Offerpad Solutions Stock

Thank you. Good afternoon and welcome to Offerpad's Second Quarter 2026 Earnings Conference Call. My name is Megan and I will be your conference operator today. [Operator Instructions]

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. These refer to the risks, uncertainties, and other factors related 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 second quarter earnings release on Offerpad's website. With that, I'll turn the call over to Brian Bair, Chairman and Chief Executive Officer.

Thank you, Courtney, and welcome everyone. Before we get into the quarter, I'd like to take a step back and talk about where we are as a company. Over the past 18 months, we made a series of deliberate decisions that weren't designed to maximize short-term volume. They were designed to build a stronger company for the long-term. We protected capital, we sold through our aged inventory. When we set our cost structure, we put the right people in place across pricing, operations, and every product line, expanded from a single product company into a multi-solution platform and embedded artificial intelligence across our business. None of those investments were made to improve 1 quarter. They were made to improve the next decade. We believe those investments are now beginning to translate into measurable operating momentum.

The rebuilding phase of Offerpad is largely behind us. The buying engine is back on. I'll be walking through several visuals during the call. So I encourage you to follow along on your screen. First, the quarter itself. We guided to 300 to 350 transactions and $80 million to $90 million in revenue. We came in at 295 transactions and approximately $78 million in revenue, while still delivering another quarter of improved adjusted EBITDA. Alongside those numbers, I'll walk you through some leading indicators, contract signs and acquisitions.

We think they're helpful for understanding where the business is headed as we scale. For the past year, you've heard us talk about discipline. You've heard Peter walk through our cost structure. You've heard us talk about contribution margins, conversion, and the investments we've made in our operating platform. Those weren't initiatives, they were always the same operating framework. The one that's been guiding how we run this business. By sharing that framework with you today, we want to give you a clear view into how we make decisions, allocate capital, and measure progress.

It's also the context behind everything we've reported over the past year. That framework comes down to 3 objectives. Let's start with the first. Scale transactions through discipline growth. That's straightforward. But here's what it actually means. We're not chasing volume for its own sake. We're using better home selection, more precise pricing, and the data we built over the past several years to grow where we believe we can generate the strong outcomes. Our target hasn't changed, approximately 1,000 transactions a quarter, at a level we believe our current cost structure supports at break-even.

But that's not where the plan stops. Beyond break-even, the plan illustrates the operating leverage we scale towards levels we have achieved before. For example, the company averaged approximately 3,500 quarterly transactions in 2022. Here's the visual that helps illustrate how we get there. Starting with the question you may have, how do we get from roughly 300 transactions today to our goal of around 1,000 a quarter? Start on the left. Every closed transaction starts as a signed contract. In April, we signed 129. That grew to 163 in May and 256 by June, nearly double where we started.

Now take a look at the middle. Roughly 30 days after signing, approximately 90% of contracts become acquisitions. We acquired 268 homes in quarter 2, nearly 70% more than the quarter before. That momentum continued into July, where we acquired roughly 200 homes in a single month as the stronger June and July signings work their way through. This growing pipeline is expected to drive higher transaction volumes in the second half of fiscal 2026, as homes typically sell within 120 to 150 days after signing. Think about it this way, we expect another meaningful step-up in acquisitions in the third quarter. And we can say that with real confidence because most of the activity is already signed.

It's sitting on the left side of this chart right now moving through the pipeline. Now let's look at the right side. Roughly 90 to 120 days after acquisition a home sells, which means the fourth quarter is largely being built right now, not in the fourth quarter itself. Today's signings become tomorrow's acquisitions, and those acquisitions become tomorrow's home sales. So when you look at our third quarter transaction guidance next to our longer-term target, remember, those quarter 3 closings were mostly locked in by contracts signed earlier in the year, before conversion improved. Quarter 4 is where you'll really start to see today's stronger performance show up. And 1 more thing to highlight, our platform is now broader than Cash Offer.

Cash Offer Marketplace and Brokerage Services, shown in light blue on the chart, widen the pool of sellers we can serve and generate fee-based revenue with little to no balance sheet capital. What you're seeing here is execution, not spending. The growth in signs I just showed you happened without meaningful increase in marketing. It's conversion. We're converting demand we already had. The second objective is expanding contribution margin. And this is where we made some of our most meaningful progress this quarter. This chart shows the annual picture. Margins compressed through the market slowdown, bottomed out in loss in 2023, and have been recovering since, with 2025's numbers still weighed down by the aged inventory we've been working through.

Look at what's happening inside this year, quarter to quarter. Contribution profit after interest reached $13,500 per real estate transaction in Q2, up from $5,500 in quarter 1, our strongest quarter since 2023. First we cleared the age book. It peaked at more than 100 homes in 2025. We slowed acquisitions, got it under 30 by quarter 1, and we're at under 10 today. What remains consists primarily of homes acquired during the past 2 quarters. Second, we're moving faster. Our aged homes have taken around 339 days to sell.

Our quarter 2 non-aged homes sold in approximately 82 days, well ahead of our 100 to 120-day target. That velocity is what's driving the stronger margins and putting us on the path toward adjusted EBITDA profitability. Our third objective is driving operating leverage. Over the past several years, we've fundamentally reset our cost structure, removing more than $140 million of annualized operating expense. These weren't cuts tied to the housing market. They were structural changes, and they've left us with a leaner, more efficient business. This chart shows what that means.

At today's volume, around 295 transactions a quarter, we're on the steep part of the curve, where fixed costs aren't yet fully absorbed. At 1,000 transactions, the level our cost structure is built for, cost per transaction drops sharply because that cost base doesn't grow in step with volume. Every transaction beyond the point should flow more directly to earnings. Those are the 3 objectives that guide how we run this business. Discipline transaction growth, expanding contribution margin, and operating leverage. Today, they're the framework behind every decision we make, every dollar we allocate, and every result we measure ourselves against. I'd encourage you to spend a few minutes with our full operating plan on our investor relations website. It goes deeper into each of these 3 objectives, the data behind them, and how they connect to our path to profitability.

Peter will now take you through our financial results and guidance in detail.

Thank you, Brian. For the past year, we've been telling you the model is getting healthier at our margins, tighter costs and a cleaner portfolio. This quarter, you can see it in the numbers themselves. The model is straightforward. Higher transaction volume multiplied by stronger contribution profit per transaction on a largely fixed cost base drives adjusted EBITDA. Let's start with what we produced. Revenue was approximately $78 million on 295 real estate transactions. But the number I point you to this quarter isn't the top line, it's what each transaction earned. Gross profit was $7.1 million, up from $5.6 million in the first quarter and that gain came on slightly lower revenue.

Gross margin improved to 9.2% up from 6.9% last quarter, our best since third quarter of 2023. As Brian stated, contribution profit after interest reached $13,500 per real estate transaction percent year-over-year and 145% quarter-over-quarter. Earning more gross profit on less revenue is exactly what you'd expect when the improvement comes from unit economics and mix rather than volume. Underneath the top line, our revenue base is diversifying. Brokerage Services and Cash Offer Marketplace drove much of the higher margin mix I just mentioned and Renovate contributed $4.8 million of revenue this quarter. Together, these fee-based offerings deepen both our margins and our reach without adding balance sheet risk. On the cost side, quarterly operating expenses, excluding property costs, were $13.3 million, down from $17 million a year ago, and down from a high of over $50 million per quarter in 2022.

We've held that cost base largely fixed by design. That will drive incremental volume to convert into profit rather than overhead as we scale. The adjusted EBITDA loss for the second quarter was $6.2 million, an improvement from a $6.7 million loss in the first quarter. Quarter of sequential improvement towards positive adjusted EBITDA before the year-end. We ended the quarter with $33.1 million in unrestricted cash of 46% year-over-year and total liquidity of more than $55 million, including the fair market value of our inventory. Cash Offer and Brokerage Services are leading the acceleration, while Cash Offer Marketplace has moved more slowly as some institutional buyers pull back. Our 2026 framework doesn't require incremental capital. Our liquidity facilities and growing fee-based revenue support the plan as it stands.

If Cash Offer demand runs ahead of plan, we may bring in additional working capital to meet it. We have a clear path forward either way, and we'll keep looking for opportunities to improve our flexibility or lower our cost of capital, which has already come down significantly over the past 2 years. Now to the outlook. For the third quarter, we expect 350 to 400 real estate transactions across Cash Offer, Cash Offer Marketplace, and Brokerage Services. Total revenue of $90 million to $100 million and a narrower adjusted EBITDA loss compared to Q2, continuing our sequential progress towards positive adjusted EBITDA. The full year objective is unchanged. Exit 2026 at a run rate of roughly 1,000 transactions a quarter and reach positive adjusted EBITDA before the year-end. It's worth reiterating what's compounding underneath those numbers. The signings that accelerated through the second quarter become acquisitions in the third quarter and closings in the fourth.

And they'll carry the stronger unit economics of a cleaner portfolio. So as volume grows, the effect compounds. More transactions, each 1 worth more than it was a few quarters ago, landing on a cost base we've held largely fixed. Higher volume, higher margin per transaction, and discounted. Discipline costs are 3 forces building on each other. To close, margins are at multi-year highs, the cost base is disciplined. The leading indicators are moving in the right direction. The pieces are in place. It is about execution quarter after quarter. With that we're ready to take your questions.

[Operator Instructions] Your first question comes from the line of Ryan Tomasello with KBW. Please go ahead.

Regarding the 1,000 transaction target by year-end, understand the positive forward indicators here that you're pointing to that give you confidence in that target, but can you just help us understand, what are the main drivers of the meaningful step-up from 3Q to 4Q? And is that target of 1,000 transactions dependent on any concentrated volume from specific institutional partners or any other partnerships that might need to come online to hit that level?

Hey, Ryan, it's Peter. So I'll take the last piece first so I don't forget, but it is not driven by institutional partners. Among the 3 products, the 2 that are growing the most significantly, we talked about Cash Offer, that's 1. But also our Brokerage Services is growing fairly rapidly too. And you can begin to see some of that in the trending schedules that are on the IR site. So, yes, I'd point back to the, you know, as Brian identified in his prepared remarks, there's if you add up the 3 months in the quarter, there's about 550 signs just for product number 1, just for the Cash Offer. And those signs, you know, if at a 100 to 110-day time to cash, those signs convert into a similar number of dispositions roughly 100 or 110 days later. So that's 1 really important driver and the signs are up very significantly again. And then again, I'd point to the Brokerage Services, which is also growing rapidly. Both of those together without any dependency on partners will get us to the exit rate of 1,000 transactions.

1 thing that I'll just add, Ryan, you and I have talked about this in the past. Our demand has stayed very, very strong. We still get thousands and thousands of sellers that are very engaged coming to us every month to sell their home. And so, you know, with less marketing spend, we're seeing more and more demand for our products. And so, as we've talked about that, again, that's a lot of lever for pricing. And so, you know, right now, as we look at some of the, we call it velocity areas that we're buying, areas that we think are when we buy the home, it's going to turn, we can buy, renovate it and sell it within 100 days. So we've spent countless hours and data and trying to figure out where those markets are.

We've made a lot of progress on that, but our demand is still there. Demand has always been there. It's just dependent on what we want to pay for homes. And so we've been disciplined in the past, making sure with the uncertainty or when we see homes moving too slow in certain markets, but in the areas that we're seeing, we're getting smarter with our marketing spend, where those marketing dollars are spent, that it's driving customers, we know we're going to have a better, that homes that we want to buy, a better chance of buying that home. And then we're giving them a stronger offer, whether or not they take our offer, they'll also then use our other products. They can use our listing services and some of the other products as well. So that's where you're seeing the growth come from. And we've been through a lot and--

Relative to the prior month, just wondering, I understand your business is running on full cylinders and having great momentum. But was there anything else like product-wise or region-wise or from an underlying industrial or industry dynamic that drove that strong inflection? And do you have any update to share on how your July month might be trending?

Sure. So we continue to see strong just across the board. But not really an inflection. Like I said, we've been really for the last several months, we've been working on products like Scout and Henry. Some of them are farther advanced than others as far as what we're doing and to help us get smarter where and how we're buying homes. And in this environment, we are hyper-focused on active inventory. And areas that are normally interior homes, like 1 of the things you're going to see is you're going to see our price point start to tick up a little bit because we're buying more homes in the interior, high velocity, strong school scores, that, but also 1 of the other things we're doing in some of those areas, we realized we don't have to put as much renovation in some of those homes. Not all of them, obviously it's market specific, but because of the affordability, normally the playbook is when you see more supply, you want to put more renovations in there, have your home sell before the others because yours is the nicest on the block. A little different there. Now you have velocity areas and desirable places that people want to live.

So, but in general, I would tell you today, it's specifically hyper-focused on our marketing dollars and marketing to areas that we want to buy homes that we feel strongly that they can move quickly. 1 of the numbers I want to highlight is, we've got rid a lot of our aged inventory and that was weighing down the entire company, the entire portfolio is inventory way when even when interest rates changed and just navigating this environment. And so we're down to, I believe less than 10 of those homes right now. And so now, so that kind of got that off of our shoulders that was we rebuild our portfolio going forward. Some of our newer inventory is performing like in 85 and 90 days on the market. So we're moving through our newer stuff very well, so the velocity stuff is working. So a lot of it is discipline, analytics, but also just making sure that we're buying homes that we feel that can move fairly quickly.

Yes, and I just add some context on July, our July signs was higher than June, so the trend continues to get even better. We expect that to be the same going into September.

Got it. That's great to hear. And then follow-up question to you, Peter. When you look at contribution profit after interest per transaction, it's good to see those reaching multi-year highs. Like how would you describe the performance of that metric relative to your expectations and where do you expect that to trend going into the back half?

