Good afternoon. Thank you for joining the Offerpad Second Quarter 2025 Earnings Call. My name is Matt, and I will be the moderator for today's call. I would now like to turn the conference over to our host, Cortney Read. Cortney, please proceed.

Good afternoon, and welcome to Offerpad's Second Quarter 2025 Earnings Call. I'm joined today by Offerpad's Chairman and Chief Executive Officer, Brian Bair; and Chief Financial Officer, Peter Knag. 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. These metrics exclude certain items discussed in our earnings release under the heading, Non-GAAP Financial Measures. The reconciliations of Offerpad non-GAAP measures to the comparable GAAP measures are available in the financial tables of the first quarter earnings release on Offerpad's website. With that, I'll turn the call over to Brian.

Thank you, Cortney, and thank you all for joining us today. Before we move into Q2 results, I want to take a moment to acknowledge a recent development. We finalized a capital raise of $21 million in July. This brings our total liquidity to over $75 million, strengthening our balance sheet and supporting key growth initiatives. This represents a strong endorsement of our model, our execution and the momentum we're building. This capital enhances our flexibility and supports our ability to make selective market-driven acquisition decisions, expand high-margin asset-light services like Renovate and Direct+ and strengthens our customer experience infrastructure, including HomePro in-person appointments and platform enhancements. Turning now to market conditions. Affordability challenges and ongoing economic uncertainty continue to weigh on both buyers and sellers, holding back broader market activity. The traditional spring selling season was underwhelming. Additionally, listing inventory continues to rise, giving buyers more to choose from. This shift has created a more competitive environment for sellers with homes sitting on the market longer and often selling below asking price. The increase in inventory is also putting downward pressure on home prices, which saw a slower pace of appreciation this quarter compared to earlier periods. Even in this buyer-favorable environment, high interest rates and tight budgets are still limiting how many buyers can take action. This mix of selective demand and cautious sentiment is causing more homes to linger and reinforcing the need for solutions that help sellers navigate with clarity and confidence. Through effective marketing and strong consumer demand, we continue to see steady request volume, reinforcing both the ongoing need for our model and the trust sellers place in Offerpad as one of the largest homebuyers in the country. For nearly a decade, Offerpad has helped sellers steer through any market. In today's environment, sellers are seeing more for sale signs in their neighborhoods and feel the urgency to act, but many still don't have a clear view of what their home is worth or how to approach the sale. That's where our model stands out. We offer real solutions. Sellers benefit from a fast cash offer with the flexibility to choose their own closing date, exposure through our Direct+ cash offer marketplace, featuring both short-term and long-term investor offers, a program to receive cash upfront with the potential to earn more after the home sells on the open market or a listing option guided by trusted specialized real estate experts. Now turning to the quarter itself. In Q2, we delivered $160 million in revenue and sold 452 homes, reflecting disciplined execution across our platform. Our ability to remain resilient in a slower transaction market is a direct result of our increasingly diversified model, supported by a selective market-driven approach to the homes we choose to acquire. To stay competitive and better support sellers in this environment, we focused on enhancing speed, transparency, and service throughout the experience. Over the past few quarters, we introduced real-time pricing ranges delivered in minutes and enhanced the inspection process with quicker scheduling and fewer handoffs. In Q2, we officially launched HomePro. This program brings specialized agents into the home through pre-scheduled appointments to walk the sellers through every available solution. We spent years building this model to serve sellers in any market, and we were the first to bring it all together. Our infrastructure delivers a true end-to-end solution powered by both people and platform. Our tenured, highly trained customer solution team gives HomePro's direct access to expert guidance and real-time support. Behind the scenes, our proprietary technology creates a faster and more seamless experience. It's the blend of human expertise and smart automation that allows us to deliver high-quality service at scale. Operational excellence and scale remain core to our approach, driving impact beyond the seller experience and into other areas of the business. We achieved another record quarter for our Renovate business, delivering $6.4 million in revenue, our second consecutive record and our strongest performance since launching the product. Backed by experienced teams and proven workflows, we're helping investors and institutions turn distressed inventory into move-in-ready homes and doing it at scale. This momentum in Renovate is part of our broader strategy to expand our asset-light services and deepen relationships with institutional buyers. We continue to invest in Direct+, our asset-light marketplace that drives demand by linking homes with institutional and individual investors. For sellers, this means greater exposure and more opportunities to receive competitive cash offers. Even amid historically low industry-wide acquisition volumes, especially from long-term holders, Direct+ has delivered meaningful growth driven by recent enhancements. Partners now have the flexibility to engage with homes at different points in the sales process, increasing buyer participation and leading to a notable Q2 uptick, clear momentum that directly benefits sellers. In addition to expanding access, we broadened our marketplace to include more partners with varied acquisition strategies. This creates more competitive offers for sellers, allowing them to have the opportunity to a higher price point and the ability to close on a timeline that works for their unique situation. For Offerpad, it means greater asset-light deal flow and stronger alignment with partner needs. Across the core initiatives, HomePro, Renovate, Direct+, and our flagship cash offer program, we're building a balanced, agile, and efficient business. Each platform plays a vital role in enhancing customer experience, optimizing inventory management, and efficiently scaling our asset-light marketplace. Our recent progress demonstrates precise execution and lays a robust foundation for sustainable long-term growth. Looking ahead, our priorities remain clear: scale high-margin, asset-light services that drive predictable contribution profit, maintain cost discipline and operating leverage to support sustainable growth, and position Offerpad to accelerate as buyer activity and transaction volumes rebound. Finally, before I turn it over to Peter, I want to thank our team. Despite operating with leaner resources, they have continued to deliver strong results, a testament to the focus, grit, resilience, and outstanding execution across our organization.

