What Offerpad Solutions (OPAD) Said on Its Q3 Earnings Call

Offerpad Solutions (NYSE:OPAD) reported third-quarter revenue and transaction volumes below its prior outlook as a rapid rise in mortgage rates late in the period slowed home sales and prompted the company to reduce acquisition activity.

Revenue totaled $78.1 million, below the company’s August outlook of $90 million to $100 million. Offerpad closed 324 real estate transactions, compared with its forecast for 350 to 400 transactions. The company reported a net loss of $11.5 million and an adjusted EBITDA loss of $7.5 million, widening from a $6.2 million loss in the second quarter.

Chairman and Chief Executive Officer Brian Bair said the company’s results were affected by mortgage rates that rose from roughly 6.7% in early August to approximately 7.4% by early October. While Offerpad has operated in an environment of mortgage rates above 7% before, Bair said the speed of the increase and heightened public focus on housing affordability made this period different.

“Buyers and sellers watched the market change in real time,” Bair said, describing a more cautious environment in which buyers weighed higher monthly payments while sellers faced uncertainty around sale timing and pricing.

Acquisitions Reduced as Offerpad Pursues Wider Margins

Offerpad acquired 605 homes during the third quarter, though Bair said the company declined to proceed with additional homes under contract when changing market conditions caused them to fall short of its wider margin requirements. In those cases, the company sought to offer sellers alternatives through its Cash Offer Marketplace or Brokerage Services.

The company said it is prioritizing the conversion of its inventory into completed sales. As of the call, 200 homes had either sold or were under contract during the fourth quarter. Offerpad ended the third quarter with 684 homes in inventory and estimated equity in those homes of approximately $55 million. Aged homes accounted for 2.6% of inventory at quarter-end, while inventory valuation adjustments were minimal, according to management.

Bair said the company is becoming increasingly selective about the homes and markets it serves, focusing on interior locations, newer homes and properties requiring less extensive renovation. He said Offerpad is not currently pursuing renovation projects requiring approximately $100,000 of work.

During the question-and-answer session, Bair cited Charlotte, Raleigh, Florida and Atlanta as markets where Offerpad has maintained an appetite, although he said the company is seeing slowing conditions in some areas. He said new-home builder incentives have affected conditions in Houston and Dallas, while Phoenix has elevated active inventory but still has moving homes in certain interior areas and price points.

Fee-Based Services Gain Share

Although home resales slowed, Offerpad said its fee-based offerings continued to expand. Total transaction volume increased for a second consecutive quarter, rising from 263 transactions in the first quarter to 295 in the second quarter and 324 in the third quarter.

Brokerage Services and Cash Offer Marketplace accounted for approximately 35% of third-quarter closed transactions, and brokerage listing signings more than doubled from the prior quarter. Roberto Galaviz, vice president of financial planning and analysis, said most of the approximately 114 fee-based transactions in the quarter came from the company’s HomePro listing services business.

Galaviz said Offerpad continues to target an eventual roughly 50-50 mix between fee-based and Cash Offer transaction volumes. In the nearer term, Cash Offer transactions are expected to provide a larger share of contribution margin because of higher margins embedded in the company’s recent underwriting.

The company’s Renovate segment generated $5.2 million in revenue, up from $4.8 million in the second quarter. That business is excluded from Offerpad’s real estate transaction count.

Costs, Liquidity and Profitability Timeline

Interim Chief Financial Officer Andrew Pieper said third-quarter gross profit was $6.5 million and gross margin was 8.3%. Contribution Profit After Interest was approximately $12,900 per real estate transaction, down from $13,500 in the second quarter but above $6,400 a year earlier.

Operating expenses excluding property costs were $13.7 million, compared with $13.3 million in the second quarter. Pieper said the company has reduced operating expenses by more than $140 million since 2022 and has identified another $8 million to $10 million in annualized cost reductions. The savings are expected to begin benefiting the fourth quarter, with the full annualized effect expected in 2027.

Management said the additional reductions will come from headcount realignment as the company shifts toward more capital-light operations, technology optimization, office-space and facilities changes, and other general operating spending reductions.

Offerpad ended the quarter with $12.1 million in unrestricted cash, down from $33.1 million at the end of the second quarter. Pieper attributed the decline primarily to capital deployed into inventory and operating cash use. He said the company expects sales to exceed purchases in coming months, allowing cash to rebuild as homes are sold and financing is repaid.

The company also said lenders are now funding a larger share of each home’s cost. At quarter-end, Offerpad had approximately $251 million of undrawn capacity under inventory financing facilities, most of which was uncommitted. Pieper said management believes existing cash, anticipated proceeds from inventory sales and inventory financing capacity are sufficient to execute its 2027 plan, while remaining open to strategic capital partnerships.

Fourth-Quarter Outlook

For the fourth quarter, Offerpad forecast 400 to 475 real estate transactions and total revenue of $100 million to $120 million. The company expects adjusted EBITDA to improve sequentially from the third quarter, supported by homes acquired during the third quarter, the 200 homes already sold or under contract in the fourth quarter, and growth in Brokerage Services and Cash Offer Marketplace closings.

The outlook assumes mortgage rates remain near current levels and does not assume rate relief.

Offerpad now expects to exit the second quarter of 2027 at a positive adjusted EBITDA run rate, extending its prior timeline as market conditions have shifted. Management previously used approximately 1,000 quarterly transactions as a reference point for reaching positive adjusted EBITDA. Pieper said that, based on identified cost reductions and current contribution margins, the company now expects the threshold to fall by roughly 150 to 200 transactions, to about 800 to 850 quarterly transactions, with further potential reductions if contribution margins improve.

The company also announced that Pieper has been appointed interim CFO, succeeding Peter Knag. Offerpad added Ben Graboske to its board during the quarter, with Bair citing Graboske’s background in real estate, data and artificial intelligence technology.

About Offerpad Solutions (NYSE:OPAD)

Offerpad Solutions Inc is a real estate technology company that provides residential property buying and selling services through its Offerpad platform. The company purchases homes directly from sellers with cash offers, allowing homeowners to receive a streamlined alternative to a traditional listing process.

After acquiring properties, Offerpad may coordinate renovations, repairs, and other preparation work before reselling the homes. The company also provides services designed to support residential transactions, including home-selling assistance, moving-related support, and digital tools intended to simplify the real estate experience.

Offerpad was founded in 2015 by Brian Bair and is headquartered in Chandler, Arizona.