Yes, it will continue to go up, but based on 2 drivers right now, we have, as Brian just highlighted, we have a very new and healthy portfolio of inventory and our expected ROIs across the rest of the year quite high. The contribution margin after profit and also the gross margin was a little bit temporarily depressed over the last couple quarters as we sold some aged inventory. So that's 1 driver and the second driver is which is equally important is our mix. We've talked about moving, right now we're at about 1/3 fee-based services or Brokerage Services or our marketplace where we sell to other buyers and 2/3 are Cash Offer. The margin dynamic on those is significantly higher. So as we shift to a higher percentage of fee-based services that will push the margin up even further.

1 thing just for the question you asked me, and then you can do a follow-up to Peter, but just, I want to highlight this is, you know, 1 thing that has changed, I think, a little bit, and this is just me and an assumption, but I think sellers' expectations have changed as well. And, you know, if Offerpad's doing their job, we're doing all right, we should be 6 months to 9 months ahead of what the market is doing and what sellers know what the market is. Right. You know, when we, over the last couple of years, we've seen sellers' expectations that continued to think we were in a post-COVID housing market that wasn't there. So staying disciplined and some of our offers with the lower conversion of what the market value of those homes are. But I think sellers' expectations have changed a little bit as well as they're seeing more inventory on the market, you know, month supply going up as well. And so being a buyer in a buyer's market is a good place to be. And there's an opportunity there that I think we're seeing right now as well.

Your next question comes from the line of Ryan Tomasello with KBW. Please go ahead.

Just in the operating framework here in the deck, you give an example of the transaction mix moving towards, I think, 2/3 capital light transactions from the marketplace and Brokerage Services versus the 1/3 today. I realize it's illustrative, but is that generally how you're thinking about the evolution of the mix from here? And then a separate question on conversion, I guess, maybe dovetailing on what Dave was asking, but what exactly in your mind has been the primary driver of the conversion improvement? Has it simply been feeling more comfortable leaning into pricing and expanding, I'm sorry, narrowing your margins, or is there something else that you feel like has been a primary driver of the conversion improvement?

Yes, no, we're staying pretty disciplined with our margins as well. I think it's, again, it's locations of areas that we have a high competence score in our propensity models. That's very important. You know, the high likelihood that a home, we can buy, renovate it and sell it and what the percentage of that likely is that we can do that within 60 days on the market. We are doing a little bit less renovations in some of those high velocity areas. That's we're getting the homes on the market quicker. And because we're not doing as much renovation, so we're getting some time on that side of it. You know, there are countless process changes that internally that we have been doing.

You know, as you guys know, I brought in a new management team as we've been focused on different things. We've been really hyper-focused on conversion at all parts of it from what from the marketing dollars that we spend and where we're spending those marketing dollars, but also the customer journey to the inspection process. So a lot of those processes you know, operationally. I wouldn't say there was 1 major thing I could say, hey, that's changing, that's why this, but all of those things as we get more efficient every day. I said something, we want to get better every day. It sounds cheesy, but we're trying to figure this out. And our conversion, you know, I would also tell you that you guys know this isn't new, but I'm just mentioning it, but we have something internally we call the Power Squad, but there are customer communication, our call center customer communication team.

That's been extremely helpful. And so, we are continuing to have more conversation because we have 2 types of customers at Offerpad. The ones that come and they want more of a tech experience, like, hey, hands off, just tell me what the price of my home is, come inspect it, and then close. And then we have another seller, it's a little bit different. To get 80% there through technology, but they need a little bit more hand-holding or answers or those. They want to talk about other products and some of those things. And so, you know, we've invested in the Power Squad a few months back. That's been extremely helpful. We've always been really good at customer interaction and customer experience. We've really taken it to a new level of 7 days a week, trying to be there for customer support. And that is definitely, that's definitely helping as well.

So overall, it's a lot of things you guys that we put in place over the last year or 2. I would tell you right now, you know, as we're starting to see this, starting to finally see this maximized and capitalized on what we're doing, probably the single biggest lever is our marketing spend and where and how we're spending those marketing dollars capped with the operations.

Yes, if I could jump in and I'd highlight the marketing that's a big tighter operations and everything Brian talked about, but 1 of the focus areas of our new Chief Operating Officer has been marketing attribution and that's also a big driver as well. We're just getting our top of funnel is stronger and healthier in addition to all the operational changes and having you know when we highlight in the prepared remarks--

You know, is at our peak we were doing 3,500-plus transactions a quarter and just kind of what we've done in the past and that was only with 1. What's exciting is when it comes from a conversion perspective is when customers were just making a huge strides to when customers come to us, it's not just a Cash Offer or no, it's a Cash Offer, but then what, what's the, if the Cash Offer doesn't work or they want to explore the market, what can I get on the market? We have some pretty cool listing products out that are different and not as traditional as what you could see, that we help the seller on that side as well. So we're seeing a really good increase in conversion, a good customer experience on that side as well. And with the whole time, without putting the company more at risk, as far as what we do on the market, on our pricing side, we focus very heavily on making the best pricing, the best real estate decision. And where you don't want to do is try to get volume by paying more than you want to in homes, especially in environments like this. There's still 4 million transactions. We want to buy our share of those 4 million transactions in the future. The right areas, the 1 that worked for our pricing team. And if they don't, then we'll move into 1 of our other products.

Okay. I didn't hit the second question, the conversion question. So I'll just hit that quickly, Ryan. You're right, that's illustrative. The product mix is super important because it helps us convert at a much higher level. And we are currently at 1/3, as I've mentioned, 1/3 the fee-based services and 2/3 Cash Offer. We expect that to move up to around 50%. And then the chart and the operating plan is, you know, down the road. Ultimately, we do expect to flip at some point. We're not ready to talk about or forecast when, but we do expect a flip to a situation where we have higher fee-based services than Cash Offer for a longer term.

Your next question comes from the line of Gaurav Mehta with Alliance Global Partners. Please go ahead.

I wanted to ask you on your renovation business, can you maybe talk about what's embedded in your '26 guidance for renovation revenues?

Yes, we do. Hi, Gaurav. We don't guide separately for Renovate, but what I would say about that business is it used to be a cost center. And so it's been a big win for us. It's a cost center that we've converted starting about 2 years ago into a profit center. The financials for the Renovate business are really about double what we report because the work we do on our internal inventory is not part of the external reporting, but just the third-party business that you see information around in the segment reporting and the SEC filings. That is a profitable business at about 20% to 25% margin. And you can also see some of the trends on the not forward-looking, but historical trends on the IR website.

1 thing I'll add just to the Renovate business that I'm pretty proud of right now is, you know, besides obviously doing Offerpad's business, a lot of when we started renovation a couple years ago, or started our Renovate business, doing it for third parties, we had a lot of large players in there. A lot of the SFRs, a lot of groups in there, we were doing single, you know, innovation for obviously with some of the new things that are happening with the regulatory side of it. Some of those large funds have slowed down their acquisitions, but we at the same time in parallel, we have been focused on small to midsize renovation players. And we're doing renovations for very small fix and flippers who maybe do 1 to 5 homes a year to midsize family offices that own a few hundred homes, to across the board to you know, there's some other large players with different models. And so our renovation continues to grow. We're still doing it, you know, for some of the larger brands that we've mentioned before in the past. And so anyway, just very happy what we're seeing there.

And I always remind everyone, everyone that we're doing renovation for is normally at their lowest volume. We can, as Renovate picks up, we expect when the market picks up, you see more transaction volume that will definitely grow with that as well. So I think there is a lot of opportunity in front of Renovate.

Okay, that's helpful. I also wanted to ask you on the operating leverage. With the current platform and the current cost structure, how much can you grow your portfolio and the volumes before you have to increase the cost?

I'll let Peter give you the smart answer. I'll give you my answer. 1 of the things that I'm probably the most excited about about what we've done is that, you know, we have, we've been through a lot over the last couple of years and since the, you know, the affordability crisis market hit, but I'll tell you like growing this company the first time, how we grow it again to do that will be much, much different. We're going to be a lot smarter. Obviously the implementation of a lot of the AI and initiatives we have internally. So we're not going to need the nearly amount of resources to buy a similar amount of homes that we were doing in before. We've centralized more things and our logistics and operations is humming. And so from a platform perspective, and this is just from my perspective, is that with the team that we have right now, we have a lot, we could put a lot more volume on that same current team because we're leveraging other factors of technology and AI and those other different things just as we get smarter.

But yes, yes, yes. On the operating expense, it's largely fixed. There are a few areas, for instance, third-party software platforms where there's some components that cost will grow a little bit with revenue, but 90%, 95% of our OpEx are truly fixed costs. We're very excited about the leverage that we'll see when we get up to 1,000 and beyond.

All right, that's helpful. And then lastly, just to clarify. 4Q number to be positive or you expect to exit the year on a run-rate basis to be--

You cut out. Do you mind repeating the question?

Yes, I wanted to ask you on the adjusted EBITDA guidance for '26 positive adjusted EBITDA. So are we expecting 4Q number to turn positive or do you expect the number to be positive on a run-rate basis?

Right. It's all run rate, both the 1,000 and the EBITDA.

Thank you. At this time, this concludes today's conference call. You may now disconnect.

Good afternoon, and welcome to Offerpad's First Quarter 2026 Earnings Conference Call. My name is Christine Linn, and I will be your conference operator today. [Operator Instructions]

With that, I'll turn the call over to Cortney Read, Offerpad's Vice President of Investor Relations and Communications. Cortney, please go ahead.

Good afternoon, and welcome to Offerpad's first quarter 2026 earnings call. 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 related 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 and 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 Bair, Chairman and Chief Executive Officer.

Thank you, Cortney, and thank you to everyone for joining us. On the call with me today is our Chief Financial Officer, Peter Knag. Offerpad is executing. Over the past 2 years, we have evolved from a single product company into a multi-solution real estate platform, and that platform is now producing measurable results.

Today, that platform includes Cash Offer, Cash Offer Marketplace, Brokerage Services, and Renovate. The macro environment has shifted since our last call. Geopolitical uncertainty has increased, including ongoing conflict in the Middle East and interest rates have moved higher in response.

Transaction volumes remain below historical norms and affordability continues to limit mobility. For some sellers, this brings uncertainty around timing and proceeds, keeping many on the sidelines. We continue to refine and enhance our model through diversified revenue streams, multiple solutions, disciplined capital allocation and AI-driven precision, positioning us to operate effectively in environments like this.

While some sellers are still cautious, we are seeing greater stabilization with increased engagement and clear alignment on pricing and expectations. That shift is supporting improved conversion, and we expect it to remain a tailwind through the remainder of 2026.

With all that said, our Cash Offer strategy is not dependent on the macro backdrop changing. We run this business as a capital allocator first and an operator second. Every transaction competes for capital. If it does not meet our return thresholds, we do not transact. Our philosophy is simple: volume follows return, not the other way around.

Throughout 2025, that meant deliberately widening spreads, tightening our buy box and slowing acquisitions rather than chasing volume into an unstable market. That approach pressured short-term volume, but it strengthened the portfolio and preserved optionality.

As we move through 2026, we are deploying capital with the same discipline. The result is a portfolio that is cleaner, faster turning and better positioned for returns than at any other point in recent history. Our aged inventory, homes beyond their target period of hold time, stands today at less than 30 homes, down from fewer than 60 at the end of quarter 4.

For remaining homes, we deployed buydown mortgage rate incentives along with pulling other levers to accelerate movement. In addition, we made an important shift in how we operate.

By moving to a post-inspection offer model, we are entering commitments with greater certainty, which means stronger transaction quality, more efficient capital deployment and a better experience for sellers. But the bigger narrative is what is happening at the top of our funnel.

Seller engagement with Offerpad is growing, and more importantly, sellers are finding solutions. Our multi-solution platform means that when a cash offer is not the right fit, we have options ready, the Cash Offer Marketplace or through our brokered services with an agent-led listing path.

More sellers are staying in our ecosystem, converting across more pathways and leaving with a solution that works for their situation. Conversion is what we are focused on, the quality and completeness of every seller engagement. That should position us to scale transaction volume with confidence through the remainder of 2026.

A key part of the execution and central to how we move forward is AI. Real estate is a data-intensive, decision-dense industry, and we have spent the last decade building the foundation to do this right, thousands of transactions, deep market coverage, rich data across pricing, renovations, and homeowner behavior. We believe this is a real operating advantage.

With SCOUT and HENRY, we are turning it into a faster, smarter and more consistent operating model across stages of the transaction. From the moment a seller first engages with Offerpad to the final disposition of properties in our portfolio, AI will be embedded in that decision. That is a fundamentally different way to operate and should be a durable advantage that compounds with every home we touch.

Let me start with what it's producing. From January through March, following the deployment of SCOUT across all operating markets, we saw over a 200 basis point improvement in home contracting rates.

Let me explain how. SCOUT is an internally developed AI-powered homeowner intake and routing platform that is being rolled out to better understand our seller intent by cross-referencing seller-provided data with third-party sources, public records and importantly, our own proprietary transaction history to improve acquisition accuracy and routing decisions before every single offer is made.

Looking ahead, we are building SCOUT to make our homeowner intake experience fully dynamic and adaptive in real time by personalizing the seller journey based on the solutions available to them. A seller whose home falls outside of acquisition criteria will not be shown a Cash Offer path.

Instead, they will be routed to the solution that works for them, guided by our customer solutions advisers every step of the way. That capability is in active development and is a core part of how SCOUT scales in 2026. SCOUT also enhances our call center operations with AI-driven conversation analysis evaluating homeowner interactions in near real time, giving our advisers live coaching and provides leadership visibility into performance trends and customer intent across thousands of conversations each month.

Additionally, that intelligence has been extended upstream into our marketing demand generation, improving how we manage spend, optimize performance and drive efficiency across channels. As a result, cost per qualified lead is down 37% year-over-year. We're reaching more sellers more efficiently in the markets where we can win.

Where SCOUT powers the seller journey, HENRY will help govern the asset. We are expanding HENRY's capabilities throughout 2026, deliberately and in stages.

