Good afternoon, and welcome to the Offerpad second quarter 2022 earnings call. My name is Sam, and I will be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question at this time, please press star one on your telephone keypad. I'll now turn the call over to Stefanie Layton, Vice President of Investor Relations and ESG at Offerpad. Stefanie? Thank you, and good afternoon, everyone. Welcome to Offerpad Solutions second quarter 2022 earnings call. Our Chairman and Chief Executive Officer, Brian Bair, and Chief Financial Officer, Mike Burnett, are here with me today. 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's non-GAAP measures to the comparable GAAP measures are available in the financial tables of the second quarter earnings release on Offerpad's website. I'll now turn the call over to Brian. Thanks, Stefanie. Hey, everyone. Appreciate you joining us today. I'll cover some company highlights, market trends, and our focus for the remainder of the year. Mike will share our second quarter 2022 financial results and our third quarter 2022 expectations. Highlights for the first half of the year include we generated nearly $2.5 billion in revenue and $52 million of net income. We sold more homes in the first half of 2022 than we did during all of 2021. We completed more than 6,500 renovation projects with an average timeline of 21 days. We maintained an average time from home acquisition to sale below 100 days, and we launched 6 new markets. We also continue to see increasing customer interest in our solutions. More people visited our website during the second quarter than ever before. Requests for an Express cash offer also hit an all-time high. The interest validates the increasing level of awareness around our services and the value we provide to customers. For our Flex listing service, transactions increased 47% quarter-over-quarter and 123% year-over-year. In the first half of the year alone, we signed more listing agreements than we did during all of 2021. We've made great progress growing Flex, and we expect it will be an increasingly important solution as the real estate market adjusts. The choice between our Express cash offer and our Flex listing service not only provides customers a more individual experience based on their preferences, it also provides the company diversified revenue streams with different advantages in either a buyer or seller's market. Our ancillary service offerings also grew in the second quarter. Offerpad Home Loans reached more customers in more states, with loan volume increasing 37% over quarter one. In addition, Offerpad Home Loans has a new mobile app and consumer portal, making it easier to shop this solution. The new app will deliver a completely digital mortgage experience from start to finish. Utilizing powerful communication and self-service tools, the app unites borrowers, loan officers, and Offerpad real estate experts to provide a streamlined home buying experience. Enhancing our Offerpad Home Loans product is another step towards becoming a one-stop solution for homeowners. Our 94% customer satisfaction rating in the second quarter remains a key indicator that our services continue to resonate with customers. A great example comes from Rachel S. in Arizona. Rachel bundled by buying a new home, selling her existing home, and using our Offerpad Home Loans mortgage service. She posted, "I highly suggest their bundling packages. I received discounts for using their realtor and lender," Rachel shared. "I was so nervous buying my first pre-existing home. I learned so much. I will definitely use Offerpad again." This is why we do what we do, because there is a way to make buying and selling a home easier. Turning to the broader real estate market, the softening we have been expecting is here. Over the last 18 years in real estate, I have learned when markets adjust, especially this quickly, it's very important to be decisive and get proactive with owned inventory. You wanna sell your current inventory quickly and replace it with new inventory underwritten for today's climate. Keep in mind, most homes we own currently and homes that are just closing today were underwritten back in March and April under completely different market conditions. For example, the home we underwrote then potentially had no other homes on the market within a mile. Now today, when the home hits the market, it has seven to 10 comparable homes. I'm gonna talk through several dynamics we are seeing nationally and then walk through how we are proactively adjusting to the unique market conditions. Housing supply increased rapidly from a low of 1.6 months in January to more than 2.5 months supply. The Fed increased interest rates quickly, and mortgage rates increased from the historic lows to over 6% at a high point. In June alone, mortgage rates increased 75 basis points in just four business days. The pace of change in rates. On top of the home price appreciation has added to consumer affordability challenges and has caused some buyers to wait on the sidelines for things to settle. Not all markets are seeing the same magnitude of change. In general, the markets that have seen the greatest rates of price appreciation are being impacted the most. For example, the Midwest and Southeast, including markets in Georgia, North Carolina, and Florida, are currently showing active buyer demand. The Southwest moves faster with visible softening in our Phoenix, Denver, Austin, and Las Vegas markets. This is a good example of how our geographic diversity mitigates risk during the transition between market cycles. The diversification we have today has been thoughtfully and intentionally established over the last six years, supporting the resiliency of our business. Our team's extensive real estate experience is another strength supporting our ability to execute through different market cycles. Our regional general