Thank you. I want to reinforce Brian's message. Our team has been instrumental in driving this performance. Their discipline and focus has led to stronger margins, smarter inventory management, and more effective solutions for our sellers. As you just heard, we've been operating with greater efficiency and discipline, and that's reflected in our Q2 results. For the second quarter, we reported revenue of $160.3 million with 452 homes sold. This reflects a measured approach to inventory management aligned with our goal of driving contribution profit, maintaining capital discipline, and responding to ongoing market dynamics. At the end of the quarter, we held 662 homes in inventory with only 87 aged homes over 180 days and not under contract. This compares favorably to prior quarters and reflects continued progress in both our acquisition targeting and pricing strategy. We acquired 443 homes during the quarter with continued emphasis on strategic markets and properties aligned to our margin targets and overall business objectives. Gross margin was 8.9%, resulting in $14.2 million in gross profit. Operating expenses, excluding property-related costs, totaled $17 million, down 30% compared to the same quarter last year. This continued improvement reflects the structural cost reductions we've made across the business, including advertising efficiencies, platform improvements, and organizational streamlining. Adjusted EBITDA loss improved 39% to $4.8 million, marking another quarter of sequential gains. We ended the quarter with $22.6 million in unrestricted cash and over $55 million in total liquidity, including the net value of our inventory. With July's $21 million primarily nondilutive raise, total liquidity now exceeds $75 million. Also and importantly, thanks to our strategic approach and growing mix of asset-light channels, we're able to operate with less cash on hand, giving us a comfortable runway as we continue progressing towards breakeven. To support that strategy, we also established new lending facilities with Genesis and Ascent. These facilities increase our operational agility and reduce committed capacity, giving us greater control over costs. In Q2, as mentioned, we achieved further reductions through headcount optimization, tighter management of third-party spend, and improved lending terms that lowered our cost of capital. We expect these changes to drive additional sequential improvements into Q3 and beyond. Looking ahead, we expect third quarter revenue in the range of $130 million to $150 million with 360 to 410 homes sold. However, as we move through the back half of the year, our revenue mix will shift with a higher percentage coming from asset-light services led by the HomePro program. In addition, we also anticipate continued sequential improvement in adjusted EBITDA as we maintain emphasis on contribution margin and operating leverage. Our focus remains clear: operate with discipline, scale solutions and stay positioned to capture more opportunity as the market evolves. We're building a stronger, more efficient business, one that's built to last and built to lead. We appreciate your time and support. We're now ready to take your questions.

I have 2. First one, on home acquisition pace for the remainder of the year, could you tell us how it's pacing so far in 3Q and how you're thinking about home acquisition for the back half of the year? And when you're underwriting homes right now, is it still with the assumption of higher spreads? Or do you feel like you have enough visibility where the spreads can normalize a little bit? And then secondly, you're seeing very strong momentum in Renovate. I'm just curious what's been driving that and how you're thinking about the pace of Renovate growth in the back half of the year?