AI-driven property inspection and renovation estimation tools are now live, powered by computer vision models that analyze property images and inspection data to generate renovation cost estimates based on our historical outcomes.

Looking ahead, HENRY will guide decisions across renovation scope, listing price, holding time and overall disposition strategy for every home in the portfolio. A core part of what HENRY will enable is a new segmentation framework that combines macro market dynamics with property level signals, allowing us to move beyond traditional static pricing approaches. This data-driven model will enhance how we assess demand and liquidity, giving us more consistent and scalable ways to make pricing and acquisition decisions across markets.

As we scale this across the platform, it's being designed to improve turn times, strengthen risk management and drive more disciplined, consistent returns over time. Together, SCOUT and HENRY are the operating architecture of Offerpad's future that will compound with every transaction we complete.

On our last call, I shared more details on our focus with our 4 solution platform.

Next, I will go into updates and progress on each. Cash Offer remains our core differentiator. It gives sellers speed, certainty and flexibility, and it continues to be the foundation of everything we build on top of.

In Q1, Cash Offer continued to perform within our underwriting guardrails. And with HENRY coming online, we expect our acquisition precision is only going to improve. The Cash Offer Marketplace grew over 60% year-over-year in 2025 and remains one of the most capital-efficient revenue streams we operate, generating fee income without balance sheet deployment.

The residential investment landscape may be shifting with regulatory and capital market dynamics continuing to influence how institutional buyers participate in residential real estate. That environment remains fluid, and we are well positioned by expanding our network designed for depth and durability, diversified across buyer segments, so no single regulatory or market shift could disrupt the channel.

Led by Rich Ford, we are executing against that strategy with discipline. As the network matures, we expect the Cash Offer Marketplace to become a meaningful contributor to gross profit in the second half of 2026.

Offerpad's Brokerage Services is a core driver of our platform. In quarter 1, we referred more qualified sellers to HomePro agents than in all of 2025 and 1/3 of Cash Offer requests now come through our agent partnership program. This capital-light model expands our reach, lowers acquisition costs and drives profitability.

Offerpad Renovate broke records nearly every quarter in 2025, and we are raising the bar in 2026. In quarter 1, Renovate generated $5.7 million in revenue compared to $5.3 million in quarter 1 of 2025, continuing to deliver margins of 20% to 30% with no balance sheet capital required.

Each solution serves a distinct need, generates its own revenue and strengthens the whole, ensuring more sellers find a path with us. That breadth improves conversion, reduces risk and keeps more customers in our ecosystem from first touch to close. Our focus remains on building a profitable, scalable business with superior returns on capital and a platform that performs across market cycles.

In closing, I want to speak plainly about where we stand and what I believe. I believe we have built a strong home selling platform. I believe our 4 solutions give sellers and partners more control, more certainty and more options than traditional alternatives. I believe the technology we are building in SCOUT and HENRY will make us smarter, faster and more precise with every single transaction we complete. And I believe the people at Offerpad, the team that has worked tirelessly to build this platform, enhance our model and serve our customers are among the best in the industry.

Our near-term objective remains approximately 1,000 transactions per quarter, the level at which the business reaches adjusted EBITDA breakeven and the foundation from which we scale. We are building towards that milestone and the progress we are making every quarter gives us confidence in that direction. But let me say it again, 1,000 transactions per quarter is not the finish line. It's the foundation. The platform we have built is designed to scale. And as it does, every incremental transaction carries more operating leverage, more data and more intelligence back into the system.

What we have built over the last 2 years is not a set of improvements. It is fundamentally different operating model. The window to understand what Offerpad is becoming before the market fully reflects it is right now, and I intend to use every day to close that gap.

I'll now turn the call over to Peter.

Thank you, Brian. What Brian described is not just a vision. It is already showing up in our financial results. The investments we have made in our platform, our people and our operating model are translating into measurable progress and Q1 is evidence of that.

We guided to a range of $70 million to $95 million in revenue and 250 to 300 transactions, and we delivered, generating $80 million in total revenue across 263 transactions in Q1. That consistency matters. It reflects an operating model that is becoming more predictable, more disciplined and more capable of scaling efficiently.

Gross profit was $5.6 million in Q1 2026, resulting in gross margin of 6.9% for the quarter compared to 6.5% in Q1 2025. As we continue to scale transaction volumes and our mix of fee-based solutions grows, we expect gross margin to improve throughout the remainder of the year.

Operating expenses, excluding property selling costs, were $12.2 million, roughly in line with Q4 2025 and down from $16.7 million in Q1 2025. With over $140 million in annualized expenses removed since 2022, our cost base can support significantly higher transaction volumes without proportional overhead growth. That operating leverage is one of the most important drivers of our path to profitability.

Adjusted EBITDA loss for the first quarter was $6.7 million, a sequential improvement from Q4 2025 and reflecting continued progress towards our goal of achieving positive adjusted EBITDA before the end of 2026. We entered Q1 in a position of strength, and we exit in the same way.

At quarter end, total liquidity was over $60 million, reflecting unrestricted cash plus the estimated fair market value of our inventory, including $41 million of unrestricted cash. Our 2026 operating framework based on current plans and assumptions does not anticipate requiring incremental equity capital to execute.

We have the liquidity, the facilities and the cost structure to scale within our defined guardrails. I want to address directly what I know is on everyone's mind. Can we reach approximately 1,000 transactions per quarter and return to profitability? And how do we get there? Here is the strategy. We closed Q1 with 263 transactions. That is our baseline.

To reach our goal, we need to grow sequentially each quarter and the drivers of that growth are already in motion. SCOUT is improving conversion rates at the top of the funnel. Our Cash Offer Marketplace partner network is expanding. We're adding more homes to more buyers without balance sheet deployment.

As Brian stated, Brokerage Services preferred more sellers in Q1 alone than in all of 2025. And Renovate continues to grow, adding high-margin fee revenue with every project it completes. Our Q2 guidance represents sequential growth of 14% to 33% in transactions over Q1. We expect continued sequential improvement in Q3 and Q4 as conversion improves.

Based on our current cost structure and expected product mix, we believe approximately 1,000 transactions per quarter represents our path to adjusted EBITDA breakeven. Every transaction above that threshold is expected to contribute incremental margin to the bottom line. That is the power of the operating leverage we've built. We do not need to add significant overhead to grow. We need to convert more sellers, and that is exactly what our platform is designed to do.

Turning to Q2. We entered the second quarter with a stronger pipeline than we had entering Q1 and continued conversion momentum across the platform. For Q2, we expect 300 to 350 real estate transactions across Cash Offer, Cash Offer Marketplace and Brokerage Services, total revenue of $80 million to $90 million and a narrower adjusted EBITDA loss compared to Q1, continuing our sequential progression towards positive adjusted EBITDA before the year-end.

Our priorities are clear and our execution is improving with sequential gains each quarter, a healthier portfolio every month and a smarter AI system with every transaction. That is how we are building our business to scale, and I'm excited by the progress we're seeing and what we're building to drive what comes next.

With that, we will now take your questions.

[Operator Instructions] Our first question comes from the line of Ryan Tomasello with KBW.

This is Yvonne Jeng on for Ryan. So just taking the midpoint of 2Q's guidance, that $85 million revenue over 325 transactions, that gets us to a revenue per transaction that's about 14% lower than 1Q. Is that just going to be the mix shift? And if so, could you help break down how you're thinking about the mix between the products?

Sure. That's right. So the revenue per transaction is a little bit different across the -- as you heard in the prepared remarks, we're heavily focused on conversion. That's the most important driver KPI operationally for us.

We historically very roughly have had a 2/3, 1/3 mix between the products, so 2/3 Cash Offer and 1/3 the other products, including HomePro and Cash Offer Marketplace. Cash Offer, we target around 5% of the home value for gross profit. The Cash Offer Marketplace is similar to that. And then HomePro is lower. HomePro is -- we split the fee for traditional real estate listing service with the broker. So it tends to be around 1% or 1.5%. So as we as we broaden our product set and increase conversion across these other products, you will see that per transaction figure adjust accordingly.

And on just the top of funnel of home sellers, how has that trended at the start of the year? Recall that you previously called out that it's roughly 10,000 to 20,000 in any given month. So has that accelerated at all?

Yes. That's actually stayed very strong and continuing to even see some growth there as well. Our marketing team has been really focused on not just bringing in more leads or more sellers, but the quality of sellers. And so we're seeing really strong engaged sellers that are coming top of funnel. So that definitely stays strong.

Your next question comes from the line of Dae Lee from JPMorgan.

I go back to that 1,000 per quarter target you guys have out there. I mean, those kind of suggest, like Peter said, a meaningful ramp in the second half to get to that target and you also have to kind of factor in the seasonality aspect of that. So just curious to hear like where like the conversion of your platform stands today? And like where do you see the opportunity to improve that? Is it on the Cash Offer side? Is it on the other transactions? Does it like vary by geography. Just curious like could you help us bridge like where you are today to the end of the year and or what gives you the confidence the bridge will improve?

Sure. Thanks for the question, Dae. A couple of things that I'd point out. One is we have -- while we have historically been really 1 product or a little bit 1 to 2 products, now we're 3 products. And so particularly with the addition of the Brokerage Services solution. So we're seeing conversion going up based on having additional offers for the top of funnel customer and just increasing the likelihood that they choose a solution.

Second, 1,000 transactions is -- we came down intentionally over the last couple of quarters last year on our Cash Offer volume as we worked on our operations. And so we're able to ramp that up just based on the adjustments that we're making and the price point that we're putting out there in our buy box characteristics. We -- if you look back in 2024, we were doing almost 800 or 900 transactions per quarter.

And at our high point a couple of years ago, we were doing 1,000 transactions per month, not per quarter. So we have high confidence that we can get there.

Yes. Just a couple of things on that as well. With our current volume, it's going to take a conversion increase of 1% to 2% a month to make that happen. And one of the things that's important is we're able to now serve customers who weren't able to serve before with our listing services.

So for example, if there were homes that were outside of -- or out of area, out of our buy box, we simply just couldn't offer on that with a Cash Offer or through our Cash Offer Marketplace. Now with Brokerage Services, it changes conversion because we can find a solution to them.

And with our listing services, the customer gets free moving services, home warranties. So it's a really strong compelling product on why to list with one of our HomePros. And so that -- so if we can -- as we increase conversion, which we're starting to see that now with our different products and then able to serve customers who weren't before that's what gives us the confidence towards that 1,000 transactions per quarter.

Our last question comes from the line of Gaurav Mehta with AGP.

I wanted to ask you on the 1,000 transactions and the adjusted EBITDA. So does your adjusted EBITDA breakeven expectations include renovations in those transactions or renovations is separate than the transactions?

Hi, Gaurav, I think I heard the question correctly. Does adjusted EBITDA include the cost of renovations? Absolutely. It's in there in the cost of goods sold as part of the Cash Offer product. And then separately for the B2B third-party Renovate business, it's also in the cost of goods sold.

Okay. No, I actually wanted to ask you on the renovation revenue. So to get to adjusted EBITDA, how much renovation revenue growth are you guys looking --

I see. So it's not in the 1,000 transactions. So we think of the business really in 2 buckets, perhaps. One, the customers that are coming to us and are looking to sell their home. And we have 3 products for that, and that's what we're focused around on the 1,000 transactions. And that business is a little bit more variable. And so that's the reason for the focus on 1,000 transactions across those 3 products.

The Renovate business is very consistent and is part of reaching EBITDA and cash flow positive, but it's not part of that 1,000 metric. But it is part of the total financials, of course, and part of the EBITDA. It's growing fairly rapidly, and we expect it to continue to grow.

Second question I have is on the transaction mix. What was the mix between Cash Offer and other services in the current transactions you reported in 1Q? And I know in the past, you have talked about maybe 50-50 mix as you approach adjusted EBITDA breakeven. Is that still the expectation?

Yes. So in the mix, you can see on the trending schedules on the IR site, you can -- we break out all those details, but the mix has been -- as I've mentioned, the mix has been about 1/3, 2/3 Cash Offer. And yes, we do expect as we move across the year up towards 1,000 transactions, a larger percentage coming from the other 2 real estate transaction products.

Yes. The one thing I'll just add to that as well is our Cash Offer Marketplace as we continue to add other Cash Offer partners in there as well. The people come to Offerpad because they want a cash offer, doesn't necessarily need to be an Offerpad Cash Offer. We want to find the best solution for them.

And so in our Cash Offer Marketplace, having short-term hold companies as well as long-term hold companies to find the best customer and the best solution for them on the Cash Offer Marketplace. And so as we continue to grow towards the 1,000, we're expecting the Cash Offer Marketplace to continue to grow and to ramp as we add more and more even though some of the smaller customers on there. And it's actually good because we can -- we help them source by -- they can find homes off of our marketplace. But then also, we're doing the renovation for those groups as well. And so Offerpad benefiting from both of those segments.

Okay. Maybe one more for me. On the operating expense side, as you ramp up the transactions, do you expect the operating expenses to remain where they are? Or do you expect any further improvements or any increases on the operating expense side?

Yes. True, if you look on the P&L, right, so for this quarter, there's $14.5 million of operating expenses. If you look on the non-GAAP reconciliation table, you can see that there are some selling and holding cost expenses in there. It's around $2 million for this quarter. That small piece of operating expenses as in the GAAP reporting is variable, but the large majority of it, which is about $12 million, which we highlighted in the prepared remarks or $12.5 million is not variable.

And in fact, we're -- there are a few more levers that we're working to pull that are harder than the other cost outs that we've done across the last few years. And so we expect that to actually continue to come down, not as dramatically as we have over time. It was a couple of years ago, it was as much as $80 million per quarter, and now we're down to $12.5 million or with the holding cost $14.5 million. So it won't come down too much more, but we expect it to go down, not up.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, and welcome to Offerpad's Fourth Quarter and Full Year 2025 earnings conference call. My name is Kara and I will be your conference operator today. [Operator Instructions]

And with that, I'll turn the call over to Cortney Read, Offerpad's Vice President of Investor Relations and Communications.

