Earnings Call Transcript - OPEN Q4 2025

Michael Judd, Head of Investor Relations

That's what we're building Opendoor for. It's why the results we're sharing today matter because every number behind them represents a homeowner who got to focus on what comes next instead of what comes with selling. I'm Michael Judd, Opendoor's Head of Investor Relations. Welcome to Opendoor's Fourth Quarter 2025 Earnings Live stream. Details of our results and additional management commentary are available in our earnings release, which can be found at investor.opendoor.com. The following discussion contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are statements that could be deemed forward-looking, including, but not limited to, statements regarding Opendoor's financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion and management objectives for future operations. These statements are neither promises nor guarantees, and undue reliance should not be placed on them. Such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Opendoor's most recent annual report on Form 10-K for the year ended December 31, 2025, and other filings with the SEC. Any forward-looking statements made on this webcast, including responses to your questions, are based on management's reasonable current expectations and assumptions as of today, and Opendoor assumes no obligation to update or revise them, whether as a result of new information, future events or otherwise, except as required by law. The following discussion contains references to certain non-GAAP financial measures. The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurements to evaluate the company's financial performance. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. With that, let's get into the open house with Kaz and Christy.

Kasra Nejatian, CEO

Good afternoon, everyone. Early in my career, I created a plan outlining what my team aimed to achieve in each cycle. At the end of the cycle, I would review the plan and evaluate our progress, marking each item based on our performance. I found it helpful to document our goals to hold ourselves accountable. With this in mind, I want to recall our last financial open house. In my first presentation, I shared a 4-step strategy to revitalize Opendoor. Let's revisit that plan. Our 4-step approach consists of the following: First, by the end of next year, we will aim for Opendoor to reach breakeven in adjusted net income on a 12-month basis, enabling us to generate cash and avoid the need to raise equity again. Second, we will enhance unit economics while improving our transaction speed in the housing market, including the launch of financial services like mortgages. Third, as we bolster our unit economics, we will shift our focus from primarily building channels to facilitating direct transactions between buyers and sellers, while also working to reduce our days in possession without unnecessarily inflating our spread. Lastly, once we've achieved these first three steps, we will create a platform allowing buyers and sellers to transact without having to do so through Opendoor, significantly lowering our capital risk and providing customers with choices. Today, I want to evaluate Opendoor based on these four steps, and then I will provide further details. Here’s the bottom line: we accomplished what we set out to do. Now let's break it down step by step. We're on track to achieve our first goal of adjusted net income positivity by the end of 2026. The objective is clear: generate cash without the need to raise equity again. Second, since September, we have increased our home acquisitions by 300%, purchasing 537 homes last week alone compared to only 128 in the previous quarter, while also achieving substantial unit economics improvements due to deliberate changes in our product, pricing strategy, and operations. Notably, our October 2025 cohort, reflecting our first full cohort under Opendoor 2.0, is performing exceptionally well and I will elaborate on this shortly. For our third point, we have significantly increased our direct-to-consumer acquisition contracts while reducing average days in possession, seeing nearly a 700% increase in our DTC acquisitions and a 25% drop in days in possession compared to the last week of Q3. For our fourth point, we have simplified the selling process for our customers, with a growing preference for our capital-light product, Cash Plus, which rose from 19% of our total contracts in the last week of Q3 to 35% last week, representing a more than 600% increase. This marks our initial step toward enabling buyers and sellers to transact directly. Christy will dive into the financial specifics shortly, but I want to emphasize that we laid out our plan with the commitment to turn this company around, and it is indeed working. We are seeing positive results across the board and remain on track to fulfill our mission. Soon, I will share extensive updates on our product innovations and developments since Q3, and I’m proud of our team's rapid progress. The list of achievements I will present is impressive and holds significant potential. However, I am fully aware that such statements may seem overly optimistic. New products, market growth, operational improvements—these are common phrases in our industry. But I understand the skepticism; many companies promise change, only to fail in delivering. One of my favorite investors, Sir John Templeton, famously cautioned against the complacency that comes from believing "this time it's different." I won't ask you to take our word for it; instead, I will demonstrate our progress. Our October acquisition cohort is poised to be the most profitable October in our company's history, particularly in terms of contribution margin, which highlights our improvement amidst a challenging housing market. This performance reflects a fundamental shift in our operations that I believe will remain effective through various market cycles. We have transitioned from a prop desk to a market maker. A significant aspect of the October cohort is not just its margin level but also its structure; for the first time, our margin decrease has been the least affected by home price appreciation compared to any other cohort. The success of the October cohort serves not as a coincidence but as evidence of our capability. The product