Offerpad Solutions Inc. Q3 FY2022 Earnings Call

Good evening. Thank you for attending today's Offerpad Third Quarter 2022 Earnings Call. My name is Megan, and I will be your moderator today. I'll now turn the call over to Stefanie Layton, Vice President of Investor Relations and ESG at Offerpad. Stefanie?

Thank you, and good afternoon, everyone. Welcome to Offerpad Solutions Third Quarter 2022 Earnings Call. Our Chairman and Chief Executive Officer, Brian Bair, and Chief Financial Officer, Michael 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 US 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. 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 third quarter earnings release on Offerpad’s website. I'll now turn the call over to Brian.

Thanks, Stefanie. Hey everyone. I appreciate you joining us today. I'll cover some company highlights, market trends, operational updates and our focus for the remainder of the year. Michael will share our third quarter 2022 financial results and our fourth quarter expectations. In the third quarter, we maintained an average timing from home acquisition to sale below 100 days, kept inventory aged over 180 days or 5% or 150 homes, earned a 93% customer satisfaction rating and grew our listing and buyer closings by 100% year-over-year. Given the macro and real estate market conditions in the third quarter, these accomplishments really speak to the flexibility of our model and the value our products offer to homeowners. In the second quarter, we shared the softening in the real estate market that's here. Since then, the economy consumer sentiment and the real estate market has changed significantly. And increasingly, persistent inflation, substantial increases in mortgage rates and further escalation of global conflict have put the financial and credit markets on edge. The downstream impact leads to residential consumers being in a temporary state of shock. Since the launch in 2015, most of the US has experienced a seller's market, but the value proposition we provide is even stronger in a buyer's market, when sellers can go from listing to pending in days, and it's going to take weeks or months. iBuying becomes even more attractive. And if we are smart about how we underwrite homes in the market, there is an opportunity for enormous growth, but we aren't there yet. Right now, we are in between the seller's market and a buyer's market and expectations between the two parties are vastly different. Sellers are holding on to the idea their home is still worth what it was six months ago, and buyers aren't willing to engage at those prices. This in-between phase is the most challenging period for the entire real estate market, including iBuyers. I'd like to discuss today how we have planned for and are navigating this time. Offerpad’s core strategy at providing a comprehensive suite of real estate solutions is more important than ever right now. Because of our diverse product offerings, including our asset-light listing service, Offerpad has continued to provide customers more certainty and control. In addition, we are continuously innovating to create new products that can help mitigate many of the challenges homeowners are facing. For example, in addition to increasing the scope of renovations on certain properties to position our homes to sell first when competing inventory is present, we are also offering customizable renovation services. We recently started testing our new service called My Way in our Phoenix market. With My Way, homeowners can select paint, flooring, countertops and appliances from a list of options that match their own personal style. Updates will be completed before they move in and the cost of upgrades can be rolled into the mortgage. The breadth and efficiency of our renovations team is a key differentiator and an important asset as we grow. This offering aligns perfectly with our mission to provide customers with a more convenient and streamlined homeownership experience. On the operation side, we continue to adjust as the market evolves. Specifically, we updated our underwriting to account for increased risk, extended holding times and depreciating prices. In fact, the difference between homes underwritten in the first half of the year compared to the second half is so distinct that I can tell the day a home was underwritten just by looking at our closing summary sheet. In the third quarter, we also revised our Buy Box by applying the purchase price cap we implemented in select markets during the second quarter to all markets. Instead of turning away customers with homes outside new parameters, we have been offering our listing service. Leading to our FLEX listing service has allowed Offerpad to continue helping customers through the current market conditions while lowering the financial risk to the company. Customers working with one of our local, licensed agents can receive free show-ready services, including landscaping and cleaning services in addition to a home improvement advance. Also, customers continue to save by bundling a home sale, home purchase and Offerpad mortgage. Our FLEX listing and buying service has grown from 7% of our transaction volume in the second quarter of 2020 to 29% of our transaction volume in the third quarter of 2022. With a gross margin profile of 31% year-to-date, we expect our listing service will continue to be an important product supporting our long-term gross margin target. The ability to use our renovations department as a risk mitigation tool and differentiator along with the ability to grow our asset-light listing service provides Offerpad the flexibility to navigate through changing market conditions. Our presence in 28 markets across the country provides another risk mitigation opportunity. While markets like Phoenix, Denver and Las Vegas are still experiencing a rapid and significant pullback, we are starting to see signs of stabilization in some of the more affordable markets. By relying on our local experts, we are strategically deploying our capital into locations with more stability and better line of sight while maintaining a more conservative acquisition approach in markets with higher volatility. The diversification we have today has been thoughtfully and intentionally established over the last seven years, supporting the resiliency of our business. To provide some historical context, in 2016, we were operating in only four markets. At that time, our largest market accounted for 84% of our revenue. In the third quarter of 2022, no market accounted for more than 10% of our revenue. This highlights the clear benefit and risk mitigation that comes from strategic market diversification. Lastly, we continue to demonstrate a conservative and disciplined approach to managing our expenses. Like many others, we recently made an adjustment to the size of our internal team to reflect the current state of the market. With conditions changing, Offerpad adapts. We have made some difficult but responsible decisions over the last quarter and we will continue to adjust as the market evolves. Given the current macroeconomic environment, we do expect volatility in the real estate market will likely extend beyond the duration of historical market transition periods. Revolutionizing a $2 trillion industry isn't easy, especially in times like today, yet the simplified services we have introduced to the consumer over the past seven years confirm there is a better way. The value of the Offerpad brand and the future potential value we can add by encompassing more services are reasons why we expect more and more people to come to Offerpad first. We are more than just a buyer. We are a real estate partner using technology and deep real estate expertise to serve our customers. I firmly believe technology-enabled solutions that simplify the homeownership experience will define the future of real estate. The iBuying industry is in its early days with only two major players. The upside potential is tremendous. As it becomes harder for homeowners to sell and the pain points from the traditional model surface, more sellers will be looking for an easier solution. Being one of the country's largest homebuyers and what we expect will soon be a strong buyer's market could significantly amplify our opportunity to grow. As a real estate solution center with cash offers, listing services, mortgage and a leading renovation team, I believe Offerpad is well positioned to excel. On that note, I'll turn the call over to Mike.