managers have an average of 22 years of real estate experience, and our local general managers have an average of 17 years. How do we put this expertise to use? We have a sophisticated underwriting model with various levers we can pull in different market conditions. Because the markets have been so hot for so long, we built in some cushion for each home in case the market slowed. We saw this happen, but this cushion has allowed us to price our inventory to sell after a swift deceleration of home price appreciation without having to take a larger impairment than we are. To adjust, we revised our overall buy box by putting a cap on our purchase price in several markets, conducting real-time market-by-market reviews of our inventory. We are prioritizing acquisitions closer to each market's medium price point, and we are offering our flex listing service to customers with higher-priced homes. We reduced the length of time available for customers to select their closing date, reducing the 90-day closing time they had in the past. Our acquisition teams updated our underwriting assumptions to account for additional risk by incorporating wider spreads, adjusting for increased active inventory on the market, increased our estimated holding times, increased our service fee and interest expense, among other items. One other important adjustment we have made is with our renovations. Our team has increased the amount of upgrades on certain properties to ensure our homes have the inviting look and feel buyers want. When inventory increases and multiple competing homes are available to choose from, we want our home to sell first. This helps limit our exposure to extended holding times. Limiting our exposure to extended holding times will be increasingly important during the second half of the year. The efficiency and effectiveness of our renovations can mitigate the risk by reducing extended time to cash and aged inventory. In the second quarter, our team completed over 3,500 renovation projects with an average investment of $17,000 per home. The average duration in renovation improved to 20 days in the second quarter, compared to 23 days in the first quarter. The sophistication of our renovations operation is unique, and it will be an important near-term strength. As always, we are closely watching and managing inventory owned over 180 days. Because of some of the proactive measures I mentioned above, as of June 30th, owned inventory over 180 days was less than 2%, well below our target of less than 10%. We know the real estate market is fluid and short-term results can fluctuate, but we believe this disruption is temporary. As one of the country's largest home buyers, we believe Offerpad will have great opportunities as the market stabilizes into what we expect will be a stronger buyer's market. When it takes sellers weeks or months to sell their home the traditional way with no certainty and no control, we believe more and more consumers will come to Offerpad. Looking forward, I have complete confidence that we are well equipped to deliver on our long-term goals of supporting our customers and delivering sustainable shareholder value. On that note, I'll turn the call over to Mike. Thanks, Brian. Today, I will cover our second quarter 2022 financial results, review a few key data points, and provide an outlook for the third quarter. As Brian mentioned, our Q2 results capped off a strong first-half performance. Revenue in the second quarter increased 185% year-over-year to $1.1 billion, with approximately 70% of the growth driven by higher volumes from increased market penetration within our existing markets and new market expansions, and approximately 30% due to the increase in average sales price. We sold 2,888 homes in the second quarter, a 129% increase year-over-year, with an average sales price of $372,000 compared to $298,000 in Q2 of the prior year. Our acquisition of 3,792 homes in the second quarter was consistent with the typical seasonal first to second quarter increase. As of June 30th, we own 3,561 homes across our 27 active markets. We reported second quarter gross profit of $93 million, or 8.6% gross margin, net income of $11.6 million, adjusted net loss of $1 million, and adjusted EBITDA of $13.7 million. Each of these amounts includes a $21.2 million inventory impairment charge, which I will discuss in more detail momentarily. Absent this charge, each of these metrics would have been $21 million higher, including adjusted EBITDA, which would have come in at $34.9 million. Fully diluted earnings per share on a GAAP basis was $0.04 per share and includes a $0.04 benefit from marking to market the warrant value and an $0.08 charge from the inventory impairment. Coming back to a discussion of the inventory valuation adjustment or impairment. At the end of every period, we evaluate each home in our inventory to determine if the carrying value is recoverable based on our expected sales proceeds. To the extent the net proceeds do not cover the carrying value, we record a charge for that expected loss in the current period. Quarterly charges have ranged from $63,000- $1.8 million over the last three years, but generally well below 1% of total inventory. At the end of June, when we performed this assessment, some markets such as Denver, Austin, and Phoenix have experienced a slowdown in demand for residential housing as a result of the combination of the rapid rise in mortgage rates and robust home price appreciation in that market. While we had been making adjustments in the quarter to underwrite new acquisitions to incorporate wider spreads and lower sales price assumptions, the homes already in inventory were underwritten under very different market conditions. As such, we calculated the value given our current assessment with the best available information and recorded a charge of $21 million in the quarter. Over