launches I’ll discuss are explanations for our success in October and outline why that success is sustainable. In the spirit of transparency, I want to clarify a few points. October was not our highest cohort by volume, but it was still double the size of what we achieved just months prior. Our performance isn’t dependent on luck in a favorable market but is a direct reflection of our structural innovations. I am confident we are on track to extend our acquisition size as planned. October validates that the changes implemented through Opendoor 2.0 are effective, and we are applying these insights to future cohorts. We still have much to demonstrate, and for the first time, we are not asking you to simply take our word for it—we are a redefined company. My focus is on building Opendoor and improving our products. Similar to how Tesla creates robots that build cars, my role is to develop the systems and tools within Opendoor to enable us to craft outstanding products. In recent months, we have made significant strides in this area. I want to highlight a critical element: as Vinod Khosla said, your team shapes your company more than your plans do. Today, I lead a team of 18 individuals at Opendoor, 10 of whom did not even work here a year ago. You can reference our 10-K filing for our executive team, which has completely changed since our last filing. Since I joined, we have appointed a new Chief Operating Officer, Chief Financial Officer, President, Chief Growth Officer, Chief People Officer, and Chief Business Officer. This is an exceptional leadership group that I believe rivals any other in the tech sector. Additionally, Opendoor 2.0 is leading with AI innovation among public companies. For instance, until recently, our team members would manually gather data from multiple systems after purchasing a home, a process that took hours. Last week, a non-engineer on our operations team developed an AI workflow that automates this task, generating a summary and compliance document without any human intervention. This initiative exemplifies our commitment to leveraging AI across all teams, enhancing our efficiency. Imagine the advancements our engineering team is achieving. Our approach to AI isn't just about engineers using tools; it's about cultivating a company culture where every team member thinks like an engineer. Now, let's review what we accomplished in Q4. We delivered numerous upgrades across our product offerings, market reach, and margin improvements, all achieved swiftly. First, we enhanced our products for buyers and sellers. Historically, Opendoor’s offering was a one-size-fits-all approach. However, we recognized that not all sellers have the same requirements and adjusted our strategy accordingly, allowing sellers to customize their offers and fees. This shift not only reduces risk but also enables us to serve a broader customer base. This ability to minimize risk also leads to tighter spreads on our cash product. From what we observe, this initiative is working, and demand has surged. We also introduced a self-assessment app, enabling sellers to upload pictures of their homes for AI-driven assessments, nearly doubling our assessment capacity in January compared to September. In addition, we expanded our buyer offerings with Opendoor Checkout, now available in 40 states, which integrates mortgage preapproval and provides benefits for our military personnel. We also launched a seller guarantee, giving sellers using Cash Plus the option to reverse their sale with a low fee. Outside of our core product enhancements, we've significantly broadened our market reach and customer base in just ten weeks. Thanks to AI, we have dramatically increased our operational coverage and capabilities, overcoming challenges associated with rapid expansion. Instead of the anticipated downturn in quality, we are witnessing the opposite. Christy will provide further insights into our margins, but our new systems are generating a remarkable number of qualified leads without additional marketing spend. Making this model work required extensive collaboration with numerous data sources and brokerage regions, emphasizing our belief that software development knows no geographical limits. Additionally, we have improved our data processing speed and accuracy with real-time data ingestion and a new machine learning model for customer targeting. This progress allows us to engage with a larger customer base while ensuring we grow profitably. I want to mention an unconventional approach to margins; rather than cutting costs, we concentrated on product improvement, which naturally decreased costs. By eliminating unnecessary elements, we enhanced our product. We previously spoke about the burdensome debt affecting the company; now we have identified and addressed the tech debt linked to inefficient decisions that burdened our operations. We've started to reduce this source of waste, resulting in substantial savings. For instance, our annual hosting costs were $12 million when we entered 2025 and are now under $5 million. Not only have we reduced costs, but the improved product quality has also enhanced customer experience. We’ve expanded our dataset for valuation models while cutting expenses, which halved the processing time for our model. We also transitioned from third-party tools to in-house capabilities, reducing costs while enhancing our efficiency. In addition to being more affordable and effective, our advanced models and data-driven pricing strategies are positively impacting our margins without sacrificing customer conversion rates. Looking ahead, I encourage you to track our performance based on the plan we established last quarter with a green-yellow-red grading system. You can follow our progress in real time through our accountability platform. We will continue this quarterly review to align our path to profitability with transparent updates about our results and achievements. We recognize the importance of this work, given the many families facing challenges in the home buying and selling process, and we are committed to addressing these issues with the right team, technology, and evidence of success in place. If you have any questions, feel free to reach out to me directly; I’m here to engage openly. Now, let’s move on to Christy, who will take you through the numbers.

