Hello and welcome to the Offerpad Solutions Inc. Q3 2024 earnings conference call. My name is Harry, and I will be your operator today. All lines are currently in a listen-only mode, and there will be an opportunity for Q&A after management's prepared remarks. If you would like to enter the queue for questions, please dial star followed by 1 on your telephone keypad. I will now hand the call over to Cortney Read, Offerpad's Chief of Staff, to begin. Please go ahead. Good afternoon and welcome to Offerpad's Q3 2024 earnings call. I'm joined today by Offerpad's Chairman and Chief Executive Officer, Brian Bair, and the 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 reconciliations of Offerpad non-GAAP measures to the comparable GAAP measures are available in the financial tables of the Q3 earnings release on Offerpad's website. With that, I'll turn the call over to Brian. Thank you, Cortney, and thanks to everyone for joining today. In the Q3, we delivered revenue at the top of our guidance, driven by a healthy mix of our products, including our cash offer, our B2B renovate business, our Direct Plus institutional buyer program, and our Agent Partnership Program. This occurred in a quarter in which the country continued to see residential resale transaction volumes at historic lows, persistent affordability issues, abnormal seasonality, and the implementation of the most significant change in the industry commission practices in our lifetime. That meant that during the past quarter, consumers not only had to contend with volatility and uncertainty in mortgage rates and access to affordable inventory, but also in how much they should pay their agents. Despite these significant macro and market headwinds, we remained focused on our mission to simplify real estate and to provide solutions for consumers and partners, all while continuing to make important strides in building a long-term, profitable business that can weather any economy. Quarter highlights include asset-light growth, now making up 30% of the total contribution margin after interest, continued expansion of our agent partnership program, further enhancements in our technology, enhanced customer journey, and improved operating leverage through our optimization efforts. These wins and positive trends exiting the quarter are expected to continue, leading us on our path to Adjusted EBITDA profitability and position us for sustained profitability in any market condition. For more than two years now, and especially during the last few quarters, we've been hyper-focused on returning to positive earnings and cash flow. This has required us to adjust our playbook, all while adapting to unprecedented market conditions that we may not ever see again in our lifetimes. That is not an overstatement. If current estimates for this year hold, there will be under four million national real estate transactions in 2024. That would mark the second consecutive year with volumes at levels below even those seen at the depths of the Great Financial Crisis. This reality has meant focusing on diversifying our revenue, adjusting our buy box, and managing our acquisition pace to address market uncertainty. Importantly, it has meant taking a keen look at our operations and expenses and wholly reorganizing our cost structure to thrive. These efforts, though challenging, have been essential, and they're working. By prudently reducing acquisitions, especially in Q3, we benefit from owning quality inventory aligned with our return goals. Our revenue diversification through other platform offerings has provided stability in contribution margins beyond the core cash offer business. Additionally, cost-saving measures, tech-driven process improvements, and strategic reorganization have brought us closer to profitability, even amid historically low volume. In short, we've become a leaner, smarter, and more resilient organization, well-positioned to leverage market momentum. This is why I'm especially optimistic about the market transition we expect in the coming quarters, a shift we've strategically prepared for and are ready to leverage as we enter the anticipated Fed rate-cutting cycle. The milestone eagerly awaited by consumers, lenders, agents, and institutional partners will set the stage for change. We anticipate continued mortgage rate volatility through Q4, stabilizing into 2025, with a busier spring selling season on the horizon. We believe that the combination of rate relief, easing inflation, a resilient labor market, and pent-up demand will help bring buyers and sellers back into the marketplace. Additionally, our Direct Plus partners have shown increased buying activity, signaling early signs of the market beginning to unlock. Based on these indicators, we're projecting a 15%-20% increase in resale market transaction volume, reaching an estimated 4.3 million-4.5 million transactions in 2025. Before moving forward, I'd like to address the impact of Hurricane Helene and Milton on our East Coast markets, particularly in Florida and the