Offerpad Solutions Inc

Previous wording

Offerpad, dedicated to simplifying the process of buying and selling homes, is committed to providing comprehensive solutions that remove the friction from real estate. Our advanced real estate platform offers a range of services, from consumer cash offers to B2B renovation solutions and industry partnership programs, all tailored to meet the unique needs of our clients. Since 2015, we’ve leveraged local expertise in residential real estate alongside proprietary technology to guide homeowners at every step, and have transacted on homes representing approximately $11.3 billion of aggregate revenue through June 30, 2024.

Current wording

Offerpad, dedicated to simplifying the process of buying and selling homes, is committed to providing comprehensive solutions that remove the friction from real estate. Our advanced real estate platform offers a range of services, from consumer cash offers to B2B renovation solutions and industry partnership programs, all tailored to meet the unique needs of our clients. Since 2015, we’ve leveraged local expertise in residential real estate alongside proprietary technology to guide homeowners at every step, and have transacted on homes representing approximately $11.5 billion of aggregate revenue through September 30, 2024.

Previous wording

We are currently headquartered in Chandler, Arizona and operate in over 1,800 cities and towns in 27 metropolitan markets across 17 states as of June 30, 2024.

Current wording

We are currently headquartered in Chandler, Arizona and operate in over 1,800 cities and towns in 26 metropolitan markets across 17 states as of September 30, 2024.

Previous wording

During the first half of 2024, the residential real estate market conditions continued to evolve and present challenges, with the mortgage interest rate environment remaining volatile during the period, along with sustained elevated levels of inflation in the broader economy, a limited supply of single-family homes and various other macroeconomic and geopolitical concerns. The average thirty-year fixed mortgage rate generally increased throughout the first half of the year, peaking in the mid-7% range in April 2024, before decreasing to around 7% at the end of June 2024. This elevated and volatile mortgage interest rate environment has continued to negatively impact housing affordability and create uncertainty for home buyers, which has challenged consumer demand for residential real estate. As a result of these conditions, we have remained focused on proactively optimizing our capital allocation across our highest performing and most efficient markets and balancing our real estate inventory acquisition pace to optimize our return.

Current wording

The elevated and volatile mortgage interest rate environment has continued to negatively impact housing affordability and create uncertainty for home buyers, which has challenged consumer demand for residential real estate. Additionally, the sustained elevated levels of inflation in the broader economy, along with other macroeconomic and geopolitical concerns, have continued to challenge consumer confidence. Further, recent severe weather events have negatively impacted the economic conditions in certain of the geographic markets in which we operate, resulting in slowdowns in real estate transaction volumes in such markets. As a result of these conditions, we have remained focused on proactively optimizing our capital allocation across our highest performing and most efficient markets. Additionally, we recently reduced our home acquisition pace as we continue to balance our real estate inventory levels to optimize our return.

Previous wording

Against this backdrop, we achieved year-over-year improvements in our revenue and net loss during the second quarter of 2024, and our gross profit margin improved on a quarter-over-quarter basis for the second consecutive quarter, reflecting our continued progress toward improving the stability of our gross profit margin. Further, we slightly increased our real estate inventory acquisition pace during the second quarter of 2024 as compared to the first quarter of 2024 and we had $307.8 million of homes in real estate inventory as of June 30, 2024.

Current wording

Against this backdrop, our gross profit margin has remained steady at around 8% throughout the year, reflecting our continued progress toward improving the stability of our gross profit margin. Further, our net loss improved on a quarter-over-quarter basis for the second consecutive quarter, as we have continued to focus on operating efficiencies throughout the business.

Previous wording

While we generated solid operating results during the first half of 2024, the ongoing challenging residential real estate market conditions continued to have an impact on our operating results. These conditions have required us to use pricing adjustments and other incentives in recent periods, which had a negative impact on our operating results during the first half of 2024. Further, there continues to be uncertainty regarding the near-term macroeconomic conditions, including the path of ongoing inflation in the broader economy, the direction of mortgage interest rates and the impact of geopolitical conflicts. We anticipate that the ongoing higher mortgage interest rate environment, economic uncertainties and affordability pressures will continue to impact consumer demand for residential real estate during the third quarter of 2024. As a result of these market dynamics, we may be required to use similar pricing adjustments and incentives in the future.

Current wording

While we generated solid operating results during the first nine months of 2024, the ongoing challenging residential real estate market conditions continued to have an impact on our operating results. These conditions have required us to use pricing adjustments and other incentives in recent periods, which have had a negative impact on our operating results during the year. Further, there continues to be uncertainty regarding the near-term macroeconomic conditions, including the path of inflation in the broader economy, the direction of mortgage interest rates, which have reversed course from a decrease in the third quarter of 2024 and increased in the early stages of the fourth quarter of 2024, and the impact of geopolitical conflicts. We anticipate that the sustained elevated and volatile mortgage interest rate environment, economic uncertainties and affordability pressures will continue to impact consumer demand for residential real estate during the fourth quarter of 2024. As a result of these market dynamics, we may be required to use similar pricing adjustments and incentives in the future.

