. You're impressive at the speed of turnaround; that 99% of homes are sold in less than 180 days. Can you speak to from your perspective what's really driving the speed in that turnaround? And as a follow-up, how do you think that timeline might change as the housing market stabilizes? Thank you.

Yeah. That’s something that we've hade our eye on since the very beginning at Offerpad. I mean, that's really the secret sauce of this entire model—making sure that. I've said this 1,000 times, but the easiest thing to do is buy homes; if you buy and you overpay, you'll own that home for a long time, and it's not going to be a profitable home for you. So it really comes down to having dedicated teams through our data and analytics, but also with our ground teams. We have directors of asset management in every one of our markets, and they are highly focused on ensuring that these homes are hitting the turn times that we want and are anticipating. We also underwrite homes with different segmentations, wanting to write some that we expect to hold a little longer and some a little bit shorter. Really the core of everything we do is based upon what we call TTC—time to cash. From the minute we own that home to the minute we sell it, ensuring that home performs and we are executing in the right timeframe. The challenges that we've seen recently with some of the supply issues out there—despite those challenges, I give a lot of credit to our team. I think on average for our portfolio, we're only up five days from where we were. Now, each market has its own challenges with many of the supplies or renovation times, but in general, we're still hitting that 100-day goal with a very low supply of homes over 180 days. Again, that's what we're focused on. We meet on that weekly, as we know that that's where success—and the core of this business—is going to come from. Awesome, well, thank you everyone for joining the call today. It's great sharing these positive results with everyone. We look forward to seeing you all soon. Thank you very much.

Thank you. This does conclude today’s call. Thank you all, again for joining. You may now disconnect your lines.