Christy Schwartz, CFO

Thank you, Kaz. Bottom line, we're executing. Last quarter, we laid out three goals: scale acquisitions, improve unit economics and resale velocity and build operating leverage, and we delivered on all three. We increased acquisitions 46% from the third quarter. Our October 2025 acquisition contract cohort is over 50% sold through or in resale contract. This represents over a 2x improvement in resale velocity compared to October 2024 and a roughly 50% improvement from October 2023. At 50% sold through, this cohort is yielding the highest contribution margins for an October acquisition cohort in company history. And we delivered all of this while reducing fixed operating expenses and holding trailing 12-month variable operations expense flat as a percentage of revenue. Our fourth quarter results reflect the early days of Opendoor 2.0. While we implemented the operational changes Kaz described, it's important to note that 94% of the homes we sold in Q4 were acquired before October. We were clearing the old book while building the new one with higher quality homes. In the fourth quarter, we purchased 1,706 homes, an increase of 46% from Q3. This marked an important inflection point as we shifted from the high spread posture of the first 3 quarters to a more tailored approach. We provided stronger offers for higher-quality homes with greater expected resale velocity and maintained higher spreads for lower-quality homes with elevated risk and slower resale clearance expectations. We delivered revenue of $736 million, representing a 20% quarter-over-quarter decline, meaningfully better than our guidepost of a 35% quarter-over-quarter decline. We sold through more aged inventory than initially forecasted, a direct result of the resale velocity improvements we've made. As anticipated, our margins face near-term pressure as we work through legacy inventory. GAAP gross profit was $57 million in Q4 compared to $66 million in Q3. GAAP gross margin was 7.7%, up 50 basis points sequentially. Contribution profit was $7 million and contribution margin was 1% compared to contribution profit of $20 million and contribution margin of 2.2% in Q3. This sequential decline reflects the continued clearing of older, lower-quality inventory acquired during the prior high-speed strategy and Q3's historically low acquisition volumes, leaving us with minimal new inventory to improve the mix. Adjusted EBITDA loss was $43 million compared to $33 million in Q3 and exceeded the favorable end of our guidance range of a high $40s to mid-$50 million loss. Net loss for the fourth quarter was $1.1 billion compared to $90 million in Q3. This included a $933 million noncash loss from last quarter's convertible note refinancing. Adjusted net loss, which excludes that item, totaled $62 million compared to $61 million in Q3. Turning to our balance sheet and capital structure. We ended the quarter with $962 million in unrestricted cash and $133 million of equity invested in homes. We held 2,867 homes at quarter end, representing $925 million in net inventory. Our nonrecourse asset-backed borrowing capacity remains robust at $7.2 billion, with total committed borrowing capacity of $1.6 billion. These facilities built over years of partnership with our lenders provided us the flexibility to scale as we execute our growth plan. Last earnings call, we announced the refinancing of the majority of our convertible notes with equity, eliminating a near-term repayment trigger. We reduced our cash interest burden, and we issued the warrants dividend to align our shareholders directly with the upside we're working to create. The foundation is set for Opendoor 2.0 operating model, and now we're focused on delivery. As we introduced last quarter, we are executing against three management objectives we believe are key to reaching profitability. The table in our earnings release shows our progress against each objective. Let me walk you through the highlights. First, scale acquisitions. We increased homes purchased by 46% quarter-over-quarter from 1,169 homes in Q3 to 1,706 homes in Q4. Last week, we signed 537 acquisition contracts, up from 236 contracts at the time of our last earnings call. You can continue to track our weekly progress on our dashboard at accountable.opendoor.com. Second, improve unit economics and resale velocity. We made significant progress on resale velocity this quarter. The percentage of Opendoor homes on the market for greater than 