Good afternoon, and welcome to Offerpad's Fourth Quarter 2025 Earnings Call. 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 fourth quarter earnings release on Offerpad's website.

With that, I'll turn the call over to Brian Bair, Chairman and Chief Executive Officer. .

Thank you, Cortney, and thank you to everyone for joining us today. On the call with me today is our Chief Financial Officer, Peter Knag, along with leaders who are central to how we execute and scale in 2026. Rich Ford, our Chief Strategy Officer and President of Cash Offer Marketplace; and Chris Carpenter, our Chief Operating Officer. Each of these leaders owns a core operating function that directly impacts how we allocate capital, drive conversion and deliver returns.

Today's call is about 3 things. First, the disciplined capital allocation decisions we made in 2025, decisions that we believe position us for sustainable, profitable growth. Second, how we evolve from a single product company into a 4 solution real estate platform capable of monetizing transactions across the spectrum of capital intensity. And third, how the operational improvements we made in 2025, stronger pricing segmentation, better conversion infrastructure and deeper marketplace liquidity are translating to momentum we're already seen in early 2026.

Let's start with the market context. The housing market remains constrained, transaction volumes are below historic norms, affordability continues to limit mobility. Mortgage rates, while moderating, remain elated relative to the prior cycle. Recovery is gradual and uneven. At the same time, nearly half of the listed homes are hitting the market today are over 40 years old. Many of these homes require significant updates to meet modern buyer expectations and mortgage financing standards. Yet homeowners are often locked into low mortgage rates and lacked the liquidity or time to renovate before selling.

The combination of agent inventory, capital constraints and limited mobility creates friction and friction suppressive transactions. But friction also creates opportunity for platforms that can step into that gap. That's where Offerpad is deciding to perform. We purchased homes at approximately $370,000 median price, which is right in the heart of affordability for first-time and middle-income buyers.

In 2025, we invested an average of $25,000 per home in targeted repairs and renovations, and we delivered move-in ready mortgage eligible homes in established neighborhoods where supply is often limited. We're not just facilitating transactions. We're solving a fundamental market problem, expanding access to quality, move-in ready housing at price points where demand is strongest and supply remains constrained.

Now let me talk about what we did in 2025 and why. Our priority in 2025 was not volume. It was readiness. We made a deliberate choice to widen underwriting spreads, operate with tighter risk hard rails and slow acquisition velocity rather than to chase transactions into an uncertain market.

Let me be specific about what we saw and why we made that choice. Throughout 2025, the housing market showed intermittent signs of improvement, but the underlying transaction data remains unstable. Existing home sales were approximately 4.1 million units, essentially flat year-over-year and the lowest annual level since the mid-'90s. At the same time, we observed operational signals across our markets. Days on market extended in multiple metros. Price dispersion widened even within the same neighborhoods and buyer cost pressures from insurance to taxes to maintenance increasingly impacted transaction velocity and completion rates.

When transaction velocity slows and price dispersion increases, pricing accuracy matters more and margin for error shrinks. That combination triggered our decision to one, tightened by box guardrails and two, increased required contribution margins before deploying capital. Last year, every home competed for capital. If we could not underwrite to a durable risk-adjusted return, we simply didn't transact.

Importantly, what we're seeing in entering 2026 is greater pricing clarity. While overall transaction volumes remain constrained, instability has moderated. Days on market has stabilized in several of our core markets, price cuts have become more predictable and inventory growth has normalized relative to demand. We are not calling for a housing surge. What we are seeing is a market that is more measurable and measurability supports disciplined scaling.

Over the past several years, the housing market has reinforced a clear lesson. Capital deployed without discipline erodes returns quickly. We chose a different path. In the second half of 2025, we deliberately slowed acquisitions and cleared aged inventory acquired earlier in the year. That decision pressured near-term cash offer margins, but have positioned us to enter 2026 with a cleaner, faster-turning portfolio. As of today, aged inventory that is not under contract has been reduced to fewer than 60 homes, materially lowering aged inventory exposure.

Importantly, as of the end of the year, all cohorts across our inventory with the exception of 2 homes are expected to be profitable. As we enter 2026, we are doing so with a streamlined portfolio, limited aged exposure and embedded mark-to-market strength across the majority of our assets. Importantly, while we moderated capital deployment, demand did not moderate. Top of funnel engagement remained consistent. Just in the past few months from November through January, signed contracts doubled up 102%, reflecting stronger downstream execution. December signed volumes increased 71% month-over-month, and that momentum carried into January.

In fact, as of mid-February, we signed approximately 305 contracts nearly matching the full Q4 total of 314 with half the quarter remaining. These are measurable leading indicators that we did not lose demand. We chose to align capital more selectively against that demand. At the same time, we learned something important about today's seller. Throughout 2025, we analyzed the outcomes of sellers who came to Offerpad, whether they accepted our cash offer, listed their home, refinanced or ultimately stayed put.

What became clear is this. Sellers aren't coming to us for a cash offer alone. They're coming to us for a liquidity solution. They're seeking help understanding trade-offs, time lines and outcomes. That shift is precisely why expanding into a broader multi-solution platform was necessary. We responded by building an integrated conversion engine designed to meet sellers where they are and guide them to the best solution. whether that's an Offerpad cash offer, an external buyer cash offer through our cash offer marketplace or a listing solution.

Here's what's materially different today compared to prior years. First, we are no longer a one solution company seeking to attach ancillary services. We are a platform where each solution is designed to generate meaningful revenue and operate at scale. Second, we built the operational infrastructure to convert sellers across these pathways. That means dedicated teams, refined handoff processes and technology that tracks the customer journey across multiple solutions. Third, we're seeing it in our data. Conversion rates are improving. Customers who don't take our cash offer are increasingly staying in our ecosystem by transacting through the marketplace or listing solutions.

Now let me walk you through the 4 solutions that makes this possible. First is the cash offer, which remains the foundation of our business. We deliver pricing certainty to sellers, purchase homes, renovate and sell them to buyers. Create a streamlined, reliable transaction from start to finish. Our underwriting today reflects a sophisticated application of decision science, supported by generative AI and machine learning that ensures we are buying the right homes in the right markets at the right time. We're leveraging years of operating data and experience, transaction history and market intelligence to increase pricing precision and reduce risk.

In parallel, under the leadership of Dr. Jai Singh, our Chief Pricing and Analytics Officer, we are developing and piloting an integrated portfolio management system that applies AI, machine learning and advanced decision science to optimize the full life cycle of a home, acquisition, hold strategy and disposition. This platform is designed to fuse qualitative property level signals, including images, inspection notes and customer interactions with quantitative inputs such as local micro market dynamics, demand indicators, inventory trends and broader macroeconomic data. By integrating qualitative and quantitative data into a unified decision framework, we are improving precision, increasing consistency and optimizing capital allocation across our cash offer portfolio.

Now let me be clear about how we think about our cash offer returns. We're not optimizing for margin per home. We're optimizing for return on deployed capital. On the property level, we target contribution margins in the mid-single digits, but what matters is capital velocity. We're targeting 90- to 120-day turn times which means we can turn the same dollar of capital 3 to 4x per year. When you turn capital that fast at those property level margins, we're generating annualized returns in the 15% to 20% range on deployed capital. That's the right way to evaluate cash offer economics. The business operates with clear guardrails around pricing, risk and capital deployment, but our focus is velocity and returns, not just margin per transaction.

Second is the cash offer marketplace. This solution extends external buyer demand beyond our balance sheet by routing homes to a diversified network of professional buyers. Our Direct Plus partners include short-term value-add operators, regional professional investors and structured capital buyers. This diversity is strategic. It deepens buyer demand, increases bid confidence and enhances execution certainty for sellers.

By matching homes with the right capital profile for each property and market we are able to deliver more competitive outcomes while maintaining disciplined capital allocation. When you route a home through the marketplace, we retain a 5% average seller paid fee, approximately $20,000 and a $400,000 home without deploying principal capital. Last year, marketplace transactions increased approximately 60% year-over-year. To lead continued growth, Rich Ford joined Offerpad as Chief Strategy Officer and President of cash offer marketplace. Rich brings more than 2 decades of experience building and scaling residential real estate marketplaces. His mandate is to expand and scale this business line.

Third is brokerage services. Within brokerage services is HomePro. This is not a traditional listing attachment. It's a premium differentiated listing service designed to deliver a highly curated, value-added experience for sellers who prefer to go to market. When the seller list through HomePro, Offerpad earns a referral fee which averaged approximately $4,500 per transaction in 2025.

Within brokerage services, the agent partnership program allows agents to introduce offer pad as one of several options available to their sellers, including the cash offer. Agents remain the trusted adviser, helping sellers evaluate alternatives and determine the right path for their situation. In 2025, approximately 1/3 of cash offer requests originated through agents who include Offerpad as part of the conversation, reinforcing our role as a solutions platform supporting both sellers and real estate professionals.

Additionally, we work with homebuilders through our homebuilder program, helping buyers remove sell contingencies on new construction by providing certainty around the sale of their existing home. Together, brokerage services positions Offerpad as a first stop for both sellers and agents with the goal of ensuring each customer is directed to the right solution while improving conversion across the platform.

Fourth is RENOVATE. RENOVATE plays a dual role. First, it enables the performance of our cash offer model. As stated earlier, many homes require updates before they are list ready and mortgage eligible. By executing these improvements efficiently and with cost discipline, we return homes to the market in buyer ready condition that meets financing standards. This expands access to quality, move-in ready housing often at price points aligned with first-time and middle-income buyers and supply-constrained neighborhoods.

Second, RENOVATE is a fee-based B2B service, generating margins between 20% and 30%. It supports professional owners, operators and Direct Plus partners with targeted repairs and full rehabs, enhancing asset readiness and execution while producing revenue without deploying balance sheet capital. Last year, RENOVATE generated $27 million in revenue, up approximately 50% year-over-year. Led by veteran renovation leader, Bobby Triplett, who has overseen more than 40,000 renovations, the business delivers consistent execution and cost control at scale. In 2026, we're focused on expanding business-to-business partners while maintaining margin consistency and repeat volume.

Together, these 4 solutions provide flexibility to support the right path for each seller while operating within our defined capital structure. Importantly, our 2026 framework does not currently assume additional capital. We believe that capital base we have today positions us well to scale transaction volumes drive conversion improvements and return to profitability within that structure.

To execute this at scale, we strengthened operating leadership. Chris Carpenter joined as Chief Operating Officer with responsibility to optimize the operating system that drives execution across the platform, end-to-end performance, cross-functional coordination and scalable systems that deliver consistent outcomes within our guardrails.

Scaling with defined risk requires more than oversight. It requires repeatable processes, disciplined feedback loops and systems designed to produce optimal outcomes at scale. That is where AI-led decision science becomes foundational. Across acquisition, underwriting, renovation and disposition we are embedding institutional-grade analytics into the core operating model. Powered by more than a decade of transaction and customer data, our system increasingly integrate both structured and unstructured inputs from market dynamics and inventory trends to property level signals to support more consistent, analytically driven decisions.

This is not automation for automation's sake. It's about improving return stability. Better precision at entry reduces volatility. Portfolio level optimization improves capital rotation, more disciplined disposition decisions protect margin and enhance balance sheet efficiency. At the Board level, we expand the breadth of expertise to support the continued scaling of our multi-solution real estate operating model with the addition of Tela Gallagher Mathias who brings more than 25 years of enterprise technology and generative AI leadership across the housing, finance and regulated environments.

The work we did in 2025 was about readiness. We didn't chase volume, we built infrastructure. We didn't deploy capital indiscriminately. We engineered optionality. The result is that Offerpad today is a different company than it was 12 months ago.

Stepping back, what we're building here is a fundamentally different category leader. Not just an iBuyer and more than a brokerage. A housing transaction platform that meets sellers across multiple pathways, deploys capital selectively and generates returns through a mix of principal and fee-based businesses. Our near-term objective is approximately 1,000 transactions per quarter as we exit 2026. It gets us to profitability, improves the operating model at scale. So let me be clear, 1,000 transactions per quarter is not the finish line. It's just the beginning. I'll now turn the call over to Peter.

Thank you, Brian. As you've heard over the past year and especially in recent months, we've strengthened leadership across our core operating areas, refined our operating model and leaned into a broader product set focused on targeting higher conversion and profit. That clarity is translating into more disciplined capital deployment, tighter cost control and more consistent execution.

In Q4, revenue was $114 million with 312 homes sold, bringing full year revenue to $568 million and 1,591 homes sold. Gross margin was 7% for the quarter and 7.4% for the full year generating gross profit of $8 million and $42 million, respectively. While volumes in 2025 were below historical norms, the operating framework and control supporting those transactions are stronger than ever before and we expect this will position us to scale back up to higher volumes driven by our broader product set.

Adjusted EBITDA loss for the fourth quarter was $6.9 million. Excluding onetime restructuring and other costs, underlying performance was consistent with the prior quarter. At quarter end, total liquidity was over $55 million, reflecting unrestricted cash plus the estimated fair market value of our inventory and including $27 million of unrestricted cash.

As previously announced, we completed an $18 million capital raise early in the first quarter of 2026, further strengthening our liquidity and providing additional flexibility to support increased transaction volumes. Including the $18 million capital raise, our total liquidity was over $70 million.

At the same time, the cost structure of the business has fundamentally changed with over $140 million of annualized expenses removed since 2022. Importantly, our cost base can support much higher transaction volumes without proportional overhead growth. That operating leverage is a critical driver of our expected path to profitability in 2026.