Carolinas. As the storms approached, we implemented our standard precautions to safeguard our properties. The impact was minimal, primarily limited to landscape cleanup and a few fallen fences, with no material damage to our portfolio. The most significant effect was a temporary market slowdown before and after the storms as local communities worked through the aftermath. We're grateful that our team members and partners remain safe and deeply appreciate their dedication through this period. In Q3, our customer engagement remained strong, underscored by a 91% customer satisfaction score and steady monthly request volume, driven by improved advertising efficiencies. Notably, customers turned to us first, often before consulting a real estate agent, with 33% looking to transact within the next 12 months. We're fully prepared to support customers whenever they're ready to transact, whether that's in a week or a year. To maintain strong connections, we've introduced enhanced communication strategies, offering updated customer offers every 30 days, with timely updates and alternative solutions through multiple channels and tailored cadences, ensuring that customers receive relevant information at every stage of their decision-making journey. In anticipation of increased market activity, we're now strategically expanding our buy box and raising acquisition volume. Our goal is to accelerate this effort through Q4 and into Q1, positioning us ahead of what we anticipate being a strong spring season. We're targeting a return to a run rate of approximately 1,000 acquisitions per quarter by Q1. As we look forward to growth, we're excited to introduce a significant improvement to our customer journey, building on our well-known commitment to deliver competitive and quick cash offers. Previously, our timeline was to provide the offer within 24 hours, followed by an inspection period for further evaluations and possible repair negotiations. Now, customers can expect an estimated offer range within minutes, allowing them to schedule their inspection instantly. This shift reduces multiple touchpoints, giving customers even more control over timing and decision-making. Powered by advanced pricing technology known as Offerpad Citrus Value, an extensive internal data gathered from hundreds of thousands of offers, this improvement reflects our confidence in our pricing model, analytics, and real estate expertise. Early results from our Q3 tests in Phoenix and Vegas show an increase in customer engagement and conversions, affirming the workflow's impact. Launched in all markets at the beginning of Q4, this process offers a smoother, more efficient experience that reinforces our commitment to customer-focused solutions. Progress in our agent partnership program, APP, continues to exceed expectations. The Pro tier, which allows agents the ability to earn up to 4% on the successful acquisition and listing of a home, grew quarterly requests and acquisitions to 26% and 33% of total, respectively. Regarding the exclusive Max tier that connects high-producing agents with regional access to seller and buyer leads, we have continued to refine pricing and operating models. This program is driving consistent monthly recurring revenue in many key markets such as Phoenix, Houston, and Las Vegas. Offerpad Renovate continues to be a strong line of business, capitalizing on the experienced teams and well-honed processes we've developed over the years. This service provides timely, cost-effective, high-quality renovation solutions for our B2B clients. Despite many of our Renovate partners operating at reduced levels, we've achieved another strong quarter with 227 completed projects, generating over $4 million in revenue, bringing 2024's running total to $14 million, already surpassing our 2023 total of $12 million. As we've expanded our client base, our average revenue per renovation has grown from approximately $11,000 to $18,000 over the past year. We've steadily added new partners and look forward to serving the institutional buyers we anticipate entering this market cycle. We continue to invest in technology to make the business more efficient. As a result of these investments, we've been able to streamline costs and improve margins, putting the business on a path to delivering consistent improvements in Adjusted EBITDA and cash flow. For example, RENO CAPTAIN, which we discussed last quarter, is not only supporting our renovate business but also making our internal renovations on Offerpad-owned homes more efficient. Renovation costs are among our most significant expenses, making it essential to continually optimize this area. With targeted investments in technology, we're positioned to drive greater efficiency as we ramp up acquisition volume. To recap, we've remained disciplined and patient in this difficult real estate cycle while planning for long-term success. We've focused on diversifying our product mix and optimizing our costs in the short term, setting us up for the long term. We have grown our asset-light