120 days decreased from 51% at the end of Q3 to 33% at the end of Q4, an 18 percentage point improvement in a single quarter. This reflects the operational changes we've made to move homes faster, better pricing, more robust monitoring system and an improved buyer experience through products like Opendoor Checkout. In addition, the margin performance and resale velocity of the October acquisition cohort demonstrates the improvements we've made in pricing and selection. I also want to be clear about what this means for our go-forward strategy. October's margins thus far have come in above our long-term target range. That's a good problem to have, but you should not expect every quarter to look like October on a margin basis. You should expect us to reinvest that spread advantage into growth, faster turns, broader coverage and more competitive offers, while we aim to maintain contribution margins within our target range. You can track our product, feature and partnership launches on accountable.opendoor.com to see how we're continuing to build velocity into the business. Third, build operating leverage. On our last earnings call, we committed to holding fixed operating expenses flat and trailing 12-month operations expense, the variable component of our operating expenses, flat or down as a percentage of revenue. We achieved both goals. Fixed operating expenses were $35 million in Q4 2025 compared to $37 million in Q3 2025 and $43 million in Q4 2024, down $2 million quarter-over-quarter and $8 million year-over-year. Our trailing 12-month operations expense as a percentage of trailing 12-month revenue held steady at 1.3% in Q4. As we scale acquisitions from this lower cost base, we expect meaningful operating leverage to emerge in 2026. These three objectives remain the foundation of our path to profitability, and we're executing against them with discipline and transparency. As I said last quarter, you can't build a great business in a spreadsheet. You build it by shipping product, operating with discipline and learning from the market. Now let me give you some guideposts for Q1 and the year ahead. Acquisitions. Our profitability framework remains unchanged. We're targeting approximately 6,000 quarterly home acquisitions as we exit Q4 2026. As we've learned more in production, we're refining our acquisition trajectory to be more weighted to the back half of the year. We're investing Q1 and Q2 in improving how the funnel operates to scale more efficiently. This means refining conversion, sharpening pricing and developing adjacent services to bolster unit economics. You'll also notice we've updated how we present accountable.opendoor.com. We replaced the cumulative projections chart with a single view that shows weekly actuals, a fitted trend line with its slope and a projected range for where we plan to be. Cumulative charts can mask what actually matters, whether we're accelerating and whether we're progressing towards our year-end targets. This view shows you both. We'll update the projected range each quarter as we learn more. On revenue, we expect a decrease of approximately 10% quarter-over-quarter. This is a direct function of entering Q4 with low inventory levels due to the prior high spread acquisition strategy and the successful clearing of aged inventory in Q4. We're focused on scaling acquisitions throughout Q1 to rebuild inventory with higher quality homes that underpin our improved unit economics. Contribution margin. The mix of old inventory versus fresh inventory drives margins and Q1 2026 will reflect this shift. We made a concerted push in Q4 to clear legacy inventory. The homes we're selling in Q1 2026 are more representative of our new model, higher quality and faster turns. Our contribution margin bottomed out in September and has been improving every month since. We expect to exit Q1 with the highest contribution margin we've posted since Q2 2024. Finally, on adjusted EBITDA, we expect Q1 2026 adjusted EBITDA loss in the low to mid-$30 million. This represents continued sequential improvement as we maintain cost discipline while simultaneously investing in automation and product velocity. Last quarter, we showed you the blueprint. This quarter, the house is going up. Our goal remains adjusted net income profitability by the end of this year on a 12-month go-forward basis. We have a lot of work ahead of us, but the proof points are building, and we intend to keep earning your confidence every quarter.