Thanks, Brian. Despite some of the most challenging conditions in residential real estate, we continue the disciplined execution of our business strategy. The dramatic drop in demand for housing, driven by affordability issues resulting from the significant rapid rise in interest rates and elevated home prices was further extended in the third quarter. Given the expected continuation of these conditions, we are keenly focused on selling our existing inventory that was acquired in the first half of the year before the disruption in the housing market at the best available price. We are utilizing real-time market data, analytics and our years of real estate experience with thousands of transactions in our individual markets to do that. We are making tough decisions in uncertain times with a commitment to aiming for the best outcome given the circumstances. Right now that often means accepting losses on homes that we believe may decline further in the short term, to be able to conserve or redeploy that capital more effectively. We are making these decisions on a market-by-market and home-by-home basis to optimize the outcome. At the same time, we have temporarily but significantly reduced the number of homes we are acquiring during this period of transition. At times of considerable market dislocation, we narrow our Buy Box to limit the homes that we are evaluating and adjust the input variables in our underwriting model to be more conservative. This results in us acquiring fewer homes, but acquiring homes that we feel will generate underwritten return in this market. Though the sample size is small at this point in time, we are seeing positive tangible results from the homes that were acquired after the change in mortgage rates that have sold in September and October. We believe this process of selling through inventory acquired in the first half of the year should essentially be completed by the end of the first quarter with the proportion of sales from older inventory decreasing from Q3 and Q4 into Q1. This would position us well to capitalize on our strategy for profitable growth in what is expected to be a buyer's market. We continue to expect an annual contribution margin after interest of 3% to 6% once the market stabilizes and to increase that margin over the longer term. Turning now to our Q3 results. In the third quarter, we generated $822 million of revenue, exceeding the top end of our Q3 guidance range and a 52% increase year-over-year. This increase was supported by the sale of 2,280 homes, reflecting a 36% year-over-year increase and an average sales price of $357,000, compared to $321,000 in the third quarter of 2021. We reported third quarter gross profit of $2.2 million, a net loss of $80 million and adjusted EBITDA of negative $64.3 million. Each of these amounts include a $27.5 million inventory impairment charge. Absent this charge, each of these metrics would have been $27.5 million higher, including adjusted EBITDA, which would have been a negative $36.8 million. Contribution margin after interest for the quarter was a negative $4,500 per home. Our focus on selling existing inventory and minimizing our aged properties can be seen in our third quarter results. Importantly, as of September 30, our aged inventory over 180 days was at 5% or 150 homes, nearly half of which were under contract. The total number of homes in inventory at September 30 was 3,128, a 12% decrease from our June 30 inventory and more than 20% below our summer peak. This planned reduction in inventory is the result of our primary focus on dispositions and our temporary decrease in acquisitions during this time of price dislocation. Our acquisition of 1,847 homes in the third quarter represents a 50% sequential reduction from our Q2 acquisitions this year. And given the current outlook, we expect that our fourth quarter acquisitions would again be less than half of what we acquired in Q3. Our time to cash increased to 97 days in the third quarter from 83 days in the second quarter. This marks the ninth consecutive quarter with time to cash below our 100-day target. However, we do expect to be above this target during periods of slower market conditions. From a cost management standpoint, we are taking a responsible approach to appropriately size our operations given the current environment, but also balancing that with our expectation of this slowdown in transactional activity being temporary for us. As a result, we reduced our operating expenses by 14% in the third quarter compared to the second quarter of 2022. This reflects reductions in headcount and sales and marketing in addition to an overall emphasis on cost reduction. Lastly, with the continued focus on risk management and cost efficiency, we ended the quarter with a cash balance at September 30 of $197 million. Looking forward, in the fourth quarter, we expect to sell between 1,425 and 1,850 homes, generating revenue of between $500 million and $650 million. We also expect adjusted EBITDA to be between negative $40 million and negative $60 million, reflecting the continued near-term variability in market conditions. During Q4, we expect the initial sequential improvement in adjusted EBITDA to begin. By Q1 of 2023, homes that were acquired in the second half of this year would likely make up the majority of homes sold in the quarter and would, therefore, be expected to further generate sequentially higher margins and ROI. While many things in the macro environment are uncertain, we do know that the current state is temporary and that the real estate market will settle. Right now, we are positioning the company to capitalize on the next wave of opportunities. As the first iBuyer with proven profitability, a holistic solution center approach and a highly efficient and value-additive renovations offering, Offerpad has the structure and strategy to deliver long-term value to both customers and shareholders. Our platform, products and operations have continuously improved over the years, allowing us to navigate through the current dislocation with an established mature and stable foundation. We are focused on executing through the meeting challenges while emphasizing and expanding the products in our portfolio to improve the balance of higher-margin, capital-light offerings and reigniting growth further into 2023.