Turning to the near term. We expect the first quarter to reflect normal seasonality and a measured start for the year. For Q1, we are guiding to 250 to 300 real estate transactions across cash offer, cash offer marketplace and brokerage listings with revenue of $70 million to $95 million in sequential improvement in adjusted EBITDA. Importantly, we believe current transaction volume represents a trough for the business. The low volume experienced over 2025 is expected to be temporary and reflects our strategic expansion into a broader set of solutions. By offering more paths for sellers, we increase the likelihood of engagement and selection which we expect to drive aggregate transaction growth, improved overall conversion and a reduction in customer acquisition costs over time.

We've already begun to see increased activity early in the year with transaction pipeline rising meaningfully in the first several weeks of the quarter. Given the natural timing of the acquisition to sales cycle, that pipeline momentum is expected to translate into higher closed transaction volumes over subsequent quarters, supporting growth in volume as we move through the year. In 2026, our expectation is to return to approximately 1,000 home transactions per quarter across cash offer, cash offer marketplace and brokerage services. We expect to reach this goal as we exit 2026.

Separately, RENOVATE remains an important revenue engine incremental to the rest of the business. RENOVATE delivered $27.1 million in revenue in 2025. While these projects are service-based B2B transactions and not included in the 1,000 transaction per quarter target, they contribute meaningfully to margin and overall profitability. At these levels of activity and with the cost structure and product mix in place today, we believe the business is positioned to support a return to profitability.

Based on our current outlook, we continue to expect to achieve positive adjusted EBITDA within the year. We entered 2026 with a stronger balance sheet, a structurally lower cost base, healthy inventory levels and a broader set of monetization pathway than at any point in recent years. That foundation supports more consistent performance as we scale responsibly across a diversified platform.

Importantly, our 2026 operating framework currently does not require incremental capital to execute. We believe our current liquidity position, asset-backed facilities and operating structure fully support our plan to scale within defined guardrails. We remain open to potential capital opportunities if they enhance flexibility lower our cost of capital or accelerate growth initiatives.

With that, we are now ready to take your questions.

[Operator Instructions] Your first question comes from the line of Dae Lee with JPMorgan. .

Great. I have two. So first one for Brian. So with the AI expertise you've added across the board and management, where are you most excited to see the impact of AI in your business? Which P&L line should we expect to show -- to see that show up first?

And secondly, to Peter, could you walk us through the bridge from first quarter 2026 transaction volume to the year-end target? And if there's any like step-up or proof points that we should be watching through the year? And if that rise should be steady? Or do you expect more of a back half ramp as you go into 2027?

Peter, do you want to take the first one? I'll take...

Sure.

Yes, sorry, start with the second one.

Sure. So we're ramping. I mean, we've effectively given full year guidance, right, at 1,000 transactions per quarter as we exit. So that means that on a run rate basis as we exit, we'll get up to that level. We've guided towards 250 to 300 real estate transactions and just reclarifying that we're moving now to a focus of 3 product focus across the cash offer, the cash offer marketplace, which is when we're selling homes, underwriting and selling to an investor and three, traditional list product as well.

So we are not giving guidance for second quarter and third quarter. But what I'd say today is we expect a fairly -- roughly linear growth trend as we move from in the neighborhood of 100 transactions per month up to just above 300 transactions a month across a broader product set of three products instead of one.

Yes. And then I'll take -- Dave, I'll take the AI. Listen, AI is such a powerful tool. I'm excited in a lot of different areas there. But specifically, the real estate operations and the power of AI, what we're working on there as far as pricing, pricing sensitivity. We have 10 years of data that we can pull from property inspections to likely sellers to it's just phenomenal what -- over the last 10 years of what AI can do with that. And so the data that we have in place but also just as we work through the process of -- from the disposition process of when to sell, how to sell, how to look at those things differently.

But there is -- like I said, the real estate is really impactful. But we're also seeing immediately, we're seeing some really good impact in just something very simple is through AI voice scheduling inspections. We schedule hundreds and thousands of inspections throughout the year. We've had a lot of labor either outsourcing it or overseas or having large internal teams. And with the ability of AI voice, we can now schedule inspections to have our call center Q&A, people can call and ask questions about where they are in the process.

So -- and the other thing I'll just add about AI is that it's across the company. Even just our individual employees using that in their day-to-day life on that is I think it makes them 60%, 70% more efficient. So there's a lot of opportunity we really excited about there.

Your next question comes from the line of Ryan Tomasello with KBW.

Starting with the real estate transaction targets for the year. Can you give us a sense of what mix you expect for traditional cash offer products to comprised as you kind of march towards that 1,000 target per quarter. And more near term here, what's being baked into the 1Q guide for real estate transactions in terms of that cash offer mix?

Sure. Yes. So we -- Ryan, so we have been, as we've talked about before, it depends on the month and the quarter but somewhere in the neighborhood of 1/3 of the transactions are -- have been across Direct Plus. And 2/3 through cash offer. Now we have three products, not primarily one or two. As we roll out, as we focus really equally across three products. We expect that mix to move up towards eventually to 50-50 range. Again, it will change month-over-month. But that's the effectively where we expect to go.

Yes. So I think -- Ryan, I think you're going to see 2/3, 1/3 as we begin here. But like Peter said, we're focused and the -- our focus really is what's going to provide seller with the best solution, whether that's a cash offer from Offerpad or one of our partners or the listing side. So we're going to work towards 50-50 and figuring out what the best solution for them is. And so as we focus on every day, everyone that comes to Offerpad, we want to provide -- we want to have a solution for them and be able to convert them into one of our solutions. .

I'd just add one more thing, Brian. Just to that, we are in our trending schedules on the IR side, going to begin breaking out volumes -- we already have cash offer and RENOVATE, we're going to have third KPI with volumes for the other 2 products. And then just finally, as you think about the quarters, we're not guiding specifically to the mix for first quarter, but you can look at the percentages. And then I'd add for fourth quarter, we -- in addition to the homes sold number that we disclosed, there were over -- were between 50 and above 50 transactions across the other services.

Okay. I appreciate all that color. And then you guys have obviously done a really nice job executing on the expense efficiency side. I guess as you think through your 2026 operating framework here, how much more wood is there still left to chop on the expense side? And how dependent is the breakeven EBITDA target on continuing to drive down on the OpEx side of the P&L?

Yes, for sure. I mean, first, I'd point out, we've done a lot there. If you just look at -- and so part of expenses is we will continue to march forward and take out additional expenses . If you look at Q4 '25 versus Q4 '24, operating expenses came down from $24 million to $15 million, so $9 million there. Again, we will continue there was an additional risk and some actions in fourth quarter.

There's some third-party spend that we can need to look at, one that's a fairly large item that we're hoping to execute across. So there will be more there. I just want to highlight that we've already come a long way. So as we look at the -- taking the operating contribution from a cash flow perspective down to 0. We've done a lot of it already. The biggest piece that's left is to take up the transactions up towards 1,000 transactions per quarter. .

And Ryan, one thing that I'll add to that is with what we're looking at as we build and scale the company again, scale it differently and smarter and obviously, with the power of AI and technology, the ability of what we can do as we continue to grow. The 1,000 transactions is our first short-term goal and then after that, but to scale it through AI and technology is something we're going to be focused on.

[Operator Instructions] Our next question comes from Gaurav Mehta with Alliance Global Partners. .

Yes. I wanted to ask you on your comments around 4 solutions platform. And maybe get some color on how you view revenue allocation from each of those solutions, maybe near term and short -- long term? .

Sure. Yes. So this business is all about conversion. And by -- there's 3 solutions that are solutions for our home sellers. And again, we're really pivoting from mostly focusing on one solution to three. And by doing that, we expect that conversion will climb materially. One of the big focus areas of our Chief Operating Officer, has joined is conversion across our portfolio. We have, in any given month, somewhere between at 10,000 and 20,000 home sellers top of funnel and to get to the 1,000 transaction mark per quarter, we need to increase conversion by just around 1%. So it's not a huge amount when you look at it from that perspective.

And then just to round out your question, it's really 3 products that are focused on the home seller and conversion that are that homeowner B2C transaction and our fourth product is really a separate product line, it's related. It's our renovation business where we renovate real estate assets, single-family homes that are owned by other third parties. .

All right. The second question I want to ask, you made big picture, there have been some talks about government restricting institutional investors from purchasing single-family homes. And just wanted to get some color if that impacts your business at all directly or indirectly. .

Yes. So as far as from the Offerpad perspective, we own home short term. So we're aligned with how they're thinking is the home ownership side. That's what our -- that's the mission of our company from day 1. So definitely aligned on that. From an Offerpad perspective, we buy, renovate and sell homes and put a better home on the market within a very short period of time.

As far as our cash offer marketplace, there's 2 ways to look at our Direct Plus partners in there. We have long-term investors, which think of the rental funds that we have short terms. And on the short-term side, you'll see everything -- think of more fixed and flip to partners in there that will have a different kind of cash buyers or a cash offer for the seller. So they'll get 80% of the money upfront. And then be able to have some of the -- to share some of the upside.

So from the long-term investment side, obviously, we're watching that closely. But what we have focused on in the last year is adding a different array of cash buyers in there. And so have hundreds of different kinds of cash buyers in there. That's so for example, if one segment slows down for any reason, we're going to have another segment that can pick up that volume. And so obviously, we're wanting it closely. But I do like just overall, I think the focus on affordability and the home ownership is, I think it's key for operate, it's something we believe in.

There are no further questions at this time. This concludes today's conference call. You may now disconnect.

Good afternoon. Thank you for attending the Offerpad's Third Quarter 2025 Earnings Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions]

And I would now like to pass the conference over to your host, Cortney Read with Offerpad. You may proceed.

Good afternoon, and welcome to Offerpad's Third 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 reconciliation 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 thanks to everyone joining us today. The housing market remains in a period of transition. Affordability challenges and limited mobility have defined the past 2 years, but signs of stability are beginning to appear. Mortgage rates are easing, buyer confidence is improving and sales activity is picking up in key markets. For Offerpad, that shift represents opportunity. We built this company to adapt, not depend on market conditions. That flexibility has carried us through the toughest housing cycle in a generation and positioned us to lead as the industry transforms around efficiency, technology and customer experience.

Now we're channeling the strength into growth. We're playing offense with control, intentionally keeping inventory lean and turning it faster while scaling asset-light services that meet sellers where they are, whether that's speed, certainty or listing-led path. Over the past year, we have taken deliberate steps to strengthen every part of our operation. We refined our buy boxes using proprietary data to sharpen acquisition criteria and improve decision-making. We have also made meaningful progress in deploying artificial intelligence across our operations to drive efficiency and scalability.

We're integrating AI-driven picture recognition and smart scoping technology into our workflow. By the end of the year, we plan to launch the first phase of that capability. It will enable our system to analyze property photos, automatically identify condition issues, estimate renovation needs and feed that data directly into our pricing model. Combined with our continuously improving AI pricing engine, which has become more accurate even in today's uneven environment, these tools help us price homes more precisely, reduce manual inspection time and human variability and increase margin confidence before we deploy capital.

In parallel, we are creating new process flows to scale our Direct+ business, which enables us to sell homes directly to strategic and institutional buyers. As part of this effort, we are evaluating a new segment of properties with characteristics distinct from our current Direct+ portfolio, broadening our opportunity set and positioning us for future growth. Automation and data power our operations. This allows us to scale efficiently, reduce cost per transaction and deliver more consistent results across every solution we offer. At the same time, we continue to refine our pricing models to optimize margins and support disciplined, profitable growth in any market.

Although we are encouraged by early signs of stabilization, we're also realistic that recovery will unfold in phases. Before expanding acquisition volume meaningfully, we are taking the time to ensure we buy the right homes in the right markets under the right conditions. This approach is very intentional. Our outlook is steady today and positioned for tomorrow. We expect heightened seasonality as we move through the winter months. And even with more acquisition and overall transaction opportunities, it takes time for those homes to progress through our inspection, renovation and disposition process.

Our disciplined approach keeps us well positioned to benefit as transaction volumes increase and our recent acquisitions convert to closings. We expect that momentum to bring us back towards our near-term goal of 1,000 transactions per quarter. To help drive that next phase of growth and execution, we strengthened our leadership team with the addition of a proven operator. I'm very pleased to share that effective today, Chris Carpenter has joined Offerpad as our Chief Operating Officer.

Chris brings more than 20 years of experience leading transformation, operations and strategy across Fortune 500 companies and private equity-backed ventures. He previously served as lead transformation executive at WarnerMedia, where he oversaw large-scale integrations and business strategy initiatives. Chris is known for driving efficiency and execution at scale. His leadership experience and operational mindset will help us strengthen the connection between technology, operations and customer experience, enabling us to scale efficiently and deliver even greater impact for our customers and overall conversion.

Everything we have built from our data-driven processes to our diversified solutions comes together into 4 strategic pillars that create value, strengthen resilience and position Offerpad to lead the next phase of real estate innovation. These pillars define how we operate today and how we will continue to grow. Cash offer remains the foundation of our model, providing sellers with speed, certainty and control. We're deploying capital deliberately, prioritizing contribution profit and velocity over volume. That's how we protect returns and optionality in a rate-sensitive environment.

HomePro extends that foundation through an agent-led approach that gives sellers in-person guidance and flexibility without requiring incremental capital. Renovate continues to grow rapidly, achieving our third consecutive record as we help partners transform inventory into move-in-ready homes at scale with repeatable workflows and predictable margins. Direct+, our cash offer marketplace, deepens institutional relationships and funnels more transactions through an asset-light channel, lifting margins per unit. Together, these pillars create an integrated ecosystem that adapts to a range of market conditions.

With that, I will turn it over to Peter to walk through our financial performance.

Thank you, Brian. In the third quarter, we reported revenue of $133 million and sold 367 homes. Gross margin was 7%, resulting in $9.3 million of gross profit. Operating expenses, excluding property costs, totaled approximately $12 million, a reduction of 37% year-over-year. That improvement reflects the work we have done across every function to drive lasting efficiency from marketing and vendor management to automation and organizational structure. Our teams continue to execute with precision.