the next couple quarters, as we sell our inventory that was acquired under previous market conditions and replace it with homes that we acquire in the current environment, we expect to return to more normalized levels of returns. Returning to the discussion of our Q2 results, Contribution Margin After Interest for the quarter came in at $28,500 per home, or 70.6% of revenue, and has been between 5% and 10% over the past eight quarters. In periods of price appreciation like we have experienced over the past two years, we have been able to absorb the increased input costs of acquiring homes at higher rates through higher sales prices on the back end. In more of a buyer's market, our attributes of convenience, certainty, and control are even more highly valued by prospective sellers, so we don't need to lean on the home price appreciation to increase returns. By adjusting the variables in our underwriting process through the combination of our asset valuation models and in-market real estate teams, we remain consistent with our expectation of generating annual contribution margin after interest of 3%-6% and to increase that margin over the longer term. From an operating cost perspective, we continue to demonstrate the ability to leverage top line growth and increase economies of scale across the organization. For the quarter, sales, marketing, and operating costs improved 230 basis points year-over-year to 6% of revenue, while technology and development costs improved 40 basis points year-over-year. G&A had a slight increase of 14 basis points year-over-year to 1.5% of revenue. The prior year period costs for G&A do not include the public company costs, which began in our Q3 2020 public company combination. In addition to the financial metrics I just addressed, there are several other key data points we monitor closely to assess our performance. We have previously shared that our goal is to keep our average time to cash below 100 days. In stronger markets, that metric has dropped down into the mid-60s, and with slower conditions, we would expect to be at or slightly above that mark. In the second quarter, our time to cash was 83 days, which improved from the seasonally higher 96 days that we saw in Q1. This marks our eighth consecutive quarter with time to cash below 100 days. Another important metric is our inventory aged over 180 days. As Brian mentioned, as of June 30th, we were less than 2% aged, well below our target of being under 10%. This is a strong inventory position as we enter this period of changing market conditions. With the softening of the market, we do expect our aged inventory to increase from the exceptionally low current levels. Inventory turnover will continue to be a key focus of the company in the second half of the year. From a capital structure perspective, we continue to make positive strides. In June, we added $200 million of borrowing capacity under one of our credit facilities and extended the maturity date to June of 2024. In July, we increased the borrowing capacity of one of our mezzanine debt facilities by over $30 million and also extended the maturity to June 2024. We now have access to $1.9 billion of inventory financing capacity across eight different facilities. Lastly, our cash balance at June 30th was $155 million. We are proactively adjusting our operations to reflect the changing needs of our customers and our company as the real estate market shifts. Over the next couple of quarters, as we work through the process of selling inventory homes that we expect to produce lower margins due to the change in market conditions, we expect to rebuild that inventory with homes acquired at values more reflective of the current environment. With continued strong request volume and an established track record in our markets, we believe we are well-positioned. Specifically, for the third quarter, we expect to sell between 1,700 and 2,200 homes, generating revenue of between $600 million and $800 million. We also expect adjusted EBITDA will reflect the variability in market conditions and will trend down in the short term between -$20 million and -$40 million. Our guidance ranges are a bit wider than our norm this quarter, given the current market conditions. As we've built out the technology, scale, and expertise at Offerpad over the past seven years, we enter this turn from a solid position. The geographic diversification of our inventory, low level of aged inventory, differentiation of our renovations model, minimal supply chain constraints, and an improved balance sheet all support our ability to manage through the transition period. Fundamentally, our investment thesis remains the same with a large addressable market, focused business model, competitive differentiation, and an attractive growth profile. Confident in our ability to adjust in the short term and to deliver long-term value to our customers and our shareholders. I'll now turn the call back to Brian for some concluding remarks. Thanks, Mike. Providing guidance at turning points of the real estate cycle is a difficult business. Over the first half of the year, mortgage rates have increased nearly 3%, from roughly 3% to 6%. For a $430,000 home, assuming a 20% down payment, that moves the mortgage payment from just under $1,500 to just over $2,000. A 40%+ increase. Moves like this over a short period of time are rare and obviously create issues for buyers from an affordability point of view. With the fast and significant move in mortgage interest rates, buyers likely pause to reassess what they can afford. While there is still a medium-term structural shortage in housing supply, in the short term, we believe markets that have enjoyed the most home price appreciation may see the most significant home price declines, though the extent of the decline will likely be market dependent. Lowering home price expectations is prudent and