Great. Thanks for taking the question. Question about two. On the first one, you talked about gaining stability in some markets that you operate in. So, what are you seeing in those markets that's driving that? And how long do you think it will take from other markets to kind of see a similar behavior to stability? And then secondly, how far along are you in selling the homes for the market conditions deteriorated and it seems like you guys are expecting that the mix of homes sold to shift more towards your home. Is that right? And as the homes that remain on your plate, over some of the reasons, those are taking longer to sell?

Yeah. Hey, Dae, it's Brian. Yeah, as far as the market conditions that we're seeing, specifically, a lot of that has to do with the affordability. We're seeing that primarily in the Midwest markets. I think Indianapolis, Fort Wayne, and Columbus, Ohio, those markets where you didn't have the home price appreciation as you saw in some of the other markets. So I think affordability is a lot driving that. You still have less than a month and a half supply of homes in those markets as well. So that's where we've seen. As far as, when we're going to see the other markets kind of settle a little bit, I think it's going to be pretty volatile until the end of the year, especially in places like Phoenix and Denver, and some of the really high home price appreciation markets that we saw due to affordability. I think you're going to see increased seasonality. But obviously, we're watching that closely. But there are spots in other markets that we're seeing. But a lot of it has to do with the immediate home price and affordability is what we're focused on.

Hey, Dae, it's Mike. Just in terms of your second question there on the homes and inventory. What I'd tell you is generally speaking, I think we will continue to sell through those in the fourth quarter in Q1 that is our expectation. We are anticipating that based on what we're seeing in the market and our current pacing that by the end of the first quarter, we should be predominantly through that older inventory, anything, call it, acquired pre up through July of this year. So that's driving some of the negative results in the guidance for Q4 because more of the homes that we sell in there will be from that vintage. As we move into Q1, I think you start to see that weighting shift to some of the newer homes, but we'll still need to be working through that at that point in time. But, based on what we can see right now, that's our expectation.