Every dollar we spend today is focused on performance, margin and scalability. We are not only operating leaner but smarter, making decisions guided by data, automation and technology that give us greater control over both cost and outcomes. Adjusted EBITDA improved sequentially by 4% to a loss of $4.6 million. This progress demonstrates how our disciplined approach and operational improvements are steadily flowing through to results. We have seen higher marketing efficiencies, stronger vendor terms and meaningful savings, all of which position us for continued EBITDA improvement in the quarters ahead.

We ended the quarter with an inventory of 498 homes and acquired 203 homes in selective markets that met our margin thresholds. Our balance sheet remains strong with $31 million in unrestricted cash and total liquidity exceeding $75 million at quarter end. We have also expanded our lending relationships to reduce cost of capital and increase flexibility as we scale our asset-light businesses. Looking ahead to the fourth quarter, we expect revenue between $100 million and $125 million and homes sold in a range of 300 to 350.

Adjusted EBITDA is expected to remain roughly in line with third quarter levels. We're guiding with discipline, grounded in what we see across our business today and where we have clear visibility to execute effectively. Our intermediate-term goal remains at approximately 1,000 real estate transactions per quarter across cash offers, traditional listings and investor services. That level of activity supported by our ongoing efficiency initiatives sets the foundation for our next milestone, a return back to profitability. Even as acquisition opportunities expand, we are managing volume carefully until demand becomes more sustained.

This approach gives us control today and flexibility to capture upside when the market accelerates. A larger share of revenue and margin will continue to come from asset-light services, HomePro, Renovate, and Direct+, as we advance towards a more diversified and capital-efficient model. These businesses demonstrate the strength of our platform and the value of disciplined execution. Finally, I want to echo Brian's enthusiasm about Chris Carpenter joining Offerpad as Chief Operating Officer. His experience in large-scale transformation and operational excellence perfectly complements our focus on financial discipline and scalable growth. I am excited to partner with him as we continue driving efficiency and performance across the business.

With that, I will turn it back to Brian.

As Peter highlighted, our disciplined execution and operational strength have created a foundation that allows us to move forward with confidence and control. The past few years have tested this industry, but they have also proven the strength of our model. Our platform is more diverse, our operations are more efficient, and our technology is driving measurable results. The market is still tight on mobility, but it's showing early signs are fine as rates ease and inventory inches higher. In that context, our strategy is simple: Keep inventory tight, turn it fast and scale the asset-light platform.

As conditions improve, Cash Offer, HomePro, Renovate, and Direct+ give us multiple ways to win with more capital efficiency, better unit economics and greater resilience than a single path model. We are energized by what is ahead and confident in our future, a company where every part of the business works together to drive growth, efficiency and exceptional customer outcomes. Thank you for your time and continued support. We are now ready for your questions.

[Operator Instructions] The first question is from the line of Dae Lee with JPMorgan.

I have 2. So first one is for Brian. You talked about strengthening the foundation of your business and expanding the reach through asset-light services. So looking ahead, like what are your top priorities to ramp HomePro, Renovate, and Direct+ from here? And as you look out to 2026, where do you see the biggest upside across those 3 asset-light services?

Yes. Dae, there each one of them has its own story about where we're seeing opportunity. And what we're highly focused on with all of them, just in general is conversion. On the HomePro side, we're seeing some really positive signs. Obviously, it's early there, but some very positive signs of meeting the sellers where they're at and the ability to talk to sellers about different products that potentially if the cash offer doesn't work, having them have another cash buyer's opportunity to bid on their home as well and then the listing opportunity as well. And so we're really seeing that with sellers.

So I think the opportunity there is just really to maximize conversion. And there are obviously a lot of learnings as we're building out this program and getting better and meeting sellers faster and some different things that we're learning along the way. But I think that is -- that has tremendous opportunity. I think as you start seeing the market pick up and different things happen, I think that's going to expand our Direct+ as we start to buy more homes or as the market starts to loosen up a little bit, you're going to see a lot of our other cash offer partners start to buy as well, which leads to 2 things, more of our Direct+ business, but the second part is really helping our renovation business as well.

And -- as you saw with some of the numbers, Renovate continues to grow even in these market conditions. And what I like about that, we have a lot of really diverse customers in that, the Renovate and the Direct+. And so they're going to be there and they're more diverse than any other market opportunity, they'll be able -- would be able to use our services. That's either Renovate or the Direct+ services. So a lot of opportunity that we're seeing.

And I will tell you, just to finalize that with the Cash Offer, which is kind of the base of what we do in this environment, we're seeing more and more people that are in moments that really value the Cash Offer. And so obviously, we're working on our efficiency, our timing and making our Cash Offer better every day, but making sure that we're also buying the right type of homes that we want in this environment. So really liking what we're seeing for setting up for 2026.

Got it. And then second one could be either for you, Brian, or Peter. As you work towards that 1,000 transaction target that returns you to breakeven, like how should we think about the mix between asset-light services and traditional cash offer deal? And is there like an optimal blend for margin and growth? And just as a quick follow-up to that, is there like an equivalent number that you guys can provide for 3Q or in your 4Q guide that's equivalent to that 1,000 transaction because understanding that's different from homes selling now going forward.

Sure. So the 1,000 transactions, right now, the mix is roughly whether you look at it based on a gross profit perspective or based on a volume perspective, the mix is directionally around 1/3, 2/3 with the larger piece coming from our Cash Offer, and this is excluding Renovate services, just focused on our real estate transactions. The -- where we're moving is -- the most important thing on this topic is conversion. So as we move from where we were 2 years ago with really primarily one product to today where we have 4 or 5, if you include Renovate, conversion goes up significantly. And as we bring those new products in the market, it becomes the approach to and the execution around getting to 1,000 transaction is easier and more straightforward.

We expect the mix to -- as we move across next year to move up and get to at some point next year, over 50% from the asset-light products. And we are going to -- as I mentioned last quarter, we are working towards providing better detail. We do break out other services and Cash Offer in a separate segment in the Q, but we are going to provide more detail on each of the products and the volume on the IR website and the trending schedules as we get into next year. So that will help you from -- just from the perspective of guidance.

And finally, what I'd say is we have guided on homes sold for next quarter like we have historically. We are -- if you add it in, we're not guiding towards or disclosing the exact number of real estate transactions. But I'd say at a high level, if you look at the 1,000 transactions that we're working towards this quarter and next quarter, we're about halfway there if you include both the cash offer and the asset-light transaction. So it's a matter of moving to 500-ish -- from 500-ish to 1,000.

One other thing I'll just add there, Dae, is that as we look at it, I continue to think the cash offer is the best product in real estate. It solves the most friction from the customer, the speed, the certainty. And so that is always going to be the foundation. But I also like what we're setting up is it lets them choose their own path, what's best for them. And so if they want to try to explore the open market, we can help them with that as well to see if anyone else is willing or able to pay more money than they can or we can.

But also, we're shopping their home through other -- with our Direct+ through other cash offers to see if we can get them a higher offer than even ours. And so I really like where -- what we're doing with the seller to put them in control. And it leads and starts with the cash offer. But overall, we want the seller to eventually choose what's best for them. But I think the Cash Offer is always going to be a really powerful tool in there.

The next question comes from the line of Ryan Tomasello with Keefe, Bruyette, & Woods.

Regarding HomePro, can you just discuss the hiring needs that you envision are needed to support the growth in that channel, just given that it's obviously more high touch with human involvement from these agents? And then I think you alluded to this on your prepared remarks, Brian, but any color just on early stats on impacts to conversion rates that you're seeing? And also, if you have the data, what the mix is on that conversion on Cash Offer versus a traditional listing?

Yes. So I'll talk high level about HomePro and then we can get in a little bit more detail. But as far as headcount, what I really like about HomePro is that whole division is primarily ran from our HomePro and the agents in the field. And so we can run a lot of that through our data. And like, for example, when people come to Offerpad, they can schedule their inspection. That is -- all that is automated through different vendors through HomePros on that end of it.

And so we can do a whole bunch with fewer heads internally, especially as I kind of -- again, I talked about in our prepared remarks, we're really leveraging our technology and figuring out how we can grow it and scale the company smarter than we did and as we come into this next market and especially with all the advances we're seeing with AI and some of that. And so -- but as far as the headcount, it's going to be mainly on the HomePros and then we'll use and leverage data and technology on that side.

As far as the conversion, what we're seeing -- and again, it's early, but we're seeing right now in this environment, more people choosing the Cash Offer. More people that we're seeing than before are in a life moment that they don't have the time or the patience to wait and try to maximize and on the listing side. So we're definitely seeing more of an appetite for the Cash Offer on that side of it. And we think that will change over time.

Obviously, there's a macro environment that comes with all of these products. And we want to be built for every -- anything that's happening in the macro environment, we'll have a product built for that. So that's what we're seeing from the early days of HomePro. Peter, I don't know if you have anything you want to add.

Yes, I'd add 2 things, I mean we will -- we recognized we need to provide more breakout on the mix, Ryan. So we will -- we're 3 months in. So we're still a little bit early stage to have meaningful numbers, although the trends are developing. So that's to come next quarter. But moving from 1/3, 2/3 to kind of 50-50 between asset-light and Cash Offer is where we're headed and HomePro's part of the asset-light and then the Direct+ piece is also part of the asset-light. The other piece that I just mentioned is we also do -- on the HomePro opportunities, do we do receive some revenue or a fee from the broker as they go out to the home effectively for the lead.

So regardless of whether we -- if we transact on the home, we end up with a gross profit that's roughly the same magnitude as the gross profit from a Cash Offer for those HomePro traditional list transactions that we don't transact on and those that we do, we still receive a smaller, but we still receive some revenue for each one of those -- each transaction or each conversation in each home visit.

One other thing on that, Ryan, just to kind of double down, and I mentioned in the prepared remarks, but one of the biggest, I would say, manual processes that we have is the ability that we're inspecting thousands of homes to make sure we're buying the right type of product we go out there. And so -- the inspection process is, we've put a lot of tech into that over the years, but nothing like what picture recognition and some of the learnings from machine learning and AI that we're really focused on. We're hoping to have something by the first of the year, and we should have something by the first of the year that's really going to speed up that process.

And that's one of the times -- and there's 2 wins on that, obviously, from a headcount and from getting just the AI that can learn from picture recognition and the tens of thousands or hundreds of thousands of homes that we've inspected over the time. But also we can get the seller their final price much, much faster as well, which is also a key to that. So those are some different things that we're doing and leveraging from a tech perspective that we don't have to add a bunch of headcount that we can leverage.

And I guess what's the logic for excluding Renovate services from this math? Just as a quick follow-up to that discussion. And then a separate topic, in terms of institutional homebuyer activity, obviously, that's more impactful to your B2B products like Direct+ and Renovate. Any update on what you're seeing there in terms of demand trends and transaction activity would be helpful.

Yes. I'll take the second one. You can take the first one, Peter.

Okay. Yes, on Renovate, it's just -- it's just the way we think about it, right? We're focused on 1,000 real estate transactions, and those are transactions where a home is purchased and the home is sold. And so from us, the economics on those are very similar when you set aside the GAAP revenue recognition, differences on revenue and net revenue regardless of whether it's a Cash Offer where we balance sheet it, it's a traditional list where a broker lists and we participate in the fee or we underwrite it and the home is purchased by an SFR or an investor or it's on our platform and a partner Cash Offer business buys the -- purchases the home and pays the fee.

The economics are very similar on a gross profit perspective. So we think of those as real estate transactions. Renovate is a related business and supports the Cash Offer, but it's a separate business and not necessarily associated with a home transacting. So that's just how we think about it. But, of course, is incremental to our profit and to our business.

Yes. And then on the second one, we have obviously some great partnerships with the Big 5 that buy a lot of our platform. Right now -- sorry, from the single-family rental side, they're buying, but not at the volume that we're normally used to or they're used to for that matter. And -- but what we have done with Direct+ is we continue to add different types of buyers to that division. And for example, and I think I mentioned this in the prepared remarks, but we get a lot of homes that come to us that we just don't have an appetite for. They are more as is conditioned homes or homes that are hard lived in.

And those are homes that we now have Direct+, people that can come into or buyers into our platform that they can buy those type of homes, and we can actually help the seller by getting them an offer. It's a little bit different process. But -- so just adding more and more of those. We're having a lot of success with the -- from the long term -- we categorize people in Direct+ by short-term hold and long-term hold.

From the long-term holders, we're having a lot of success with -- there are some newer funds that have started. But with that mid-tier fund, they're actively buying in segments of homes across the country, and most of them are more of 1 or 2 market experts that they want to buy in or they have appetite for those 2 markets. But we continue to add more and more to that Direct+ with a variety of different buyers in there to buy homes.

The next question comes from the line of Michael Ng with Goldman Sachs.

I was wondering if you could talk a little bit about what you need from a transactions or Cash Offer versus kind of value-added services mix to get to breakeven? What does the environment look like for breakeven? Is that something that you think you might be able to achieve next year?

Michael, for sure. And first of all, yes, as we identified in the prepared remarks, at least directionally, we're focused on getting to 1,000 transactions. The mix, as I've said -- as I mentioned earlier, is going to move up to -- we expect it's going to -- will move up to around 50-50 as a next step.

And both of those steps will happen as we move across 2026. So we're not ready to guide towards which quarter, but we were expecting this to happen almost regardless or really regardless of the real estate environment, and that's part of our strategy around diversifying the product set to a greater -- a larger set of products, 5 products and also products that we can transact on regardless of the market that we're sitting in and reach the conversion levels we need to get to 1,000 transactions in any real estate environment.