underlies the reasoning behind our impairment charge in Q2 and our Q3 guidance. We expect price adjustments to impact our earnings in the near -term, but as the market shifts from a sellers to buyers' market, we expect our margins will improve. At Offerpad, we believe there is an opportunity in both seller and buyers markets. We saw great success over the past year in a heavy seller's market. Now, when it takes sellers longer to sell their home, homeowners can gain more certainty and control over the transaction by coming to Offerpad. As the market settles, we expect our value proposition and strategy to produce improving margins in Q4, and volume should likely begin to return to normal levels in Q1, setting Offerpad up for a great 2023. I'll now turn the call over to the operator to begin the question and answer session. Thank you. We will now begin the Q&A session. If you'd like to ask a question, please press star one on your telephone keypad. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We would like to ask that you limit your comments to one question and one follow-up before returning to the queue. Thank you. We will now take our first question from the line of Dae Lee with JP Morgan. Dae, your line is open. Great. Thanks for taking the questions. I I have two. The first one, you guys have talked about this being a short-term volatility, and I think Brian just mentioned that, in the Q4, trends could start to improve. What gives you the confidence that this is more short-term? And are you seeing any signs of stability right now? Hey, Dae Lee. I think it's very market, you know, market-specific right now. We're seeing some markets much more impacted than others. The short term goes into, you know, buyer demand of where, you know, the affordability and buyer demand, where buyers sit on their hands for a little bit. How quick it happened was definitely different. We are starting to see that, like, for example, adjusting some of our price points that we're talking about, you know, as I just mentioned. We're starting to see buyer demand pick up a little bit. You know, mortgage rates have been fluctuating a little bit back and forth, which has been helpful. One of the things that we're doing is definitely building in wider spreads right now, as it's a little bit more uncertain. Yeah, it's, you know, we're depending on, you know, weeks. You know, we're watching it very closely and, again, very market-specific. Okay. Got it. Second one, maybe this one is for you, Mike. I think you guys talked about there being around 3,500 homes in inventory right now. How should we think about or is there any way to think about that relative to the homes that you've bought in, I guess, a different environment back in March and April versus the current environment that you guys have talked about on the call? Yeah. Thanks, Dae. On the inventory, we've got. You're right. We've got a little over 3,500 homes at the end of June. If you recall, we were, you know, Q1 seasonally is a little bit lower of an acquisition period for us, so we were building inventory throughout Q2. So there, you know, there's a decent normalized stratification there. When you take a look at when we were going through some of the work that we were doing on the impairment, you know, we assessed the entire portfolio. There were about 1,000 homes, you know, that were impacted, and most of those, you know, tended to be earlier acquisitions under the earlier, greater change market conditions, if you will. You know, I think it's something that you'll see us work through here, you know, over the next, you know, couple quarters, getting those out, in the normal course. You know, I think at the same time, as Brian mentioned, we've, you know, changed the underwriting criteria, and we've been doing that as we've gone through, you know, the months here, and adapting here. You know, the demand really, you know, tended to slow things down at the end of June as we moved on. You know, that's our current outlook. Got it. Understand. Thank you. Thank you, Dae. The next question comes from the line of Ryan Tomasello with KBW. Ryan, your line is open. Hi, everyone. Thanks for taking the questions. Can you provide some color on how gross margins trended through the quarter? Perhaps 3Q to -date if you have data to share, particularly within some of your larger markets. You know, for example, I think Phoenix in particular has seen HPA decelerate by over 10% from recent peaks. I guess, you know, looking back at your inventory management heading into the slowdown, what lessons are you taking from that performance heading into what's likely to be an even more volatile period in the second half? Thanks. Yeah. I'll take the first part of that, Ryan. Just on the gross margins. You know, as you would expect throughout the quarter, they started to trend down. You know, we had been seeing very good returns, HPA environments, you know, had frankly continued, you know, longer than I would tell you that we had even expected. As you know, you know, we've been talking, you know, for six-nine months now about the market normalizing away from the higher HPA environment that we've been seeing for quite some time now, and we've been preparing for that. So we did start to see some of those margins come down through. Again, it really is dependent market by market. You know, our Midwest operations that we've opened up within the past year have been a good sign of stability within the portfolio. The Southeast has been also held in there, you know, pretty well. As you mentioned, Phoenix has seen, you know, some pretty dramatic movement, as has Austin and Denver was another market, you know, that we pointed out earlier. As we get into Q3, obviously we've got the, you know, some of the charge from the impairment that we're taking this quarter, but we would expect those to come down, you know, and then bottom