Yes. One other thing I’ll add is that in real estate, much of the data is retrospective. For instance, if we underwrite a home and someone decides to close 45 or 60 days later, we then need to renovate the house and get it on the market. That's where, as I mentioned earlier, when we underwrote that home becomes very important. Currently, the properties we are underwriting that reflect the present market conditions are starting to show it’s challenging to see positive signs of their performance. We're still dealing with older inventory that reflects entirely different market conditions from what we're currently experiencing.

Just as a quick follow-up. Is that said, fast on to be the key quarter of your, I guess, order on the written homes being sold? And do we see being second biggest or you're seeing a smaller number of those homes getting sold?

Yes, the expectation is that most of those will materialize in the fourth quarter.

Thank you. Our next question comes from Ryan Tomasello with Stifel. Your line is now open.

Thank you for taking the questions. I guess first question on the considering the decline in book value this quarter and presumably the pressure that will exist into the end of the year. Can you talk about your conversations with your financing partners, how you feel about financial covenants. And overall, I guess, how you're thinking about protecting the capital base to maintain the financing capacity required to scale this business beyond this market correction that we're going through?

Yes. Hey, Ryan, it's Mike. Without a doubt now, these periods are when you need to be in regular communication with your financial partners and your banks and we do that regularly. We've got a great team in the finance and treasury group over here. We've got good relationships and built up a very good working group on the debt capital side of the equation. So, we’re in close contact with them. We're proactive in our communications with them and try to give them good visibility because they're critical to our collective success. So we are in compliance with our covenants. It is something that we look at all the terms and conditions there to make sure that we're abiding by those and in line with those. We ended the quarter with just short of $200 million in cash. The other thing to consider, too, is that as we go through now and the end of the year and into the first quarter, our inventory and debt balances will be coming down as we talked about in our prepared remarks with slowing intentionally temporarily slowing the pace of buying. And so, those outstanding amounts come down, part and parcel to that as well. So again, something very critical in terms of partnerships with them, but we've had these relationships in some instances, for the past four years, we've added to them as we've gone along and they've been good supporters of the company.

Thanks for the insights, Mike. Regarding the guidance for the fourth quarter, could you share more details about the gross and contribution margins included in that forecast? Additionally, how should we consider spending in a recovery as you manage inventory into 2023? On the operating expenses side, you mentioned some workforce reductions. Could you clarify the amount of costs removed from the system and how we should view the run rate for operating expenses following those efficiencies? I recall you indicating a 14% reduction quarter-over-quarter.

Yes, a lot to cover. Please remind me if I overlook anything. First, regarding contribution margin, we don’t provide specific guidance on that. However, it's important to understand that our contribution margin calculation considers the total cost of ownership of a home. This includes aggregating costs that may not fall within a specific period. With that said, we believe Q4 will be the lowest point for contribution margin, with an expected recovery in Q1. Regarding your question about recovery, it’s difficult to determine. We operate in various areas under different conditions. Ideally, as mentioned earlier, we aim to move through the legacy inventory and position ourselves to begin rebuilding our comfort level for purchases in 2023. The timeframe for achieving this is hard to predict at the moment. As for the workforce reduction, we have reduced our workforce by about 7%. Earlier this year, in September, we implemented measures to pause hiring and tighten our cost structure. Comparing to our peak employment during the summer, we’re down about 12% due to hiring pauses and natural attrition, and we will continue this trend through year-end. I anticipate a benefit of around $2 million from this reduction this year, which annualizes to about a quarter’s worth for next year.

Hey, Brian. I want to add to that by revisiting the third quarter. It was notable because the market cycle shifted unexpectedly and quickly. In the third quarter, we observed a pause among buyers who believed they could afford a certain mortgage amount as rates increased. This led to a blockage in the market, hindering buyers' ability to act based on what was affordable. We experienced a sort of status shock during that period. However, we are beginning to see some stabilization. We are monitoring our homes weekly and progressing through this situation. Although it feels like we're moving through inventory at a slow pace, I’m pleased with what our team has achieved under these conditions.

Thank you. Our next question comes from Nick Jones with JMP. Your line is now open.

