Opendoor Announces Fourth Quarter and Full Year 2020 Results
Opendoor Technologies Inc. (Nasdaq: OPEN) today reported financial results for its Q4 and fiscal year 2020.
3/4/2021 · 10 min read
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Exceeds prior expectations for fourth quarter and full year 2020 results
Doubling of markets expected for 2021
SAN FRANCISCO, March 04, 2021 (GLOBE NEWSWIRE) — Opendoor Technologies Inc. (Nasdaq: OPEN), a leading digital platform for residential real estate, today reported financial results for its fourth quarter and fiscal year ended December 31, 2020. Management will host a conference call at 2:00 p.m. Pacific Time today to discuss its operating results, which can be accessed on its investor relations website at https://investor.opendoor.com.
“We are making it possible to buy and sell a home at the tap of a button and building the future of the real estate transaction,” said Eric Wu, Co-Founder and CEO of Opendoor. “While 2020 was an unprecedented year, I’m proud of our team’s relentless focus on digitizing the transaction and delighting customers. As we reflect on Q4 and enter 2021, this focus has resulted in increasing business momentum. More customers are coming to us and choosing Opendoor than ever before, we are seeing healthy margins, and we plan on doubling our footprint to 42 markets. Since creating the category seven years ago, we have generated over $10 billion in home sales, served over 80,000 customers and demonstrated our ability to scale efficiently. While we are pleased with the progress and foundation we’ve built, we are just getting started.”
OPEN became publicly-traded via a merger with Social Capital Hedosophia Holdings Corp. II on December 18, 2020, raising net proceeds of $970 million
Completed an underwritten follow-on public equity offering of $860 million of net proceeds in February 2021, adding to the Company’s cash and marketable securities balance of $1,460 million at the end of Q4 2020
Launched a completely digital, contactless consumer experience in all markets
Tripled inventory balance from Q3 2020 to $466 million and 1,827 homes at year end
Generated 15.4% Gross Profit margins and 12.6% Contribution Profit margins in the fourth quarter of 2020
Announced planned doubling of footprint to 42 markets during the course of 2021
Expanded leadership team with the addition of Andrew Low Ah Kee as President, Daniel Morillo as Chief Investment Officer, and Carrie Wheeler as Chief Financial Officer
Fourth Quarter and Full Year 2020 Financial Summary
Revenue and Homes Sold
Revenue for the full year and fourth quarter exceeded prior company forecasts as a result of strong home resale performance and an increased acquisition pace after pausing home purchases in March at the onset of the COVID-19 pandemic. The decision to temporarily pause home buying, and the subsequent sell down of homes in inventory over the second and third quarters, drove a significant decline in revenue in 2020. The Company began rebuilding inventory in the fourth quarter, and expects to return to sequential revenue growth in the first quarter of 2021.
For the fourth quarter, Total Homes Sold was 849, as compared to 5,013 for the prior year period, and Total Revenue was $248.9 million, as compared to $1,255.7 million for the prior year period.
For the full year 2020, Total Homes Sold was 9,913, compared to 18,799 for the prior year, and Total Revenue was $2,583.1 million, as compared to $4,740.6 million for 2019.
Opendoor realized increases in unit margins, particularly in the fourth quarter, largely driven by a combination of inventory weighted to recently acquired homes, coupled with home price appreciation in its markets. Contribution Margins are expected to moderate with the rebuilding of inventory over the course of the year.
For the fourth quarter, GAAP Gross Profit was $38.4 million or 15.4% of total revenue, compared to $74.0 million or 5.9% of total revenue for the prior year period. Gross Profit per Home Sold was $45,188 compared to prior year Gross Profit per Home Sold of $14,754. Contribution Profit was $31.5 million and Contribution Margin was 12.6%, as compared to Contribution Profit of $18.2 million and Contribution Margin of 1.5%. Contribution Margin after Interest was 12.2% as compared to 0.2%. Contribution Profit per Home Sold was $37,052 compared to prior year period Contribution Profit per Home Sold of $3,635.
For the full year, GAAP Gross Profit was $219.8 million or 8.5% of total revenue, compared to $301.3 million or 6.4% of total revenue for 2019. Gross Profit per Home Sold was $22,173 compared to 2019 Gross Profit per Home Sold of $16,025. Contribution Profit was $110.1 million and Contribution Margin was 4.3% as compared to Contribution Profit of $92.1 million and Contribution Margin of 1.9%. Contribution Margin after Interest was 3.2% as compared to 0.6%. Contribution Profit per Home Sold was $11,109 compared to prior year Contribution Profit per Home Sold of $4,897.