out. As we're able to, you know, put more accretive margin homes to work in the third and the fourth quarter to begin to balance and bring that back up again. I'll just add to that. You know, Phoenix has always been a super strong market for us, and you're spot on. The home price appreciation, you know, and what you're seeing in home prices in Phoenix and how quickly it's happening from a lot of inventory hitting the market rapidly and affordability issues. You know, back to your question, what are we learning? Obviously, we're underwriting that market much differently. As you can see, we're slowing acquisitions temporarily in a market like Phoenix. You know, a market decline is actually not bad as long as we get a good feel and it's consistent of understanding what we can do. There's opportunity there for us. Right now, it's just really volatile still. You have a lot of inventory hitting the market really quickly, and prices are really inconsistent as well. Markets like that, you wanna be able to, you know, slow your acquisitions in a market like that and focus on markets that are healthy. Mike went to the Midwest or some of the Florida markets. There's still, you know, a decent buyer demand there and there's opportunity there. Thanks for that. Are you expecting additional large impairments for the third quarter? Is that something that's reasonable to model? Regarding the guidance, can you say what level of gross and contribution margins those ranges contemplate and how to think about, I guess that cadence of, you know, bottoming and improving margins into the end of the year? Yeah, Ryan, in terms of our expectation for impairments in Q3, you know, we're not currently expecting to see that in magnitude again. If you take a look at that, you know, the impairment charge of $21 million this quarter and our guidance for Q3, what you end up with as you can obviously see it's pulled back a bit. That's a result of the homes that we've impaired selling through some of those. Those will essentially come through the P&L at a break-even, you know, type margin. There's other homes in the portfolio as we go through the evaluation that we've reduced prices on, some selling prices on, but we're still gonna make a profit on those. There's no impairment associated with those, but those two come through Q3, Q4 at lower margins than the norm. Mixed in there are the homes that we're acquiring and turning over that we've underwritten with increased spreads. We don't really give out forward-looking gross margin and contribution margin guidance. I think we'll just tend to leave, you know, the EBITDA ranges that we have for Q3, and really see where we're at and looking at Q4 from there. Ryan, one thing I'll add there is a majority of the impairments came from like the Phoenix, the Denvers, the Austins. We try to get really smart there. We don't want to dump inventory. We want to make the best real estate decision we can make with that inventory. We want to price it, you know, where we could move that inventory quickly. But more of that, you know, to your point earlier, some of those inventory or some of those markets have dropped 8%, 9%, 10%. So we want to take a healthy drop on those properties to move through those, so we wouldn't have... The whole point of that exercise is to get aggressive and move through some of the inventory now, as quickly as possible with making the best real estate decision, so we wouldn't have issues in the future. Just to clarify quickly, the impairment in the quarter related to about 1,000 homes, and you're expecting about a break-even gross margin on those homes when they sell in the third and fourth quarter? That's correct, yes. Okay. Thanks for that. Thank you, Ryan. The next question comes from the line of Jason Weaver with Compass Point LLC. Jason, your line is open. Hey, good evening. Thanks for taking my questions. Given your comments on, you know, what's transitioning into a buyer's market and also the record number of monthly average users, can you give any context around the growth in express offer requests and/or conversion rates within your existing markets? You know, sort of versus where we were last year. Sorry, I missed the first part of the question. Sorry, can you repeat the question? I'm sorry. Express offer requests and conversion rates. Yeah. What we've seen, which is not a surprise, as the market has transitioned, in a lot of these markets, we could buy as many homes as we want. Right now, we're just uncertain about. You know, we wanna make sure there's more certainty in the market. As we saw in, you know, second quarter, our conversion was very strong and especially towards the end of the second quarter when you started to see the market change rapidly. We continue to see that today as the market starts to slow for sellers, we're seeing more and more people, you know, start their experience with Offerpad first. Okay. Thank you. To follow up, can you give some more color around the 3Q guide on homes sold? How much of that is the overall macro environment versus the changes you're making to your buy box or acquisition criteria? I'd really say it's a lot of it's driven by the macro environment. Really what has been challenging is, you know, the speed at which, you know, we've seen the buyer demand pull back. Again, you know, primarily due to affordability issues driven by a rapid increase in mortgage rates and with the backdrop in some of the markets where we're seeing the greatest impact of that home price appreciation, which has, you know, been very strong in the markets that we had listed. It's really trying to get, you know, our footing on how quickly does that, you know, buyer demand come back. We've got good, strong positions, good, strong homes on the market. I think you just have buyers out there that are, you know, paused and a little bit in wait and see mode right now, trying to