Opendoor continued to feel the market’s headwinds in the second quarter of 2023, which led to fewer homes sold and lower revenues in the period. But the iBuyer greatly reduced its operating costs, delivered a profit, and increased its home purchases in the quarter.
The iBuyer recorded a net income of $23 million from April to June, compared to a net loss of $101 million in the previous quarter and a net loss of $54 million in the same quarter last year, per Securities and Exchange Commission (SEC) filings.
The firm’s revenues came in at $2 billion in the second quarter of 2023, down 37% compared to the previous quarter and 53% related to 2Q 2022. Total operating expenses declined to $217 million, compared to $294 million in Q1 2023 and $454 million in Q2 2022.
Carrie Wheeler, CEO of Opendoor, said the company exceeded the high end of its guidance for adjusted Ebitda and revenues in the second quarter as it continues to “focus on what we can control and operate with discipline in this environment.”
In April, the iBuyer announced that it had made the “very difficult decision” to lay off roughly 22% of its workforce, or 560 positions. More layoffs followed in November 2022, when Opendoor cut 550 jobs, or approximately 18% of its workforce at the time.
“Our results reflect the progress we’ve made in strengthening our offering, driving cost efficiencies and managing risk. We expect the third quarter to mark our return to positive contribution margin levels,” Wheeler said in a statement.
Opendoor has committed to deliver at least 100 basis points of contribution margin improvement by 2024, increasing the annual target range to 5% to 7%, with a goal of eventually returning to positive adjusted net income. The contribution margin was negative 4.6% in Q2 2023.
“We expect to perform within our 5% to 7% contribution margin target beginning Q4 2023,” Opendoor’s interim CFO Christy Schwartz told analysts Thursday. “We are managing our business to return to positive adjusted net income, which is our best proxy for operating cash flow. And we believe we have the cost structure and balance sheet in place to do so.”
Schwartz said the company expects to reach breakeven at steady annual revenues of $10 billion, or approximately 2,200 home acquisitions and resales per month at its target contribution margin range of 5% to 7%.
But what about selling and buying homes?
In the second quarter of 2023, Opendoor sold 5,383 homes, a decline of 35% compared to 1Q 2023 and 49% compared to 2Q 2022.
“As of quarter end, 99% of the homes we made offers on between March and June of last year were sold or under resale contract and our new book of inventory is generating positive unit economics in what continues to be an uncertain time in the U.S. housing market,” Wheeler said.
Meanwhile, Opendoor’s inventory balance reached $1.1 billion in the quarter, representing 3,558 homes. The total is down 46% from the previous quarter and 83% from the same period last year.
The company purchased 2,680 homes from April to June, up 53% from Q1 2023 and down 81% from Q2 2022. The decline versus the prior year comes primarily from elevated spreads embedded in its offers since June last year, coupled with sellers remaining on the sidelines, Opendoor’s executives told analysts.
Opendoor ended the quarter with 1,390 homes under contract for purchase, up 22% versus Q1 2023.
Looking forward, the company expects to deliver revenues between $950 million and $1 billion in Q3 2023 when adjusted Ebitda is expected to be between negative $60 million and $70 million.