I'll jump in. This is Brian. Dae, good hearing from you. Renovate, several things happening there. We continue to sign more and more customers up to the program and deliver good results on that end of it. So our efficiency is still strong. And even in this environment where a lot of the large institutions are on the sidelines or at lower volumes, we've really focused down the pipeline a little bit with the mid- to small investors that we could do renovations for. And so the team has done a fantastic job there. And so one of the things we say all the time is if somebody likes the renovation person that they're using, I would say, put us side by side and we normally will be done from the cost, the efficiency and doing tens of thousands of homes on our own behalf leads to a lot of really good efficiencies there. So really happy with what we're seeing the momentum on that end of it. As far as the pricing and how we're underwriting the spread side, we're still having a very disciplined approach there. As I've mentioned in the last several earnings calls, as we continue to see a lack of buyer excitement and that affordability is still an overhang on everything. And so we're focused on areas, there's pockets in every market that are still working, that are decent transaction areas. And then there's definitely pockets that are not. As I mentioned before, outline areas next to new builds. Those are the kind of things that we're being very cautious of buying. But interior homes that have good transactions, we're still buying and focused on that type of product. And we're still focused on spread. The way we look at spread, it's just a risk metric for us of what we're seeing in the environment. So as we see more actives and more for sale signs going up in areas, we want to be really careful from a supply and demand issue of just that our home one shows well, that it's going to sell before some of the other ones, but also we're not buying a home even if it's the lowest price in the area with a lot of supply that's getting chased down by prices. So did I cover Dae, any follow-ups on that or Peter do you want to jump in?

I would just add to that on transactions, we're guiding this quarter to somewhere in the neighborhood of 400 cash offer transactions in 3Q. That's along the lines of what Brian was getting to, and we've talked about in prior quarters, we're underwriting at higher spreads, so intentionally coming down in volume for our cash offer. But importantly, you're going to see a revenue and mix shift that along the lines of what we've talked about and Brian has also talked about in prior quarters towards a higher percentage of asset-light transactions. The volume that we'll be focused on will not be only the cash offer moving across the back half and into next year. It will be the total real estate transaction volume that includes HomePro, which launched in June, includes continued focus on underwriting and selling into institutional, large financial institutions, SFRs and smaller investors, but also selling into partner cash offers that don't go on to our balance sheet. And then finally, this is not new to us. We've done this in other forms previously, but selling in new with HomePro selling into a traditional list. So those are all going to be factors as you look at volume. And as we in a quarter, when we get into next quarter, we'll likely shift our guidance from cash offer homes sold to total real estate transaction volume.

Yes. One of the things I'll add is that this is a particularly interesting time because many of the sellers coming to us place a high value on cash offers. The certainty of receiving cash and knowing the closing date is very appealing to them. Additionally, through our HomePro service, we aim to provide different options that allow sellers to access some cash immediately while also benefiting from potential upsides, including the option to list their homes on the open market if they choose. The current timing is notable because we are seeing a significant level of urgency and more people experiencing life changes that compel them to sell, more so than we have in quite some time.

Got it. I’d like to ask a quick follow-up about the future mix of the asset-light offerings. You mentioned a shift towards more of those offerings. Currently, Renovate constitutes the largest portion of our other services revenue, but you also mentioned that HomePro is growing. Looking ahead, do you believe HomePro will become a larger part of the overall asset-light offering? How should we view the mix change in the future?

Yes. I would definitely say that our goal from the beginning with Offerpad was to create a one-stop solution for customers, allowing them to address all their real estate needs. Our cash offer is the foundation of this service. However, especially in the current environment, if our cash offer isn't suitable, we can provide an alternative cash offer through our Direct+ channel. This is where we see significant opportunity as the market stabilizes and more institutions participate, leading to an increase in Direct+. Additionally, many sellers may want to explore the market by listing their properties. Our ability to engage with customers and determine the best solution for them has always been our mission. While we receive questions about the ideal mix of offerings, I think there's no perfect formula. Ideally, I would like to see a seamless integration of all our products. Currently, our Renovate product is only B2B and not yet B2C, whereas many other initiatives are B2C-focused. This may change in the future. However, we anticipate that HomePro will have a greater impact as customers benefit from more choices in their decision-making process.

This is Yvonne Jeng on for Ryan Tomasello from KBW. On the HomePro offering, could you please elaborate a little bit on how the economics are like with HomePro compared to a traditional cash offer?