understand where they think mortgage rates are gonna go and where home prices are gonna go. Yeah. If you track mortgage rates recently, you know, you'll see how volatile the mortgage rates were. I think yesterday they were below five for a first time in a long time, and they've increased, you know, way above five, you know, just within 24 hours. You know, the normal buyer is not tracking mortgage rates every day. You know, those are things. That's where the volatility, a lot of things like that are happening. That's where, you know, again, as is, you know, the best real estate decision is to slow down acquisitions, especially in some of the markets that are being affected more. Being able to wait for things to settle, and inventory to settle a bit. There is a lot of opportunity moving forward in those markets. Thank you. Thanks. Thank you, Jason. The next question comes from the line of Nick Jones with JMP Securities. Nick? Thanks for taking the questions. Two, if I can. I guess one, you talked about kind of varying dynamics by market. Are there markets that perhaps you're not in that you could potentially more aggressively or you can more aggressively enter where the dynamics are either more resilient or further ahead, where you kinda have better clarity? I guess, is there any change in how you're thinking about market expansion, you know, as kind of this dynamic unfolds? Yeah, no, it's a great question. We're definitely. If you look at the tracking of affordability in markets and you look at affordability in the Midwest, markets that haven't been impacted by the amount of, you know, price decreases and some of the things that you're seeing, the affordability is much stronger in those markets. If you look at the West or the West Coast markets, South, you know, some of the Southwest markets that we've mentioned, the affordability is really off the charts. As we look at expanding more markets, we're definitely having an eye on affordability because as mortgage rates, you know, reached a high in a long time and, you know, up into the high 5s or 6s, and then you had the median home price reach over $400,000, it's a bad combination for buyers. You know, that obviously, that's what slowed the market so rapidly. That is definitely something we're exploring. Affordability is becoming a very hot topic around here as looking at new markets. Nick, I would add a couple other things there too. If you take a look at our footprint and our market expansion that we grew out this year in 2022, you know, we're very intentional about going, you know, into California early in the year to establish ourselves in those markets. Those have been coming online. We don't have a big presence there as we're moving into it, and that's proven, you know, to work out to our benefit right now. But it has us positioned well as you move through the cycle for, you know, those to be really good markets for us moving forward. The other market build-out, we really focused on a combination of Midwest markets and satellite markets for us. We were doing that with an eye to risk management because, you know, we've had a lot of discussions about how, you know, the HPA environment has been very strong for a long time. It's gonna slow down at some time. You know, satellite markets are much more efficient for us to get into. They're generally smaller markets that are close to some of our hub markets that we can leverage our management teams there from a cost perspective, but they're also more affordable markets, and those are really showing, you know, to be prudent moves for us, you know, during this year and during, you know, this particular cycle move. Got it. That makes sense. I guess a question on, you know, acquiring homes. You have a pretty large capacity, so is this kind of reflective, I guess, the 3Q guide and the commentary on the back half, is that reflective of this kind of being a little bit longer term? Or is there a scenario where you can use your capacity, kind of change your algorithm a little bit or your fees to kind of just, kind of buy through this pressure? I think kind of longer term, a lot of economists are expecting rates to actually pull back by 2024. I mean, is there a scenario where you can just kind of grow through, we'll call them kind of missed purchases, to kind of make up for any impairments? I'm not sure if the question makes sense, but ultimately, can you kind of just buy faster to make up for a more challenged environment given the borrowing capacity? Yeah, no, it's a great question. The answer to that is absolutely. When the opportunity is there, you wanna buy. How you make up for either misses or market changes in some of the inventory you have now is buying better product with wider spreads that's more consistent. That's exactly what we're focused on right now. You know, it's interesting. I think one of the things that maybe one of the biggest misunderstandings about real estate is that it goes from a seller's to buyer's markets overnight. That's not. I think probably the question I have been asked more than anything else in the history of Offerpad is what happens in a downturn? The answer I've always given is a downturn doesn't bother me. The downturn is actually opportunity. To be a buyer in a buyer's market is a good place to be. The hardest place to be is when it transitions from a seller's to buyer's market, and that transition period at the very top, that's when it gets more foggy than ever before, and that's exactly where we're at in this cycle right now. That's where we're watching closely. As soon as we see more consistency in our markets, there is a great opportunity. I'll tell you the one thing also we're seeing is sellers are not as patient as they used to be. In a normal real estate market, sellers have been on the market, you know, in, say, a balanced market, quote-unquote, six months of what it takes to sell their