services, expanded our partner ecosystem, enhanced our customer offer request journey, and optimized our cost structure. This preparation has positioned Offerpad well as we transition to the next phase of the market and return to our normalized acquisition volume and inventory levels in our cash offer business. With that, I'll now turn the call over to Peter. Thank you, Brian. The quarter brought a lot of change in the market and industry, which we expect will bring significant opportunity for each of our lines of business. With market conditions expected to stabilize, including easing mortgage rate volatility, we anticipate stronger and more serious interest from buyers in the months ahead, especially as we move past the election and routine seasonality of the holidays. Additionally, decreasing rate expectations have a direct impact on institutional acquisition level, which we're beginning to see come through in offer and transaction activity. This is an exciting early trend that we expect will help us grow our B2B businesses, including Direct Plus and Renovate. During the past few months, we've been highly focused on business improvement opportunities, both cost-out actions as well as change management and process enhancements. As Brian mentioned, we've accelerated the speed and efficiency of our initial offers, providing customers with an estimated offer range within minutes and an early inspection opportunity. This streamlined approach increases customer engagement, creates more inspection opportunities, and allows us to view more properties, ultimately driving improved conversion. As we discussed last quarter, we carried forward the focus on optimizing margins and costs throughout Q3 as we continue to position the business to generate positive EBITDA and cash flow in any real estate environment. Turning to the quarter, inventory remained in a healthy position. We ended the quarter with 796 homes in inventory, of which only 10.9% were owned over 180 days and not under contract for resale. During the quarter, we continued our strategy of acquiring fewer homes at wider margins as we positioned ourselves for the seasonally slower fourth quarter and to mitigate continued uncertainty in the market. While the lower acquisition pace has reduced overall contribution profit, our underwritten ROI and margins have grown, and importantly, we have navigated a tough environment without any material inventory impairments six quarters in a row. We acquired 422 homes in the quarter, down 49% compared to Q2, and in line with our strategy of acquiring fewer homes at wider margins during this period. However, with the anticipated market transition, we are now focused on increasing acquisition pace throughout the fourth quarter to meet expected demand in 2025. We anticipate this to result in sequential acquisition growth in both Q4 of this year and Q1 2025, with total acquisition levels climbing to 1,000 or more per quarter. While our cash offer continues to drive the majority of our contribution margin, we're pleased with the performance of our asset-light services, including Renovate, Direct Plus, and our agent partnership program. Combined, these services represented over 30% of total contribution profit after interest in Q3, and we expect this momentum to continue to the end of the year and into 2025. Homes sold in the quarter had an average time to cash of 110 days, an increase of four days quarter over quarter, and in line with our seasonal expectations. Given those same dynamics and our sales mix with a larger portion of aged inventory given our intentionally lower recent acquisition pace, we expect time to cash to increase in Q4. Gross margin was slightly down compared to the second quarter at 8.2%. Gross profit was $17.1 million, down 29% year- over- year and 22% quarter- over- quarter. This performance and gross margin was driven by increased contribution margin in our asset-light services, which represented 34% of total transactions in the quarter, offset by a slight decrease in contribution margin from our cash offer business. Operating expenses, excluding property-related selling and holding costs and contribution margin of $19.2 million, improved by $4.9 million versus the prior quarter as a result of our continued cost-out initiatives. That's an improvement of 48% or $18.1 million year- over- year, driven by reduced advertising spend, growth with our agent partnership program, and cost management activities. This has been a critical area of focus as we continue to streamline and restructure our organization. I'd like to take a moment to emphasize our relentless focus on cost efficiency. Through this commitment, we've achieved remarkable cost reductions. After lowering annual operating expenses by nearly $70 million in 2023, we continued to make excellent progress in our cost-out initiatives during the quarter and now expect to save over $45 million annually, up from the $30 million target we shared earlier in the year. You should expect cost improvements to continue in Q4 as