Net Income (Loss) and Adjusted EBITDA
Net Income (Loss) and Adjusted EBITDA improvement year-over-year was due to improved Contribution Margin performance and prudent operating expense controls put in place as the Company managed through the uncertainty of COVID-19.
For the fourth quarter, GAAP Net Loss was $(87.8) million as compared to $(91.7) million for the prior year period. Non-GAAP Adjusted Net Loss was $(41.3) million as compared to $(86.6) million. Adjusted EBITDA was $(27.1) million or (10.9)% Adjusted EBITDA Margin, as compared to $(59.0) million or (4.7)%.
For the full year, GAAP Net Loss was $(286.8) million as compared to $(339.2) million for 2019. Non-GAAP Adjusted Net Loss was $(175.1) million as compared to $(326.8) million. Adjusted EBITDA was $(98.0) million or (3.8)% Adjusted EBITDA Margin, as compared to $(217.9) million or (4.6)%.
First Quarter 2021 Outlook
For the first quarter of 2021, Total Revenue is expected to be between $600 million and $625 million, which represents 146% sequential growth over Q4 2020 at the midpoint of the expected range. This first fiscal quarter is expected to mark a return to sequential revenue growth across existing markets with strong and increasing demand for Opendoor’s service and an accelerating pace of home acquisitions. The Company expects to launch six new markets in Q1.
Adjusted EBITDA1 is expected to be between $(33) million and $(28) million, which represents Adjusted EBITDA margins of (5)% at the midpoint of the expected range.
Conference Call and Webcast Details
Opendoor will host a conference call to discuss its financial results on March 4, 2021 at 2:00 p.m. Pacific Time. A live webcast of the call can be accessed from Opendoor’s Investor Relations website at https://investor.opendoor.com. An archived version of the webcast will be available from the same website after the call.
Use of Non-GAAP Financial Measures
To provide investors with additional information regarding the Company’s financial results, this press release includes references to certain non-GAAP financial measures that are used by management. The Company believes these non-GAAP financial measures including Adjusted Gross Profit, Contribution Profit, Contribution Profit After Interest, Adjusted Net Loss, Adjusted EBITDA, and any such non-GAAP financial measures expressed as a Margin, are useful to investors as supplemental operational measurements to evaluate the Company’s financial performance. The non-GAAP financial measures should not be considered in isolation or as a substitute for the Company’s reported GAAP results because they may include or exclude certain items as compared to similar GAAP-based measures, and such measures may not be comparable to similarly-titled measures reported by other companies. Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s performance by excluding certain items that may not be indicative of the Company’s recurring operating results.
For more information on the Company’s non-GAAP financial measures, please see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Measures” included at the end of this press release.
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking, including statements regarding our financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion and objectives of management for future operations. These forward-looking statements generally are identified by the words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast”, “future”, “intend,” “may,” “might”, “opportunity”, “plan,” “possible”, “potential,” “predict,” “project,” “should,” “strategy”, “strive”, “target,” “will,” or “would”, the negative of these words or other similar terms or expressions. The absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many important factors could cause actual future events to differ materially from the forward-looking statements in this press release, including but not limited to our public securities’ potential liquidity and trading; our ability to raise financing in the future; our success in retaining or recruiting, or changes required in, our offices, key employees or directors; the impact of the regulatory environment and complexities with compliance related to such environment; our ability to remediate our material weakness; various factors relating to our business, operations and financial performance, including, but not limited to, the impact of the COVID-19 pandemic and our ability to grow market share; our ability to respond to general economic conditions and the health of the U.S. residential real estate industry. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described under the caption “Risk Factors” in our annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2021 and our other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and we assume no obligation and do not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. We do not give any assurance that we will achieve our expectations.
Opendoor’s mission is to empower everyone with the freedom to move. Since 2014, Opendoor has provided people across the U.S. with a radically simple way to buy, sell or trade-in a home online. Opendoor currently operates in a growing number of markets across the U.S.
The Blueshirt Group
Sheila Tran / Charles Stewart
1 Opendoor has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net income (loss) within this press release because the Company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to, inventory impairment and stock-based compensation with respect to future grants and forfeitures. These items, which could materially affect the computation of forward-looking GAAP net income (loss), are inherently uncertain and depend on various factors, some of which are outside of the Company’s control. For more information regarding the non-GAAP financial measures discussed in this press release, please see “Use of Non-GAAP Financial Measures” below.