Thank you for taking the questions. Earlier, you mentioned that the volatility is expected to last longer than usual during this transition. Can you clarify what that timeline might look like? Do we need to observe the peak rates and then see spreads tighten before gaining more confidence in home affordability for buyers? Could you provide more details on that? I also have a follow-up question. Thank you.

When we discuss volatility, it's important to recognize that it's a broad term. The key aspect of volatility is the fluctuations in sales prices on the seller's side, as we can purchase properties under various market conditions, whether the market is on the rise or decline. Our goal is to find consistency in these trends. For example, in certain markets or segments of homes, a typical downturn might see prices drop by about 2% to 2.5% per month, and we can plan for that. What makes the current situation unique is the significant equity homeowners have today. Unlike the 2007 to 2010 period when many homeowners had little to no equity and were trying to salvage their mortgages, today's sellers often possess $250,000 to $300,000 in equity. This has led to inconsistent pricing for sellers. We're monitoring this closely, particularly in high home price appreciation markets. Overall, affordability remains crucial, and we anticipate pricing will experience volatility. As sellers' equity stabilizes and inventory turnover begins, I believe we'll start to see more consistency. I'm optimistic that in the early part of next year, depending on the Fed's actions and overall market conditions, we will see improved consistency in what we are underwriting, which is the most critical factor for us.

Got it. That's helpful. And then, Mike, could you kind of touch on how you said about the cash position? I know you spoke to some cost cuts freezing hiring. It sounds like there's about an $8 million benefit next year we should look for. How do you feel about kind of the cash position kind of heading into next year to the extent that the macro environment stays challenged maybe a bit longer? Thanks.

Yeah, Nick, we finished the quarter in a solid position. However, as we address some of these losses in the upcoming quarter, it's important for us to manage that closely. This has been a key aspect of our company for the past six years. We've always maintained a strong focus on costs and have operated efficiently. We keep the organization lean and will continue to do so. Therefore, this will remain a significant focus for us. We'll keep monitoring it and manage the business accordingly.

Right now, we are highly focused on our current inventory and our asset-light products. An example of this is Flex, where we are collaborating with our SFR partnerships, not just selling our homes but also buying some of those homes from us. As we navigate the volatility, we are being smart about our approach to asset-light offerings. As I mentioned in the last call, being a solution center not only allows us to provide more options for consumers but also gives us leverage during volatile times to focus on and promote different products to our customers.

Thank you. next question comes from Justin Ages with Berenberg. Your line is now open.

Hi, thanks for taking the question. First, on the renovation, I do think it's a key differentiator. I think you've disclosed about $22,000 average cost of renovations, which is up from where it's historically been. Has that been an impediment to getting homes sold that even though you have to put in a little more money to make them more attractive, it's making the houses cost more?

Okay. It's actually quite the opposite. What we're doing is being more mindful when we're underwriting any new inventory, particularly regarding the renovations needed for those homes. Once we acquire a home, we're deliberately increasing the extent of renovations as supply and demand fluctuate. In stable times, the goal is to earn money through service fees and maximize home prices by renovating. However, in the current climate, it's crucial to ensure that our homes sell before others. Our renovation team has been enhancing homes with upgrades like granite and new appliances, making them stand out in the market and ensuring they are ready to sell quickly. We're intentionally pursuing this strategy. While some renovations are taking longer, it’s worthwhile as it shortens the market time for our homes. This has been our main focus. As I've discussed for the past six years, during market transitions, controlling renovations—costs, efficiency, and timing—becomes vital for managing supply and demand. Ultimately, we aim to sell first.

All right. That's helpful. Thank you. And then along those lines with this introduction of My Way, has the response been good? I think you said you introduced it in October? And has it been well-received enough that you're also considering expanding to other markets outside of Phoenix? Thank you.

It's still early, but I have some optimism about My Way. We've been developing this product for some time, and the timing aligns well with the current buyer's market. As we prepare to renovate a home through Offerpad, we're deciding on renovations before the house goes on the market. Personal preferences can influence these renovations, and My Way allows us to accommodate that. The initial phase focuses on Offerpad properties, but the future phase includes serving buyers represented by our Flex teams for homes outside of Offerpad. I'm very positive about the direction we're heading. The initial customer response has been encouraging, indicating they appreciate the option to customize finishes on a home, similar to a new build. We're dedicated to rolling this out in other markets quickly, as it presents a great opportunity for buyers in those areas.