And the second thing that I'd highlight is we ended -- and we've really made a lot of progress on our fixed expenses. We've taken -- we've removed about $150 million in fixed expense, annual expense from our operation. We -- just going sequentially quarter-over-quarter, we moved from $16 million down to $12 million in operating expenses, and we're going to continue -- we've -- there's been some actions already this quarter. We're going to continue to focus on cost reductions and execute that number down even lower. And so as you match the 1,000 transactions and the lower OpEx, that's when profitability kicks in.

And just on that, too, Michael, just one of the things I will just say on that as well is, we're definitely seeing some on buying a little bit. And hopefully, it's not a glitch. But over the last little bit, we are definitely seeing more sellers that are jumping into the market wanting to sell. And from our perspective, but also from just the overall macro perspective, starting to see more of that. And I think what's also key is being a little bit more patient as well. We saw sellers come on but also pull their houses off the market. So we're seeing sellers that are more willing to engage.

And on the buying side of it, we're seeing early signs of purchase loan apps going up. We're seeing more -- some of the showing activity. We're definitely seeing in segments in some of our markets where sellers are selling and buyers are wanting to trade and they're together there in certain segments. And so obviously, a lot of work to still do in this market, but we're definitely seeing some things that are encouraging on that end.

And a lot of this is just driven by the interest rates that are in the lower -- at lower 6s now. And so anyway, so we're seeing some of that and obviously, in effect, it makes us more willing, more able to buy homes and we're more comfortable with and then get more aggressive on that end. And also that's going to build the other products as well up over time. Right now, we're staying very disciplined, but we're liking what we're seeing in the market early, early signs.

And just one last thing I want to add to it because I want to make sure that it's come out and it's clear based on these questions in our prepared remarks is we are guiding towards a fourth quarter that's -- from a volume perspective is similar or a little bit less than third quarter. It's for a couple of reasons, including the seasonality of the holiday season and all that. But more importantly, we're guiding towards from a sign perspective, that's ticking up -- and from a close perspective, that from a purchase perspective, transactions are ticking up. And the most important guide for this quarter is for next year and that we expect to ramp back up to 1,000 transactions.

And just as a follow-up, I was wondering if you could just talk a little bit about the appointment of Chris as kind of the -- as somebody who's going to be leading transformation. Your most significant peer also has some leadership changes. I was just wondering if you could talk a little bit about like what are the key things that need transformation in this sector? Is it an acknowledgment that we might be in a kind of lower for longer type of environment? Is there something structural that needs to change about the current business model?

Yes. No, but great question. Yes, very excited about Chris. Chris is here to help on a few main key points. One of them is conversion. One of them is helping us get ready and prepared for scale again as we buy. And we're talking about the 1,000 as getting profitable -- the 1,000 per quarter to get it profitable. And that's our very -- it's our near-term goal where we want to be, but that's not what this company has built for long term. We've -- we want to grow and scale this company. Again, we want to be more disciplined. We want to be smarter, but I want to bring in key talent to help us do it again and do it smarter this time and to have different skill sets and fresh perspectives.

And so I think Chris can be able to deliver on all of those fronts. And -- but I will just tell you from the -- the one thing that the 4 product lines that we have, they're all somewhat it's a big wheel tied together. But also I want to even get more efficient of how all those are tying together and how they can help in every one of those, for example, Direct+ helps conversion with Renovate because when people use us for their sourcing for Direct+, especially the mid- to smaller Direct+ partners, they're going to use us on our renovation services. And that's just one example. But to make sure we're -- our logistics, our efficiency and we're getting better and getting some fresh eyes and fresh perspective as we scale again, I think it's going to be extremely helpful.

There are currently no questions registered. [Operator Instructions] There are no further questions waiting at this time. That will conclude today's call. Thank you for your participation, and enjoy the rest of your day.

Good morning, everybody. Welcome to the Offerpad fireside chat presentation at the Goldman Sachs Communacopia and Technology Conference. I have the privilege of introducing both Brian Bair, who's the Co-Founder and CEO of Offerpad; and Peter Knag, who's the CFO of Offerpad. My name is Mike Ng, and I cover Offerpad and the real estate technology sector here at Goldman Sachs. We have about 35 minutes for today's presentation. Brian, Peter, it's such a pleasure to have you on stage here with us.

Yes. Thank you for inviting us.

Great. Brian, I'd love to start with a conversation just on current market conditions. Could you talk a little bit about the housing market, perhaps some of the affordability challenges and pricing, economic uncertainty and how that may impact buyers and sellers? And what's your view of current trends in the market? Do you see an inflection point in the future when things will see improvement and better velocity?

Yes. I mean everything you said is -- and I know it's been talked about a lot now, but the affordability and the lock-in effect are real things. We see it every day. And so you have sellers that are wanting to stay in their current mortgage rate and you have buyers that -- the home prices have stayed steady and that can't afford the new home. And I think there's a stat that came out that 80% of Phoenix couldn't afford the home now with the new interest rates that they're living in. So it's just -- it's all real.

So we have been very -- our approach is to be very selective. We have -- always, my approach to real estate is always you look at active inventory more than even closed inventory, and I don't like to talk about that a lot, but especially in moments like this because we are seeing inventory over the last few months especially mount up in markets that you just don't normally see inventory mount up in or areas that you don't see a lot of inventory. So we've been really focused on high-volume areas, that interior high volume, like a lot of transactions in that. And so we've been pretty selective about what we're willing to purchase in the market like that.

Yes. And what characteristics do you see that distinguish a higher velocity market versus a slower one?

Definitely interior. The things that we're seeing, a significant slowdown are things on the outlying areas. One, you're competing with new builds out there, and new builders are very aggressive in moving inventory right now. And so -- but areas that -- close to jobs, close to just -- so that's what you're seeing the volume. And I'll tell you that the price points that are the second and third tier homes are moving absolutely more than the first-time home buyers because they're coming off -- at least they have a liquidity from selling a home. They're coming off to put down as a down payment. It helps them get into that home. But -- so you're seeing even a lower price point actually getting more pressure than normal just because of the affordability side.

Right. So first-time homebuyers may have a little bit more of an issue in this environment, which makes sense.

It's important, just like -- because home prices haven't come down, you still have people with a lot of equity in their current home, right? So that's a big leg up right now in the market. So you can obviously trade into a different home, and not having that is -- definitely puts a lot of challenges.

Right. And just while we're on the topic of macro, mortgage rates have been coming down a little bit in the last couple of months. I was just wondering if you're seeing any real impact or real-time impact rather on trends as a result of what we've seen in the last couple of months?

So our mortgage rates hit 6.25% a couple of days ago. I think they're about 6.3% now. And just to tell you the affordability that's there and how closely people are watching it, like there's definitely a pent-up demand because we see almost instantly in our showing activity when interest rates drop. And I think you get agents on the call, you get people that are watching that closely because of -- there's definitely people that are wanting or needing to move, but they're just trying to figure out the right time.

And so yes, you can see showing activity. Our contract activity picks up almost instantly. And it's very, very sensitive, which -- I've been doing this a while, and I have never seen it this sensitive before, just of the mortgage rates. But also, I've never seen the mortgage rates being this volatile either, up and down in short periods of time.

Great. And kind of bringing it back to Offerpad's financials, I was wondering if you could talk a little bit about how you're tracking relative to your homes sold guidance of 360 to 410 homes. What was assumed in that guidance? Has velocity been better or worse than anticipated?

Yes. We're on track. So no -- nothing new on that guidance, other than that is -- that continues to be our guidance. And I just -- I'd emphasize, as we pointed out in the last earnings call, we are going to pivot -- I haven't quite landed on exactly how we're going to present it, but we are going to pivot from homes sold to real estate transactions per quarter. So that is something to come.

And it's important as we've talked about this since really we started, but the goal of Offerpad was never to create just an iBuyer and just a cash buyer. That's the foundation of everything we do, and that relieves the most friction from sellers. But the idea was to really have a one-stop transaction center or a platform that people can come to and get whatever they need solved.

And so just to focus on just our cash offer business, which is obviously, again, the foundation of what we do. We really want to start as we -- and especially as we're launching some of these other products, really highlighting some of the success of the products. Because transaction, there's a lot of different ways to get a real estate transaction. And what we're focused on is trying to find what's the best transaction for the seller at that time. And especially in the market like this, we're seeing sellers that have more urgency.

For example, on average, probably since the history of Offerpad, sellers want to close within about 34 days. That's our average in 8 or 9, 10 years, right? Lately, it's been about 15 days. So the people who want to transact want to move pretty fast, but that's not for everybody. Then you have some that want to explore the market, and that's where we could connect them with one of our partner agents, they could list their home. And so just having that and being able to talk more about the transactions. And for us, we just focus on the overall conversion and what's going to be the best for the seller.

Yes. And maybe you can just expand on that a little bit. Why does it make sense to transition from just the express type of business into everything else?

Yes. I think it's -- and there's -- like -- so just to kind of lay it out, so we have 4 main products. We have our cash buying business, which people refer to as the iBuying business. We have our Renovate business, which is our renovation business, which we're -- people never look at this this way, but we're one of the largest renovation companies in the country, just doing renovations on our own behalf. And so we -- but now we have our renovation business that we'll do renovations for third parties.

We'll have our Direct+ business, which -- think of Direct+, which is just a marketplace for other cash buyers. And then the fourth is our HomePro business. And that is if -- so now when someone comes to Offerpad, they'll get a range offer. And then we'll have one of our HomePro partners in that market go down and say what's the best thing for the customer and lay out the foundation.

For some people, here's the good and bad of a cash offer. The cash offer, you're in complete control, you can close on your own schedule. But you could be leaving a little bit on the table if you want to market it to open up to fully market on MLS. And so here's an option on that end of it. So the really focus of that is finding out what is the best for the seller because when the seller wins, we're ultimately going to win from a conversion standpoint.

And from the renovation business alone, being able to do renovations on our own behalf is efficient as we do. Being able to let others leverage our renovation has been real -- we're doing renovations now for Fannie and Freddie and renovations for other, I would say, cash buyers and markets. And so we let them really plug into our renovations and get the efficiency on that. So everything is just about the efficiency of conversion and trying to find the best solution for everyone who comes to Offerpad.

I was wondering if you could talk a little bit about the competitive landscape. Your primary competitor has seen some leadership changes. I think the market, iBuying overall has seen a renewed interest from the investment community and the kind of the market at large. So could you just talk a little bit about what that means for you and how you're operating the business and the potential for innovation and strategic change that...

Sure. Listen, I mean, there's no -- it's been a challenging time for the sector, right, for us and our competitor. And because real estate transactions have been so depressed just over the last 2 or 3 years, but it's a market environment that's been extremely challenging because there's not really one sector -- like we talk about the 4 different products that we have, not one of them because everyone's business is down. We're -- on the cash buying business, there's not other people that are buying more homes up our marketplace than we are. There's -- on the renovation business, all -- everything is depressed at the same time.

But it's -- so what I love the renewed interest in -- because I think people understand that the real estate market is not going to be like this forever, right? And I know for us, we're going to come out of this much, much stronger than before. I mean, I'm going to be a much smarter CEO coming out of this with the challenge that we've had. And from an OpEx perspective, from a technology perspective and the other products we've been able to launch through this, it's been great. And just as far as the leadership change, I love -- I saw Eric Wu was back on the Board of our competitor there. And I've known Eric for a long time, and I'm glad to see him back in the space and love to see the interest that's coming back into the space as well.

Great. Bringing it back to the fundamentals. During the most recent quarter, Offerpad talked a little bit about some of the increased inventory in the market applying a little bit of downward pressure to home prices. Could you just talk a little bit about balancing home acquisitions with pricing, which at the very least, comes with a degree of uncertainty in terms of the outlook?

The hardest challenge for us is really seller expectations. Because most sellers are -- and I would say -- I mean, there's a lot of information that sellers have now that they didn't have, let's say, 10 years ago. So there's a lot of different -- but our biggest challenge is the seller expectations of what their home is potentially worth. Because sellers in effect, they're not looking at all, of course, all the data and analytics we're looking at. And so they say, hey, this house sold -- even just -- we had -- in some of our look backs last week, we had a seller that was pretty frustrated because their last comp was in December that sold for a certain price. And we're like -- and they wanted the same price of something in December, like it's just -- so the seller expectations is something that we have to of what we want to pay. And we want to try to be as fair and pay the most we can for every home, but also making the best decision.

And so what we're doing now is everything is about us is versus risk, right? Anything we talk about underwriting and fancy analytics and AI and all these different things that people like to throw out, it's really about risk, is how do you give yourself enough margin to -- with the risk. So every -- so we're being selective about what we're buying and building in more risk into that and more range and what we're willing to pay for that home. And that helps us.

And then also, it's really important going back to kind of where we started is now as the supply and demand as a buyer has definitely more inventory to look through. So we really want to leverage our renovation to make sure our homes sell before other homes that are in that same area. So being able to give ourselves more range, but also putting a little bit more renovation in our homes so people can walk in and they get a -- felt like new home that's highly upgraded and making sure our home sells first. And that helps our time to cash, which we want to -- in normal times, we want to buy, renovate and sell a home in less than 100 days throughout the process is what we want to own it. And right now, we've expanded that a little bit. It's about 120 days that we wanted just because of the market.

So we want to be selective about what we're buying. We want to upgrade it, and -- but the seller expectations is something that we're trying to communicate, but that's also where the other products are extremely helpful because they say, here's the cash offer. So you don't have to worry about the other things on the market. We have to worry about that when we buy it. But if that doesn't work for you, then we're going to try to get you somebody on the cash offer side that can pay more than we can through our Direct+ channel. And if that doesn't work, then you can list your home.

So just give them those options. And I will tell you that the sellers love the choice, that they can feel like which journey they can choose. And one of the things that -- one of our challenges as we talked through that is explaining to our partner agents that we don't want you to go sell them a product. We want you to provide the solutions to them about what solution fits right for them. And again, give them the good and bad to each one of them because like everything in life, there's a positive and there's some negative depending on what -- how they look at it. And so really making sure our agents are trained that we're partnering with when they present these options and we make sure they're compensated the same. So they're not trying to push one way or another, that they can really tell -- introduce the seller to the options that works best for them.