Michael Judd, Head of Investor Relations

Great. Thanks, Christy. Okay. We've had a handful of questions that center around a common theme. We grab two of them. First, Zach H. asks, where is Opendoor at currently compared to expectations and profitability and where would you like to be? And Ryan Tomasello from KBW asks, according to your accountability dashboard, acquisition contract volumes are running at or below the low end of your targets. Aside from seasonal factors, what are the primary macro or pricing drivers preventing a faster ramp?

Kasra Nejatian, CEO

Yes, thanks for the questions. To be straightforward, we're exactly where we need to be and on track. If someone had told me three months ago that we'd arrive at this point, I would have thought they were being overly optimistic. Last quarter, we shared a four-step plan, and I believe we've successfully accomplished all four steps. We've followed through on our commitments, and it’s proving effective. Our contribution margin hit its lowest point in September but has improved each month since then. We're set to finish Q1 with the highest contribution margin since Q2 2024. While it's still early, everything is progressing positively. It's important to clarify that our success is not due to external factors; it’s the result of our own efforts. To address your question, we stated our goal is to achieve adjusted net income profitability by the end of the year on a 12-month forward-looking basis because this is essential for ensuring Opendoor generates cash independently and avoids needing to raise equity again. That’s our aim. Just as Google Maps finds various routes home, we are also exploring the best path forward. Before reaching adjusted net income profitability, we expect to become adjusted EBITDA profitable. Although I believe adjusted EBITDA may not be the ideal measure for our business, I can’t provide specific guidance due to legal considerations. However, I can be open about the plan I currently have, which projects adjusted EBITDA profitability on an annual basis starting in Q2. Things are going well, and despite the fact that building a company can be messy, we’re making substantial progress. Now, there’s a deeper question regarding why we're at the lower end of our acquisition goals. Let me clarify two points. First, I reserve the right to learn and adapt each day. I've gained insights over the last three months, realizing that our available levers are generally functioning faster than anticipated. We've even identified levers we didn't expect. If we aimed for the top end of our range, we could achieve that easily, but it would come at a price. In a product-focused company, you essentially have two options: invest in product development or invest in growth, and these choices have a back-and-forth relationship. Engineers are our most valued resource and typically focus on one of these paths. When we invest in product, we’re adding fuel to our capabilities. When we invest in growth, we're using that fuel. Currently, my priority is to enhance our product before redirecting focus on growth. For example, at the beginning of January, we directed four engineers to work on our mortgage product instead of the Opendoor app. While improving the Opendoor app could lead to growth, we recently acquired 500 homes, and our growth is steady. So, we decided to focus on improving our mortgage product and infrastructure instead of the app. Because of this decision, we’re launching our mortgage product in beta this week. To be more direct, we developed a mortgage product in less than 10 weeks when others predicted it would take at least a year. This approach is significantly more beneficial for our long-term growth than merely aiming for the top end of our previous targets. Our primary concern is profitability, and for that, what matters is how we finish this year. I believe we can maintain the necessary pace. I'm considerably more confident now than I was three months ago. That’s why I feel comfortable investing time into our product to build a stronger foundation for future growth. I promise we will not compromise the future growth of our company. We'll focus on the most important priorities. Our results from October validate our strategy. They demonstrate that our actions are working and provide the evidence we need to achieve profitability. Therefore, we will invest in product development before pursuing growth.

Michael Judd, Head of Investor Relations

Great. Our next question comes to us via video submission from Anthony Pompliano.

Unknown Analyst, Analyst

Hi Kaz. I hope you and the Opendoor team are doing great. My question today is about artificial intelligence. Obviously, this has become really pronounced in the market. But what are you guys using it for internally? And how should that change the customer experience in the Opendoor product moving forward?

Kasra Nejatian, CEO

Thanks, Ben. A good example of AI use can be seen in what we're doing at Opendoor in underwriting. I love football, but I dislike how in a game there are only about 11 minutes of actual playtime amidst hours of interruption. Opendoor's Workday felt similar, with much of our time being spent on tasks that could be automated. Many companies tout AI as a trend, but in real estate, we often assume that humans understand asset valuation better than models trained on extensive data. For too long, we believed that at Opendoor as well. However, machines excel in certain areas where humans do not. Humans contribute with subjective insights while machines handle data processing, documentation, and calculations. Essentially, humans should focus on work that requires human judgment, while machines handle tasks suited for them. For instance, machines struggle to assess properties located near highways, where human evaluation becomes essential. The issue at Opendoor was not the presence of humans; it was the misallocation of their roles. As a result, our analysts now audit AI-generated valuations instead of performing the initial calculations and paperwork. To use a football analogy, AI allows us to execute our strategies more rapidly, but human judgment is still vital. Regarding what investors can expect, customers should anticipate receiving fair, swift offers with fewer mistakes. Investors should look forward to reduced operational expenses relative to our revenue and a faster pace than we've seen from the competition. Additionally, it's important to acknowledge that AI can disrupt some businesses while enhancing others. Companies focused on singular SaaS solutions may face challenges, but for those tackling real-world issues involving pricing and complexity, AI offers substantial advantages that could drive our success.

Michael Judd, Head of Investor Relations

Great. Our next question comes to us via video submission from Catherine Ann.