mid-quarter work is fully realized across the quarter and into 2025, where we expect to improve sequentially quarter- over- quarter. These focus areas, including optimizing OpEx, drove an adjusted EBITDA loss of $6.2 million, an improvement of 53% year over year, and a slight decrease of $1.8 million quarter over quarter, which did include a one-time restructuring cost of $700,000 in the quarter. This is slightly below our expectations of sequential quarter over quarter improvement, primarily driven by lower volumes in the cash offer business. Turning to the balance sheet, we ended the third quarter with $49 million in unrestricted cash and when incorporating the estimated net value of our carried inventory over $90 million in total liquidity. As we've discussed, we're hyper-focused on reaching positive cash flow, as evidenced through the sequential improvement from $12 million to $8 million in quarterly cash decrease. As we rebuild inventory through increased acquisitions, we anticipate increasing leverage in the coming quarters as we finance acquisitions using our dedicated asset-backed warehouse facilities. We continue to have a strong roster of supportive lending partners and, importantly, have zero parent-level debt. Moving now to guidance, considering the continued lower industry-wide volumes and our prior strategic decrease in acquisition pace, we expect fourth quarter revenue to be in the range of $160 million-$185 million, supported by 480-540 homes sold. With our continued focus on operating leverage, we expect to achieve slightly lower Adjusted EBITDA and a sequential improvement in change in cash. As we move through the final quarter of 2024, we're energized by the positive shift starting to emerge in the market. With a stabilizing and potentially decreasing rate environment expected in 2025, we're poised to return to more normalized acquisition levels, a transition already underway. We are proud of the cost discipline we've maintained throughout this unprecedented period of dislocation and historic low activity in the residential resale market, and we'll continue this discipline as we move back to revenue growth. With our unwavering commitment to profitability, I'm confident that as we resume normalized volumes, we're rebuilding a resilient and sustainable business that can thrive in any real estate environment. We look forward to updating you on our progress. We will now open the call for questions. Thank you. If you would like to ask a question, please dial star followed by one on your telephone keypad now. When preparing to ask your question, please ensure that your phone is unmuted locally. If you change your mind and would like to exit the queue, please dial star followed by two. And finally, we respectfully ask that you limit yourselves to one question and one follow-up per person, and then re-enter the queue for any further questions. Our first question today will be from the line of Dae K. Lee with JPMorgan. Please go ahead. Your line is open. Great. Thanks for taking my question back to first for Brian. I appreciate your comments on acquisition volumes and what 2025 might look like, but could you share what assumptions are contemplated in your outlook, meaning what do you need to see? What kind of mortgage rate environment are you assuming for that? Yeah. I think. I'm sorry. No, go ahead. Answer that. I have a follow-up. Yeah. So we're seeing, I think, first and foremost, the pent-up demand we're seeing from both sellers and buyers. That increases, I feel like, month over month. Obviously, there's been a lot of adversity over the last couple of years in that, but pent-up demand overall is something that we watch really closely. The second part of that is that we're expecting that interest rates right now, they've been so volatile. And I've said this, I think, the last few earnings calls, but it's not just the mortgage rate. It's the volatility. I mean, for example, we saw that in the third quarter again, is that interest rates dipped to 6% and then back up over 7% again. They're 7% today. So we're expecting that to be that way through 2024, but really to settle in in 2025, that will be that. The other part is that we saw a pretty dramatic pause in the market about mid-August when we saw the NAR settlement really start settling in with agents and a lot of confusion, both from sellers, buyers, or I should say, sorry, sellers, buyers, and agents. We're expecting that to mitigate a little bit as well, and like I mentioned in the comments, there's going to be less than 4 million transactions this year. That's what they're estimating, and we're not thinking it's going to be back to 5.5 million again or 6, but an increase to 4.2-4.4 range, I think, is very realistic in what we're going to see. The last two years, we have seen very soft selling seasons and higher seasonality. We're expecting the spring selling season to really loosen up again. Like I said, nothing dramatic, but just to loosen up and then soften the volatility we're seeing with mortgage rates. Great. I