home. That hasn't been the market over the last two years. When sellers are sitting on their home for a month or two, they're very impatient. They don't have access to the liquidity. As you know, that's why I keep mentioning the opportunity there. They can come to us and close on their schedule, and that's where we get really excited. Right now, we wanna be really smart and make the best real estate decisions through this cycle. Like I said, you know, like it's most of these, you know, it doesn't take long for people to find where they're at. Obviously we're watching that closely. Thank you, Nick. The next question comes from the line of Justin Ages with Berenberg Capital Markets. Justin? Hi. Thanks for taking the question. The first one, given the highlights that you gave around kinda the new product, is there any information you can give us on attach rates and kind of the ancillary services and you know how we should think about those products going forward? I don't know if we're giving attach rates, but what I will tell you, again, a good question, Justin, is what has been nice about having our Flex product, as we have widened our buy box and right now temporarily got a little more conservative about what we're buying, as far as risk management, having our Flex product has been fantastic because instead of having to buy their home with all the uncertainty, we can have sellers use our Flex product, which, you know, they can list a home with us. That has been a really awesome product we've had, especially over the last 60-90 days, as more and more people are using that product. We are seeing increased volume there, but I don't think we're talking about conversion yet, Mike. No, not specifically, but, you know, what we can say is, you know, we're building up, you know, obviously Flex has been part of the product portfolio for some time now. We're just seeing consistent growth quarter-over-quarter there as we move through that. Again, that will continue to further enable some of these other ancillary products like mortgage. Again, they're similarly at a bit of a lesser level just because we're starting out more soon in that particular area. It's not material for us, but, you know, we're having more opportunities. Again, that you know, our mortgage count quarter-over-quarter has been growing, you know, throughout since inception. Yeah. I think that's been, you know, the positive of transition is, as you guys have heard me mention before, one of the challenges we have is the education of being a one-stop solution center, not just a quote-unquote iBuyer that we'll pay. Right now we're seeing more and more opportunity of people looking at us as a solution center as, you know, from our bundling service of using mortgages, using one of our solution experts to help them find their next house, which is really important right now, and then being able to sell us their home cash or to use our listing service. That has been something that has been getting, you know, more and more volume especially lately. All right. That's helpful. Thanks. Switching gears to the renovation side, given your comments that you're adjusting the strategy to make the homes more appealing so they kinda stand out given the rising inventory, is that gonna be reflected in maybe higher average cost of renovations or seeing the number of days per project kinda tick up? Yeah. To highlight that, renovation right now is gonna be key. I mentioned a little bit in the comments, but you know, as there's more inventory, you want your house to be the most-home that people want to buy. We have the ability to know what else is on the market and how to upgrade our homes. You know, what we've seen over the last couple years, you know, you haven't had to put in all the bells and whistles in some of these homes because of just the lack of supply. Now, as people are choosing and as buyer demand picks up, we wanna make sure that we can add different upgrades in there. The one thing with our, and I think the most important to your question with our renovation teams, it shouldn't add a lot of time on that. It'll add some costs, obviously, as you know, if we're throwing in granite maybe we didn't before, maybe we're throwing in more stainless appliances or doing more with the cabinets. That'll add a little bit, but it shouldn't really affect our, I mean, it'll affect some, but maybe a few days of our renovation times. One of the things that I will shout from the rooftops is the strength of our renovation. The adversity these guys have been through the last couple years with supply issues and everything else, they've done a phenomenal job. With the sophistication we have there now, having them do a little bit more renovation to these homes, they're geared and ready for it. All right. I appreciate the color. Thanks for taking the question. Thanks. Thank you, Justin. The next question is from Mike Ng with Goldman Sachs. Mike, your line is open. Hey, good afternoon. Thank you for the question. I just have two. First, could you talk a little bit about how you're thinking about inventory balances and purchases into the third quarter? You know, I know, Brian, you mentioned that you're slowing acquisitions in certain markets. I was just wondering how we should think about that line exiting 3Q. And then second, I was just wondering if, Mike, you could talk a little bit more about funding. You know, has the volatility in the real estate market you know changed anything as it relates to you know the terms of your funding facilities? Have the advance rates come down? Is there, you know, more cash that you have to commit to support any of those facilities or anything like that? Thank you very much. Great. Thanks, Mike, for the questions. In terms of, you know, Q3 acquisitions versus, you know, our expectations on sales, what I would tell you is, I would anticipate, you know, acquisitions