Thank you. Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Your line is now open.

Hi guys. Thanks for taking the time. I guess my question is rates have continued to go up, call it, 100 basis points at end of September if anything, the pace of home price decline should theoretically accelerate. I guess what gives you confidence that the homes you're purchasing now, when prices have yet to fully adjust to normal levels, won't face the same issues you're currently facing with the older vintage homes that you had in pre-July?

I agree with your overall assessment. We are highly focused on this issue, and our approach varies significantly by market. In highly volatile markets, where we anticipate further price declines, we are being very cautious regarding the volume of homes we purchase. For instance, markets such as Phoenix, Denver, and Las Vegas are expected to see notable decreases, so we're underwriting conservatively, employing a deceleration model and considering wider margins. Conversely, in areas like the Midwest and Indianapolis, we’re not experiencing the same level of impact, allowing us to buy more homes there. Even in regions like Charlotte and Raleigh, we see potential. We are adjusting our underwriting practices to reflect more extensive margins and assumptions, particularly with purchase prices, recognizing that homes in many of these markets may not be as valuable as we previously thought. Additionally, in markets where we're being cautious about inventory acquisition, we're encouraging more people to use our FLEX program to sell their homes. We assist them in marketing and may fund upgrades and renovations, facilitating their sales without adding to our inventory in uncertain markets. It's important to note that outlying areas are seeing the greatest depreciation, with home prices falling significantly further from central metros. Consequently, we're making very deliberate choices about our purchases and are focusing more on the FLEX product or considering converting properties into single-family rentals.

Perfect. That makes sense. And then maybe just a comment, another, call it, $27.5 million inventory impairment, should we expect that to moderate, or how should we think about that going forward?

So that's always a tough one from a prediction standpoint. What we do at the end of each quarter is go through our existing inventory. And we have a very thorough process that we involve our local folks all the way down to each of the marketplaces. We run that back up through our regional operations head to our Chief Real Estate Officer. And so, it's a thorough process that considers the markets, the homes, and the neighborhoods, specifically, and we mark them to market basically at that point in time. The inventory balance is expected to be below where we're at now. So between that and the markdowns that we take, I would tell you sitting here today, I would expect lesser of an impact as we go along. And, hopefully, we start to see the market settle down a little bit, but candidly, it's impossible to predict at this point.

Thank you. Our next question comes from Jay McCanless with Wedbush. Your line is now open.

Hey. Good afternoon. Thanks for taking my questions. I guess, the first one I had, assuming all else equal as rate, I guess, what is the difference between the top end versus the bottom end of the home sales guidance you have out there for the fourth quarter? What are some factors that would keep you from getting to the top end?

I believe the key factor will be the demand characteristics in each market. This has been the main reason for the slowdown in demand from an affordability perspective. Additionally, the fourth quarter typically sees the most seasonality, and we need to consider how that may influence our situation. There's some uncertainty surrounding this, which is why we have provided a somewhat wider range, similar to what we offered last quarter, to account for this variability. One of the things we are currently observing in some of the most volatile markets is that significant moves are not occurring. Some individuals are looking to upgrade their homes or kitchens, but that is not happening. The majority of transactions are coming from people who need to relocate for various reasons. This also contributes to the volatility we are seeing in transaction volume, which is a concern. We are monitoring this closely as it influences buyer demand for anything we purchase. We want to ensure that anything we acquire can be renovated and sold within 100 days, or else we will consider putting it into Flex. Yes. We have been consistently adding about 7 to 8 new markets over the last couple of years, and we still aim to do so next year, but we will need to take it as it comes. It should be something we focus on more during the second half of the year. Additionally, we are inclined to target larger hub markets as well as smaller satellite markets. Considering the current situation, our plan is to evaluate how the first half of the year progresses before leaning more towards the satellite or adjacent markets. The thing I'm most proud of is that over the last seven years, we've created momentum maturing real estate will never be the same. We are being realistic about the world around us, but I believe even more strongly today in our mission and our people. I'm excited to be part of the solution that can revolutionize a $2 trillion industry. Thank you all for joining us today.

That concludes the Offerpad Third Quarter 202 Earnings Call. Thank you for your participation. You may now disconnect your lines.