appreciate that. And then as a follow-up for Peter, when you think about profitability, and I appreciate the comment about reaching positive free cash flow and profitability in any environment, so is it right or should we assume that you could be just a little bit profitable for the full year in 2025, or does it need to take a little bit more time for you to get to or achieve full-year profitability? Yeah. So thanks for the question. We are, I mean, absolutely, that is our approach and our focus. We're laser-focused on cost-outs. I'm not ready to give guidance for 2025, so I'm not going to give a direct answer to the question, but it's right on target with what we're talking about, of course, and what's in the prepared remarks and what we're doing. You can see what I'd point you to is from a cost perspective. Pillar One really has been taking cost out of the business. We took $70 million of cost out last year. We've taken $45 million, and there could be more. There will be more. It's just a question of how much more. And by the way, not all of that is in the results because our last cost-out work process was in August, and so we don't see all of that in third quarter. So you do already see sequential improvement in cost-outs. You can see that $32 million in reported OpEx second quarter down to $26 million in third quarter. We're moving now to 1,000 homes, so that's really pillar two. We've retooled our cost base, and then we're relaunching back up to levels close to but higher than where we were at in first and second quarter earlier this year, up above 1,000 homes. That's going to increase our revenue and therefore our gross profit. And once we put those two together, back up at 1,000 homes and the lower cost structure, that's when we will hit adjusted EBITDA positive, and then after that, free cash flow positive. Yeah, Dae, just one thing I'll mention as well is we're seeing very strong and continue to see really strong seller demand. Our request volume is strong. Our agent partnership program continues to grow, and our partnership we have with Realtor.com. We're seeing really strong request volume. As some of those I've commented before, buying homes is the easy part, but buying them where they perform and making sure that when we buy them under the right circumstances, we know how that home is performing. That is something we're continuing to see, and it also gives us. We get pretty excited about what the early 2025 is going to look like. Got it. Appreciate the color. Thank you. The next question today will be from the line of Ryan Tomasello with [Stephens]. Please go ahead. Your line is now open. Hi everyone. Thanks for taking the questions. Peter, just in terms of the $45 million of annual cost saves, that's up from, I think, $35 million that you cited last quarter and up from $30 million at the beginning of the year. Can you just elaborate on where you're driving those savings from? And then considering the progress that you guys have continued to make on those expense efficiencies, can you give us an update on what level of monthly or quarterly acquisition volumes you think is necessary to achieve break-even on a cash flow basis, inclusive of interest costs? Okay. So for sure, as we've stressed over and over at this point, the cost-outs are critical in part one. There are people costs there. We have taken the business down to lower levels. At the same time, we've worked through with process improvement initiatives, and we've taken the opportunity to make sure that we're not just running the business efficiently, but we're doing it effectively as well. So that is a significant part, over 50% of the cost-outs. But on top of that, we've done everything else that you'd expect. We've gone through our largest spending areas from a procurement perspective, and we haven't just done that. We've gone all the way down to the long tail, the smaller expenses that are sometimes ignored, and gone through those as well. And then finally, marketing is an area that we've focused on as well. It's a variable expense, and so it's a little bit different than the other areas that are truly permanent cost-outs, but we've looked hard at attribution, and before we go and spend more to get more top of funnel, we're making sure that we're getting the best conversion across the leads that we are paying through direct marketing, and so we've taken marketing costs down as well, and you can see we do disclose that. That is in one of the footnotes in the Q where our marketing levels are, and then as far as I think your second question was, how do we get through to what's the acquisition level? What I'd say there is we're targeting 1,000 homes, and we're really excited. Without saying more than this, we're really excited about what that's going to bring us from a financial perspective when we put the volume at over 1,000 homes back on top of our lower cost structure, and that will bring us where we're looking to go. Great. And then just one more for Brian. Now that we have about two, three months