and sales being in probably in about in the same range. You know, as we are temporarily slowing the acquisition pace, you know, a bit here as we go month to month or just week to week, pardon me, in terms of, finding where we can reengage, you know, accurately in each market. I think for Q3, you're probably gonna see levels of acquisitions and sales given, you know, the demand characteristics right now to be pretty comparable, and therefore inventory levels looking pretty similar as we exit Q3. In terms of financing backdrop, we really haven't seen any detrimental effect, or anything like that. We've got, you know, excellent relationships with our existing lender base. We've been, you know, we keep in constant contact with them. You know, ironically, the shorter duration of the facilities, the two-year facilities, you know, causes us to be back active with them on a pretty regular basis. As we've gone through each of those renewal processes and over the past year, putting some new facilities in place, what we've seen is that we've been able to, you know, maintain terms, and in certain instances, improve them. Even from the standpoint of, you know, borrowing base, you know, requirements and things like that. These are, you know, kind of disruptive times when you're, you know, speeding up or slowing down a little bit. You know, we test through some of the provisions, you know, in there, and thus far, you know, we've been in pretty good shape, and haven't really seen any detrimental effects to that. There's no, you know, cash calls or reductions or anything along those lines. Just to add on that, obviously Mike lives in the credit facility world, but I'll tell you, like, I just had dinner with one of our lenders in New York not very long ago, and I think each one would tell you that they have confidence in us because we're gonna make the best real estate decisions. Sometimes they're hard decisions to make the best decisions, you know, for the company, for our investors, but also the best real estate decisions that are out there. I think that our lenders have a lot of confidence that we're gonna make the right decisions in moving through our inventory. Great. That's excellent to hear. Thanks for the thoughts, Brian and Mike. Thank you. Thanks. Thank you, Mike. Our last question comes from the line of Jay McCanless with Wedbush. Jay, your line is open. Hey, guys. Thanks for taking my questions. The first one I had is when you think about the inventory that you're seeing in your markets, is the inventory, you know, at median price, below median price? What are people showing right now? I guess I jumped on late, but, you know, if you could kind of frame that in the comments of what you're doing with the buy box right now. That's a great question. A couple things there. What we're seeing, and this is where when I mentioned the volatility, what happens in these markets is you're seeing more inventory, and more importantly, you're seeing sellers that have had more equity in their homes. Some of these markets have appreciated 50%-60% within just two years, so they have a lot of equity in their homes. Different than what it was I've seen in other cycles, where making a $25,000 or $30,000 price adjustment was a big deal because maybe they have $50,000 in equity in their home. You know, it was, you know, some of these sellers have $230,000-$800,000 equity in their home that they've accumulated pretty quickly. Where the inconsistency is coming from pricing is you're having sellers reduce prices and I don't want to say race to the bottom, but there's more inventory hitting. They want theirs to sell first, and so they're being more aggressive in the price side. What we want to do is watch that for that to get a bit more consistent. The way that we underwrite now, just like we underwrote when the market was accelerating, we would write more in the top of where the comps are. We would take some of the higher comps and justify for home price appreciation. It's exactly the opposite now. Now you want to go low to mid where the market is, and put inventory out there. You know it's going to move quickly. What you're doing is you're watching active inventory more than you're watching pending and sold inventory. You know, I've said for a long time, active inventory is really the best key metric of real estate. We're watching active inventory really closely and pricing it accordingly. Okay. Then I guess for the EBITDA guidance for Q3, I mean, I'm assuming, and please, apologies if you've already addressed this, but I'm assuming you guys are pushing a little harder, wanting to take a little bit less margin on each home. Is that the reason you're thinking EBITDA is going to be negative for the quarter? Yes. I mean, what we want to do, and this is just because you missed the first of the call, you know, some of the markets that have declined quicker than others, that in some of these markets, you know, we've reduced some of our list prices, you know, 8%-10%, to find where the buyers are. And the good part about that, it's working. We've reduced some of the prices, and we're finding buyers at those price points. It's really important to distinguish the two, though. Just trying to blow out inventory and sell whatever to get, you know, to get out of the inventory is much different than the approach that we're taking. We want to make the best real estate decision. How can we reduce the price to sell in 21 days with the information we have now? That's what we've been doing. You know, we've made those adjustments. We're starting to see more activity there, which has been a positive. Okay, that's great. Thank you. Appreciate it. Thank you. Thanks, Jay. Thank you, Jay. We have no further questions waiting at this time, so that concludes the Offerpad second quarter 2022 earnings call. Thank you all for your participation. You may now disconnect your lines.