Unknown Analyst, Analyst

I'm Catherine Morgans from Portland, Oregon. I became a shareholder in Opendoor in 2021. I was inspired to invest in the company following my experience using Opendoor to sell my home. It was the most streamlined and painless home selling experience that I've ever had. And I cannot imagine should I ever need to sell a home again in the future using any other option. I've been following the progress of Opendoor mainly via the Datadoor Discord. And it's been very thrilling over the past 6 months to see all of the innovation, especially with the improved implementation of AI to enhance operations and sharpen modeling. So as far as I'm concerned, things are looking very good on the, let's call it, the software front. My question has to do with, let's call it, the human front or the customer front. And that is, how do we get to the point where sellers think, I'm going to try Opendoor first before even considering going via a realtor? How do we turn that corner where Opendoor becomes the default first option that people try when they're ready to sell their home?

Kasra Nejatian, CEO

That's a great question. Defaults are incredibly powerful, and people often discuss defaults in relation to brands. Just as you might use a Kleenex or put a Band-Aid on your child's leg, I want you to think of Opendoor when selling your home. Brand is essentially a reputation, which is built over time through experience. You can't simply buy a great brand; otherwise, everyone would be tuning in to Quibi right now. Selling a home is a crucial financial decision for many American families, and it's fundamentally an act of trust that historically has been placed in people rather than software. Opendoor aims to create software that is worthy of that trust. To earn that trust, we need a lot of users who are genuinely pleased with our product. A prime example of this is Jeff Bezos and Sam Walton; the best marketing is a product that truly delights. Bezos didn’t invest heavily in advertising but rather in ensuring that products were delivered quickly, and the same can be said for Walton. For us to become the go-to choice, we must earn a similar level of trust, starting with our offers. Our offers must be accurate, fair, and reliable while providing a great experience. To be honest, we're not the default choice yet, but we are making progress. In the mature markets where we operate, 20% of individuals considering listing their home explore opendoor.com first. This is a sign that we are on the path to becoming a default. To achieve that, we must focus on a few key areas. First, we need to be available everywhere. By the end of last quarter, Opendoor was not accessible everywhere, but we've expanded our reach across the Lower 48, making ourselves available to nearly everyone. Second, we have to eliminate any points of friction. Opendoor must provide a fair and prompt offer, and the experience for sellers should be enjoyable. Lastly, we must continuously deliver value through quick transactions, competitive pricing, and excellent services, including a great mortgage product. Improved unit economics empower us to do this; better economics lead to better offers, which in turn foster trust. And trust is key to becoming the default option.

Michael Judd, Head of Investor Relations

Great. Our next question comes to us from an analyst. With the stock down significantly since your tenure began, how should investors assess progress? What key metrics best reflect operational improvement? What is the strategy to restore market confidence?

Kasra Nejatian, CEO

I want to start by expressing that I am very motivated to see Opendoor's stock price increase. My family has a significant investment in Opendoor stock, and my salary is just $1. Unless the stock reaches levels it hasn't seen in years, I don’t get paid. I don’t want you to misinterpret what I am about to say, but my focus is on managing the business and the value we are building, not on the stock price. My responsibility is to create shareholder value, which I take seriously. I believe that if we build something valuable, the stock price will eventually reflect that value. One of my favorite books, which I keep at my desk and in our library at Opendoor, is called "The Score Takes Care of Itself." Bill Walsh, a successful football coach, won Super Bowls by focusing on executing properly rather than constantly checking the scoreboard. His philosophy was to handle the right things and let the score take care of itself. In the short time I've been here, we have shown that our business model is effective and that we are structurally improving. When assessing our progress, I don't think you should rely solely on the current stock price but rather evaluate whether our underlying business is getting better. I've shared my perspective on our progress, but I encourage you to build your own understanding of our performance. My goal is to develop a company that offers a product people want and to enhance the business's economics. Everyone at Opendoor is committed to executing our strategy successfully. The stock price will take care of itself.

Michael Judd, Head of Investor Relations

Great. Thank you. Next, Victoria B asks, if home prices drop another 5% to 10% nationally, what happens to your margins and inventory risk? How prepared is Opendoor for that scenario?