of the NAR settlement behind us, I was hoping you can give us an update on any impacts. You've observed whether in terms of actual data or anecdotes you've gotten from the industry around commissions and just the impacts for the industry overall so far? Yeah, and like I mentioned, there was definitely a shock to the industry as far as we talked about before, buyers having to sign buyer agreements with agents and guaranteeing the commission to the agent where if the seller didn't pay, they would have to pay for it. Definitely was something that everyone had to get used to on all fronts, but seeing as things have settled a little bit and starting to see that, definitely starting to see some impact of commissions there from maybe even 50 basis points coming down on the buy side, and so a lot of direct conversations from agents asking what commission Offerpad pays. We've continued with buyer demand being low to keep commissions and obviously to partner with our agents to keep commissions with our original underwritten commissions at least till the end of the year. That's something that we're always going to be looking at closely, but I do think you're going to start seeing the impact of the overall commissions. Even in the early days, you're seeing that impacted a little bit, and I think you'll still see a little bit more of that over the next several months. Great. Thank you. Next question today will be from the line of Nick Jones with JMP. Please go ahead. Your line is open. Hi. This is Luke on for Nick. Thanks for taking our question. Given ongoing but potentially improving macro volatility, are there any markets you're seeing more resiliency in than others? I guess if you could just provide any color on performance across your different markets, that would be great. Thanks. Yeah. From a resilience standpoint, the markets, the Texas markets, Atlanta, the Carolinas have been very resilient markets. It's hard with the impact of the storms there in the Carolinas and the Florida markets has been really just impactful on the timing of a lot of this and, of course, a lot of devastation that's happened there, but those have been very resilient markets, and as I commented before, markets that saw the highest home price appreciation in the shortest period of time have been the ones that have been a little longer to settle in again, but yeah, and the Midwest markets as well have been pretty resilient, so I would say Midwest, the Carolinas, and Atlanta. Great. Thank you. As a reminder, for any further questions, please dial star followed by one on your telephone keypad now. And our next question will be from the line of John Colantuoni with Jefferies. Please go ahead. Your line is open. Great. Thanks for taking my questions. First off, home price appreciation is beginning to moderate after being elevated for the past five years or so. Given you're holding homes now for over 100 days, I'm curious how you plan to adjust to home price appreciation moderating back to historical averages while holding costs and renovation costs remain elevated. And I have a follow-up. Thanks. Yeah. A great question. We still continue focused on the margin on the home and not the volume of what we're making per home and what we're buying. The interior areas are things that we're focused on. The exterior areas, we're seeing more active inventory, more price volatility in those areas, but definitely focused on the certain type of product that we feel we can perform really well and being careful about what we're buying still. Okay. Great. Second one, just with cash on hand, continue to moderate. I'm curious to get your sort of philosophy or perspective on potentially raising capital to provide just more fuel, more flexibility, and more aggressively pursue the growth initiatives that you've laid out? Thanks. Yeah. Sure. First, you're right. It's moderated some, but it still is at a comfortable level at $49 million. And so that's what I'd stress, number one. From a capital market, again, we're focused in the immediate term, and when we get to the intermediate term, I think capital markets for sure. Of course, we look at capital markets opportunities both from a debt perspective and an equity perspective from time to time and on an ongoing basis. As we get, maybe we can think about it in three steps. One, these cost-outs, which have been critical and have gone really well. Two, ramping up volume. And then three, is everything else, deeper penetration in our existing markets, moving into more broadly into new markets and from a product perspective. And at some point across those steps, capital markets could be and may be part of our strategy. But right now, we're laser-focused on moving out of the cost-out initiative and into the growth initiative and into next year based on that strategy. Thank you. Thank you, and with no further questions in the queue, this will conclude the Offerpad third quarter 2024 earnings conference call. Thank you to everyone who was able to join us today. You may now disconnect your line.