The volume was relatively low, but regarding the economics of HomePro, I want to emphasize that as we shift towards a revenue mix and transaction volume that leans more towards the asset-light HomePro services, gross profit will become crucial. For cash offers, we recognize gross revenue with a single-digit margin for the asset-light services and for selling to institutions. With HomePro services, we recognize net revenue, which closely resembles gross profit. This transition will result in a change in our revenue and gross profit mix, leading to higher gross profit but lower revenue due to the changing margin profile. Importantly, from a transaction value standpoint, whether we're charging a mid-single-digit fee on a cash offer or selling to institutions, the total value to the bottom line is comparable across similar transactions, and that’s where I would direct your focus.

The one thing I'll add is that our request volume for HomePro has remained strong over the last several years, despite the various market conditions and lower transaction volumes. In many of our markets, people still come to us first to determine their home's selling price and receive cash offers. HomePro aims to capture these customers, even if the cash offer doesn't pan out, by providing them with alternative solutions. We're focused on our conversion rates throughout our entire funnel, whether customers are looking to transact immediately or in the near future. Our goal is to accompany them on their journey, regardless of the product they need. This approach stems from both the margin factors Peter mentioned and our commitment to finding the right solution for sellers.

Got it. And just to quickly follow up. Following the recent equity raise and the new credit facility, how comfortable are you with the company's current capital position and the ability to self-fund that path to breakeven cash flow?

Yes, we are in a good position. Our total liquidity at the end of this quarter is approximately $55 million, combining our cash and the net equity in our homes. At the end of the first quarter, it was around $60 million, so we've lowered it slightly but not significantly. We've made significant progress in reducing our fixed costs, which are currently at $17 million. Due to ongoing cost-cutting measures, we expect these costs to decrease further in the third quarter and beyond. Our fixed costs are becoming quite manageable. Concurrently, our gross profit is on the rise. We had a plan in place that did not rely on the capital raise, but we are pleased with the flexibility provided by it, particularly in adjusting our operational funding for homes and gaining additional liquidity from our warehouse facilities. We are also improving our cost of capital, as we've significantly reduced the commitment fees we were previously paying to financial institutions. Lastly, I want to emphasize that the capital raise was mostly nondilutive, which was our primary objective. We managed to raise the amount of cash we intended while structuring it mainly as nondilutive capital, engaging with a diverse group of investors across both equity and debt tranches, and we are pleased with the outcome.

This is Vincent on for John at Jefferies. So you've historically talked about 1,000 homes per quarter as sort of the North Star for the point at which scale should combine with the mix shift to asset-light services to help you deliver breakeven EBITDA and cash flow. So maybe just talk about how you view the path to 1,000 homes from here or whether that's even still a relevant goal now that there's clearly this increased focus on asset-light transactions? If not, whether there's a new target to keep in mind, whether that pertains to acquisitions in the traditional sense or whether it's total real estate transactions and what the timeline looks like at this point? And then just a quick one on following the cost-outs underwent in April. Just curious how you're thinking about runway on those initiatives in the back half.

Thank you, Vincent. Yes, regarding the 1,000 homes, we anticipated this question. We've been considering our approach, especially from a guidance perspective. As I mentioned earlier, the 1,000 real estate transactions remain our primary goal. We are shifting our strategy and will be conducting fewer asset-based cash offer purchases where we take homes into our inventory. Instead, we'll focus on transactions with partner cash offers and financial institutions through our Direct+ product, as well as engaging in the traditional listings. While the revenue recognition varies across these transactions, the overall impact on the bottom line is similar, and we are still on track for 1,000 transactions, which aligns with our breakeven point. Regarding cost reductions, we have made significant progress, nearing $150 million in savings over the past two years. Our quarterly operational expenses are down to $17 million, and we anticipate further reductions as our cost-cutting measures for employee expenses and third-party spending take effect in the third quarter. We are actively managing cost increases and will maintain the savings we've already achieved, while continuously seeking additional opportunities.

Yes. The one thing I'll add on that, just from a practical operational standpoint, too, from the cost outs because how do you achieve, obviously, if you're making reductions, how can you achieve what we need to achieve? I will tell you, we are getting like with HomePro, the efficiency we've seen since we started testing HomePro mid- to later last year in just various markets and different variations. But the product and technology lift of HomePro is really allowing us to scale differently, to be able to provide a range offer instantly, the way that we are scaling some of our other products. I think technology, we're getting a lot better and smarter on how we're going to go. So as we scale the business again, we're going to scale it much smarter. Quite honestly, I think much faster, too, from some of the efficiencies we're seeing on the technology side. So definitely leveraging that and as we continue to build out HomePro.

There are currently no further questions registered. There are no additional questions waiting at this time. So that will conclude the conference call. Thank you for your participation. You may now disconnect your lines.