Christy Schwartz, CFO

Thank you for the question, Victoria. It is the right question to ask. Opendoor 2.0 is built to move homes, not hold them. The longer you hold when the market turns, the more it hurts. So the whole game is turn faster. And here's what's genuinely different now. We have more tools than we've ever had. Previously, the primary lever was spread, price conservatively enough to absorb a market move, and that works, but it's blunt and it has terrible adverse selection. We now have a broader toolkit. First, selection. Under Opendoor 2.0, we are a more tailored approach. We offer strong prices on high-quality homes where we expect faster resale velocity, and we maintain wider spreads on homes with more risk or slower clearance expectations. Second, velocity. We reduced homes on market greater than 120 days from 51% to 33% in a single quarter. Our October cohort is clearing at 2x the velocity of October 2024. A home we own for 45 days has fundamentally different risk exposure than one we own for 180 days. And as we grow volume, the goal isn't to hold more homes, it's to move more homes. Scale and velocity compound together. Third, cash plus. This is an underappreciated as a risk management tool. When a seller opts in, they're retaining more of the price risk, and we earn fees with less capital at risk. That structurally shifts our exposure. Are we immune from a 5% to 10% decline? No, nobody is. But the question isn't whether it hurts; it's whether Opendoor is structurally positioned to navigate and withstand it. The October cohort is a great example of this. Over the past 5 months, national home prices came down roughly 300 basis points. During that exact period, our contribution margins on that cohort held steady or slightly improved. That's not hope or an expectation that happened.

Michael Judd, Head of Investor Relations

Great. Our next question comes to us from Andrew Boone from Citizens, who's wondering, there's some testing of a mortgage product with Lennar. Where is Opendoor in extending the services opportunity? What should our expectation for 2026 be for Opendoor to be able to attach more adjacent products to transactions?

Kasra Nejatian, CEO

I feel like I'm now on a football thing, so I need to find a football analogy. I just don't have one. Okay. Look, like I said, we started building our mortgage product in January, and we're going to launch it in beta this week. I showed it to Christy last night. I'm very, very bullish on this product. I think it's going to be good. It's going to take us a second to get all the right things because that's how products work. But I'm very bullish, and we're going to have more news on this soon. I think there was a part of the question that was about unit economics. Let me hand wave because I think the unit economics of the mortgage space are like relatively well understood. We're going to do some special things about them, but let us tell you about them when we do those things. So I think the primary unknown question is this. what will be our attach for mortgage and adjacent products, right? How many people who buy or sell a home from Opendoor take a mortgage from us? I have a hypothesis, but not a good answer. I've done this a couple of times, but we're going to underpromise and overdeliver here. But separately, I think there's very likely that there is a world where we have partners, especially our homebuilder partners that use some of the software we're building. We're building a new stack with the help of some partners, and it will be more finely tuned to people who own assets they're selling than a typical mortgage stack. I still don't have a football analogy.

Michael Judd, Head of Investor Relations

We can come back. Our next question comes to us from Dae Lee from JPMorgan asking, what has stood out to you so far about the quality and profitability of the homes you're buying since ramping up acquisitions? Any surprises as you pick up the pace and have those led to any changes in your approach? And looking ahead, what are the key factors or milestones you're watching most closely to gauge progress toward your current profitability and margin targets?

Christy Schwartz, CFO

Thank you for the question, Dae. As you may have noticed, the October 2025 acquisition cohort is something we've been paying a lot of attention to. And that is because that's the first cohort where we had the offers, the contracts, the acquisitions and now 50% of the resales are under the Opendoor 2.0 model. So it is a very important source of data for us. The performance of this cohort isn't just one thing. It's everything working together for the first time. So I talked earlier about selection and spread dispersion, but we are targeting higher quality, higher velocity homes so that we can turn them faster and get better selection. When you have better selection coming through the door, that really improves our operations. Those are homes that we can get relisted faster and have less variance in outcomes. And then it comes to the resale systems and our ethos. We, as an organization, fundamentally believe that it's better to identify a margin-optimized clearing price than to wait around for the perfect offer to come along. And so our machine learning pricing model, it has meaningfully improved the precision of pricing decisions, better demand signals, better timing and better calibration at the individual home level rather than blanketed spread reduction or price reductions. The result, resale velocity in our October cohort was 2x what it was in October 2024 and with margins that exceeded our expectations. And so that puts to rest the idea that speed and margin are a trade-off. We've shown the answer to both can be yes in a market that, frankly, no one would characterize as particularly strong. To answer your question about surprises, I think what surprised us was how quickly some of the changes we put in place showed up in our results. For example, the degradation. And so when you have a cohort of homes that you buy, you expect the homes that you sell right upfront to probably perform a little bit better than the homes later in the cohort. But in this last October cohort, we saw that from 10% to 50%, our margins basically held flat. They were actually up about 18 bps, and that was during a tough market. And so seeing that flat degradation was very promising. Finally, you asked about looking ahead. And I guess I would just bring us back to our management objectives, scale acquisitions. We've said we want to exit the year with 6,000 acquisitions per quarter, and that will set us up well for our adjusted net income profitability. As a reminder, we're now available through the Lower 48, and we'll start leaning into marketing in Q1 as we expand to reach those markets. Objective number two is improving margin and resale velocity so that we return to our 5% to 7% targeted CM. And objective 3, build operating leverage as we rescale. Fixed operating expenses flat or down and trailing 12-month operation expense flat as a percentage of revenue or down.