Right. Yes. So maybe a listing agent should at the very least, right, like check what Offerpad is offering in terms of the cash offer before they go down the route of more uncertainty by listing on the open market?

Exactly. And being able to explain that and just give them saying, "Hey, listen, you see 5 signs in your neighborhood. And if we list it, here's what's going to happen." And a little bit is the seller expectations because again, sellers want to try to do their best and make the most money for their home and on that side. And so -- but be able just to explain it and understand just the path for both is really important.

So I'd just add to that. We -- so we -- having this broader set of products, as Brian was just taking through, from a financial perspective, it gives us the ability to really not feel pressure to target a certain volume. What we target is our price point. And right now, we're pricing at a certain spread. It's an attractive spread, and we can stay there. If that pricing doesn't work, then we still -- as long as we transact through Direct+ or a traditional list, which we also take a fee on, we still get to the same level -- roughly the same ballpark type of fee. And so it's a very good dynamic from a profitability perspective, and I think we'll drive more consistent contribution profit over time.

And this is where one of the things is having other cash buyers in what we call Direct+. We have roughly around 1,500 other cash buyers that are on our platform that will buy on the platform. Now there's not that many that are buying actively now, but just in general, and they all have different buying boxes, buying criteria, areas.

For example, a lot of our single-family rental partners, they're not focused on what that home is going to sell for in 100 days. They're focused on what it's going to rent for. So in a lot of cases, they can pay rate more than we can because it's more rent of what they're focused on. Well, then they can pay the seller more money.

And so trying to do that and letting the seller understand that when they come into Offerpad and they have -- and they want a cash offer, it's not just us that's making the offer. It's -- we're running it automatically through our system to see if anything triggers somebody else to buy that home. And they'll get the same Offerpad experience, really high customer satisfaction. But we -- and then for us, we don't balance sheet the home, and then we just -- we make a fee on that. And so it's a really good outlet to have now. And so we're -- again, that's just back into trying to find the best solution for the customer and being really customer-focused.

Yes. And single-family rentals, SFR is like one type of buyer on the Direct+ platform. Like what are the other flavors of buyer look like?

Yes, there's a lot of them. And so everyone on the SFR, everyone knows the Big Five, some of the publicly traded SFRs out there that own 100,000-plus homes, but that's only 2% of the market. Most of the -- especially the rentals are think of like family offices. And we'll go down in some of them with a certain level of -- we'll go down to people that specialize in certain areas that fix and flip homes.

And so -- I mean, just a quick example, there's specialists that say, listen, they'll take homes in Tampa that are built in 1965. And their model is they're going to go put a couple of hundred thousand dollars in renovations and really push the value of that home. That's not our model. But they're willing -- they specialize in that area so well. They'll know what they're willing to pay for their model so they can pay more to the seller. And the one thing that we know is the more you pay the seller, the more homes that you buy. And so when it comes to a conversion, we're just, again, trying to find the right path, and that will lead to higher conversion across the board.

Yes. That's great. I wanted to follow up on just the dynamic of home prices. As you mentioned, you're seeing some of the interest pick up because of the declining mortgage rates. Is that enough to drive home velocity? Like, will that be enough to drive us back to mid-cycle?

Yes. I think I would love to see -- if I had a magic wand, I'd love to see rates around the 5.5% range. I think that would -- for whatever reason, that's in my mind of going that we'd be there. I do think -- and this is where we want to be -- like, we're seeing people pull their homes off the market at rates we've never seen before. And so that's actually kind of hiding some of the inventory numbers that are out there because you have people that are either -- they don't really need to sell, but they're trying to test the waters. And in normal markets, they're going to end up selling at some point. They're either going out there or seeing what other mortgage rate or what their new mortgage rate is going to be or what they can get for the same price and they're pulling their home off the market. So that's definitely leading to a different -- kind of a different world on that perspective.

But yes, from a mortgage rate perspective, we're watching -- we're already seeing some declines in some areas of home prices. And home prices -- residential home prices don't go down by 10% to 20% overnight, and that's not what we're saying at all. But they do go down by 1% or 2% month-over-month. And so just watching some of these areas and just natural -- and again, real estate a long time is if you have a lot of inventory and not enough buyers, you have to be very careful that sellers don't try chasing trying to find a buyer, and that will chase prices down quicker than anything. And that's where it's been very resilient. I will tell you, even surprising to us or to me specifically that I haven't seen more of that chasing down because people are pulling their homes off the market, which is good. It's keeping home prices to where it's at. But also, it's keeping the affordability challenge as well.

Right, right. And just given all the uncertainty, one thing that you mentioned is that you're putting in an appropriate spread just given some of the unknowns out there. Like, what is the normalized spread level? Like, how varied is it? How do you approach your philosophy around spreads?

I'll have him talk specific, but let me just -- he can give you more of the -- but I think specifically, the one thing I just want to say before Peter jumps in is it's definitely market-specific and area-specific. And like as we talked about, everything we do is built in with risk. There are definitely some markets right now in some areas we're building much more risk in.

In some areas, like Atlanta continues to be a pretty strong market, pretty resilient, strong market. There are some areas of, for example, is in the Austin markets and Denver markets, and we've really pulled back in those markets because you are seeing home prices come down. And I don't know where that new floor is going to be. So we're being very careful on that. And so -- and more than ever, we're passing on some homes that -- especially at the higher price point that we can normally see come down at a much faster pace. So we're being careful on that. When it comes to the margins and things, maybe...

So we've moved to -- as we've alluded to, we've moved to higher spreads on the cash offer. So I think high single digits from a profit perspective. We price -- there's more room in how we price it, but that builds in the carry cost, the interest and everything like that. But at the end of the day, the ROI or the contribution margin, which both are very similar that we target is up now compared to some prior periods last year. And before that, I would say we were mid-single digits, 4%, 5%. Now we're 300 basis points higher than that.

And the one thing -- and I probably say it 1 million times a month, but the -- just to the team is that we want to get smarter with every home that we buy. And so as we talk through that is that this is real estate and you're going to buy a home thinking certain performance, and it doesn't perform and other homes that perform better. And so you have to look at everything from a portfolio standpoint. But we also want to look at -- and especially now with some of the analytics and some of the AI that we can somewhat integrate.

And AI, we've been doing AVMs for a long time, and it's machine learning. But just the simplicity that how other people can use AI and you can really integrate into some of your systems. It makes you smarter with pricing because a lot of the -- we don't have to have humans that are making a lot of those decisions. It's getting us smarter with every home that we buy and what areas we can buy and different even characteristics of homes that it can help us recognize that they're going to perform better -- and others that don't -- that a lot of times, not just simply machine learning or AVMs can pick up, which has been pretty cool.

Yes. I'd love to spend a little bit more time just diving into, I'll call them, like the asset-light services. Maybe we can start with Renovate. What are you doing there? Is it mostly a B2B product that you guys use internally? Is there an opportunity to work with other partners, eventually turn this into a consumer offering?

So a little bit like Direct+ with our cash buying business, we've been doing Direct+ since we really started Offerpad. It's completely grown since then. But Renovate is something we launched a couple of years ago. And so we're really getting hyper growth there just by adding more and more customers.

And so think of the smaller -- so we really solve two things with other investors. Sourcing, which how do they find enough product. And so in most of our markets, people are coming to us first. And so we have a unique opportunity for sourcing.

But the second part that they struggle with is the renovation. And that's -- and so having our built-in renovations, we have boots on the ground in these markets that they can be able to plug in and tie into is key. So we'll take -- we have a great partnership with Auction.com now with -- we're their national renovation partner on that side, and they have, I want to say, tens of thousands of the [ dips ] and [ put ] people that are on their platform, and they go to them for sourcing, and we can help them with the renovation. To people like Fannie and Freddie, I mentioned, but also to -- but the large SFRs have a lot of that built in, like they have their own -- I'm sorry, their own renovations. But there's a 97% that don't. And so we've been really able to leverage our renovation. And we make good margins on that, 20% to 30%.

And -- but for a customer, because of our scale and what we've done, even at the size we are right now with the amount of homes we're buying, they just can't match our pricing and scale. So they can pay us, we can make a margin, and it's still a really good win for them because we handle all the operations as well.

Great. One of the company's priorities has been to maintain a very predictable contribution profit margin. First, could you talk a little bit about some of the components of that and then the progress you've made in making that predictable for you all in what's obviously been a more sober macro environment?

Yes. HomePro takes us a long way, and the success in -- we don't break out Renovate, our third-party renovation business separately, but it has exceeded our expectations. And the margins there are very consistent, between 20% and 30%. The margins on our other products if we're underwriting and selling to an investor or underwriting and selling or assigning to another third-party cash offer business or a traditional list are also quite consistent. The revenue recognition is -- gross revenue is going to change a little bit as the mix changes because for the cash offer, we recognize -- if it's a $500,000 home, we recognize $500,000 of revenue if -- when we buy that home and then sell it at a single-digit profit. If instead we transact through a traditional list and share in the real estate, the brokerage fee, we just -- and there's a $25,000 fee, we just recognize that $25,000 fee, but it's a 90-plus percent margin.

So contribution, we expect two things that I'd point out. Gross revenue will be a little bit less important from a metric perspective. Gross profit will become more and more important. And then number two, margins will be more consistent because the cash offer margin is the most variable across all of our products.

Right. Yes. So just as you diversify away from the cash offer, you're going to see a lot less volatility in the top line and the margin?

Absolutely.

Yes. Okay. Great.

And I like your word sober in this last market. It's definitely been sober.

And then what are you doing on the operating expenses side? What does that look like within Offerpad from, I guess, a sales and marketing perspective, but also from a corporate expense perspective?

You're speaking Peter's love language. So let me just -- just before I say that as well, because I mentioned this a little bit earlier, but where we are -- because from buying 10,000-plus homes a year to now really focused on buying and then rolling out these other products, we'll get back there again when the market gets there. But what we have been focused on is how do we get smarter the second time in growing this? Because we're going to see that growth again. But how can we do it smarter from an OpEx perspective? How can we leverage technology? How can we leverage this so the next time it's not as headcount heavy, but also, we're going to get smarter and more efficient the next time we grow it. So it's a really unique opportunity for us to get much smarter the second time as we continue to scale this. But...

Yes. I mean, OpEx -- and I've run this drill in prior CFO roles as well. It's not rocket science. There's two parts to it. One, the people cost, and the other is the third-party costs. And so we've executed in a very deliberate way across both. We have taken down headcount significantly. And we go through on a regular basis, on a weekly basis, all of our third-party spend and have had some tough negotiations with especially some of the larger components of that. So we're going to keep -- we're going to continue to hammer at that.

We've -- everybody in the business is very focused on it, and they understand that it's one of our top 3 or 4 priorities. The last thing I'd say about that is expense creep is a real thing, and we're not just taking these expenses out of the business. We're working every day to make sure that they don't slip back in. So a big priority around that.

Yes. I mean, just let me give you a couple of examples just quickly on that is, as we talk about headcount is and how do we get smarter and use technology. Now when a seller comes to us and wants an offer on their home, they get a range offer almost instantly. And so we use that all through our AVM, all through the analytics and what we're going to go do. And then that goes through even the way that we inspect the home, we're using more technology. And before, we would have humans look at almost every home. But getting the range off of where we -- now we marry that with HomePro has been a game changer as far as just cutting costs, but also, it's a better customer experience as well, which is great, too. So again, we're just leveraging from a strategy standpoint of where we're going to go.

And the one thing I will say is because we talked about the -- just where this environment has been over the last couple of 2 to 3 years. And -- but I will tell you what we have been very, very happy with and I would say, pleasantly surprised and happy is just the amount of sellers we still have come to us every month, requesting offers. And so I believe that a cash offer is the best product in real estate. It's hard for anything to compete because it removes, to say, remove the friction and you get a close in your -- it's a pretty hard argument, right? And especially if you get the price right, then who wouldn't take it, right?

So that's been really strong. And -- so getting people to come here and wanting to know what their home is worth, that's been great, and creates a large opportunity for us to, obviously, with some of the other products that we've talked about.

And maybe just in the couple of minutes we have, I can ask a question that -- for both of you. I guess, first, could you talk a little bit about your financing and capital needs, whether for running the operations of the business and supporting the cash offer or capital just to support growth in the business? And then I guess, putting that together, like, what are the growth priorities that you have over the next couple of years?

Yes. So on the financing side, so the most important thing is we're stepping sequentially closer and closer to cash flow breakeven and cash flow positive, and that's in our guidance and is the key focus. We have looked at various different opportunities from a capital structure perspective, and we executed on a blend, primarily nondilutive capital raise. It was part equity, part debt in July time frame. So we will -- so we're in a very -- just thinking about our steps towards profitability, this extended our runway very significantly. We're feeling really comfortable about where we are from both aspects just operationally from a cost perspective. And then with the extra cash on the balance sheet, that's helpful as well.

And I think just from the strategy and where we're going to go and where I get very, very excited about is that when -- right now, as we see -- and I mentioned earlier, I'll give you the negative and I'll give you the positive. The negative is it's been such challenging times because all 4 of our products are compressed at the same time. No one is buying at volume, real estate transactions are down and all this.

But the positive to that, what gets me excited is also, no one's seen how 4 of those are all working at one time. And the ability to come in there that we can get back to buying the volume of homes, but then also have all the other asset-light solutions across when people are in the real estate mindset again and when the market gets back to whatever "normalized" is, the ability that we have to put that all together, I said we're going to be much, much stronger coming out of this, and that's -- super excited about that.

It's a great place to wrap it up. Awesome. Brian, Peter, thank you so much for being on stage here with us. It's been great.

Yes. And thanks, everyone, for joining. Appreciate it, Michael.