Michael Judd, Head of Investor Relations

Great. Our next question also comes to us from video submission and will be answered by Brad Bonney, Opendoor's Chief Business Officer.

Brad Bonney, Chief Business Officer

Opendoor. My name is indiscernible. I'm here with my daughter, Eva, and we're in Omaha after relocating from Hawaii to Tennessee. We purchased through Opendoor a few months ago because of the convenience. We tried the traditional method multiple times and then discovered Opendoor. It provided us with unlimited access to the property we were interested in, quick responses, and it was the easiest process to navigate. We didn't require a realtor or attorney; it was just the two of us working with Opendoor. We're actively promoting Opendoor throughout Omaha because this is new for us and a different approach to buying, selling, or relocating. This experience also encouraged us to invest in the company, as we recognized it as something innovative, convenient, and distinct from traditional methods. My question for Kaz is regarding veterans; many military personnel have to relocate quickly. I believe this platform could significantly benefit veterans and active-duty members. What is Opendoor doing to support our community? Thank you for your time. Talk to you all later.

Unknown Executive, Unknown

Thank you, Brad. Thank you for your question, and thank you for your service. As a fellow veteran, you spent more than 7 years in the Navy serving primarily out of a nuclear submarine. I know what it means to raise your hand and say, I will go where you need me, when you need me for as long as you need me. That commitment makes the American dream possible for all of us, and it shouldn't come at the cost of the dream itself. Nearly 400,000 service members PCS every year. That's almost 0.5 million families navigating a home sale on a timeline they don't control. The traditional real estate process wasn't built for that reality. Opendoor was. Fast offers, close dates you control and certainty in an otherwise uncertain transition. Here's how we're helping. We've already launched the Heroes Home Credit. This is a $4,000 credit towards closing costs for active duty service members and veterans buying an Opendoor home. That's not just some marketing gimmick; that's Opendoor recognizing that military families already absorb significant out-of-pocket expenses every time they move. They shouldn't have to sacrifice when buying their next home too. We're building from there. We're working hard to make sure VA loans work seamlessly with Opendoor because that's how many military families buy. These are some early steps, but we really need to continue to build trust with the military community. Trust doesn't happen with ads. It happens through word of mouth. One soldier tells another how easy it is to sell their home. One sailor tells her shipmate how they seamlessly moved their family across the country. And each time, it's Opendoor who made it happen. That means the most important thing we can do is exactly what we've always said, build a product that actually works for the people who need it most and deliver on every promise we make. Every military family we help becomes an advocate, and every advocate helps spread the word. Coupa, your question today is exactly what this looks like. Thank you, and thank you again for your service to our country.

Michael Judd, Head of Investor Relations

Great. Thanks, Brad. I think we have time for one more. And Zach H is wondering, where do you expect to see Opendoor in two years?

Kasra Nejatian, CEO

That's a great question. It's actually my favorite question. Before I answer that question, I want to say something. One of the things that makes me deeply proud of working at Opendoor is the number of veterans that work at Opendoor. We deeply recognize that freedom isn't free. So thank you, genuinely thank you. So where will it be 2 years from now? And what do I expect? Well, 2 years from now, I expect to be sitting in front of you telling you that we delivered exactly what we said we would do. 2 years from now, I want Opendoor to be the default that we talked about. I don't want to have to choose anymore between margin and volume. 2 years from now, we're going to get both. Two years from now, the AI infrastructure we're building right now is going to have a compounding effect across our cohorts. We're no longer going to be talking about the model. We're going to be talking about scaling it and how we can serve as many people as we can. And we're going to be okay with the people who doubt us now, taking credit for our work 2 years from now. But the most important question for me generally is where homeownership is going to be 2 years from now. Will a teacher living in Kansas City be able to afford a home on her salary so that her kids can grow up in a home owned by their mom and dad. Today, the answer to that question is no. 2 years from now, I hope can stand in front of you and say the answer to that question is yes because then our work will have mattered. Okay. Thank you. Thank you. Thanks for putting up with us. We'll see you in three months. Cheers.