Previous wording

Residential real estate is one of the largest industries, with roughly $1.9 trillion in value of homes transacted in 2023 in the United States, and is highly fragmented with over 100,000 real estate brokerages, according to the National Association of Realtors (NAR). In 2023, we estimate that we captured roughly 0.5% market share of real estate transactions across our 25 active markets as of December 31, 2023. Given this high degree of fragmentation, we believe that bringing a solutions-oriented approach to the market with multiple buying and selling services to meet the unique needs of customers could lead to continued market share growth and accelerated adoption of the digital model. We have demonstrated higher market share in certain markets, providing the backdrop to grow our overall market penetration as our offerings expand and evolve. By providing a consistent, transparent, and unique experience, we expect to continue to build upon our past success and further strengthen our brand and consumer adoption.

Current wording

Residential real estate is one of the largest industries, with roughly $1.9 trillion in value of homes transacted in 2023 in the United States, and is highly fragmented with over 100,000 real estate brokerages, according to the National Association of Realtors (NAR). In 2023, we estimate that we captured roughly 0.5% market share of real estate transactions across our 25 active markets as of December 31, 2023. Given this high degree of fragmentation, we believe that bringing a solutions-oriented approach to the market with multiple services to meet the unique needs of customers could lead to continued market share growth and accelerated adoption of the digital model. We have demonstrated higher market share in certain markets, providing the backdrop to grow our overall market penetration as our offerings expand and evolve. By providing a consistent, transparent, and unique experience, we expect to continue to build upon our past success and further strengthen our brand and consumer adoption.

Previous wording

In order to drive additional value from our agent partnership program, we implemented various enhancements to the program during the first half of 2024. Under the enhanced program, our partner agents can continue to request a cash offer on behalf of their clients, and now also have the ability to list an acquired home and ready for resale. Additionally, partner agents in the top tier of the program have access to sellers in defined zones and have the potential to list other Offerpad-owned homes in their zone.

Current wording

In order to drive additional value from our agent partnership program, we implemented various enhancements to the program during 2024. Under the enhanced program, our partner agents can continue to request a cash offer on behalf of their clients, and now also have the ability to list an acquired home prepared for resale. Additionally, partner agents in the top tier of the program have access to sellers in defined zones and have the potential to list other Offerpad-owned homes in their zone.

Previous wording

Since our launch in 2015, we have expanded into 25 markets as of December 31, 2023, which covered roughly 22% of the 4.7 million homes sold in the United States in 2023. Given this current coverage, we believe there is significant opportunity to both increase market penetration in our existing markets and to grow our business through new market expansion over the long-term. Also, because of our strategic approach to our asset-light platform offerings, which include our listing and renovation services, and our agent partnership program, we believe a significant portion of the total addressable market is serviceable with our business model. As we expand our reach through these other service offerings, we expect to continue to serve customers in markets beyond our direct service area. Further, this strategic approach has enabled us to enter into new markets to offer certain of our service offerings, without offering all of our buying and selling services in such markets. In connection with this approach, we began offering renovation services in two additional markets during the first half of 2024, bringing our total markets served to 27 as of June 30, 2024.

Current wording

Since our launch in 2015, we have expanded into 25 markets as of December 31, 2023, which covered roughly 22% of the 4.7 million homes sold in the United States in 2023. Given this current coverage, we believe there is significant opportunity to both increase market penetration in our existing markets and to grow our business through new market expansion over the long-term. Also, because of our strategic approach to our asset-light platform offerings, which include our listing and renovation services, and our agent partnership program, we believe a significant portion of the total addressable market is serviceable with our business model. As we expand our reach through these other service offerings, we expect to continue to serve customers in markets beyond our direct service area. Further, this strategic approach has enabled us to enter into new markets to offer certain of our service offerings, without offering all of our buying and selling services in such markets. In connection with this approach, we began offering renovation services in two additional markets during 2024. This, together with adjusting operations in existing markets has brought our total markets served to 26 as of September 30, 2024.

Previous wording

Although we recently expanded into two new markets, we have decelerated our market expansion plans in recent years given the challenging residential real estate market conditions and the uncertainty regarding the near-term macroeconomic conditions, including the path of ongoing inflation in the broader economy, the direction of mortgage interest rates and the impact of geopolitical conflicts. We intend to continue evaluating expansion plans on an ongoing basis in order to maintain our flexibility in assessing the overall timing of our expansion plan and appropriate market entry points in the future.

Current wording

Although we recently expanded into two new markets, we have decelerated our market expansion plans in recent years given the challenging residential real estate market conditions and the uncertainty regarding the near-term macroeconomic conditions, including the path of inflation in the broader economy, the direction of mortgage interest rates and the impact of geopolitical conflicts. We intend to continue evaluating expansion plans on an ongoing basis in order to maintain our flexibility in assessing the overall timing of our expansion plan and appropriate market entry points in the future.

Previous wording

Our renovation services represent an important component of our asset-light platform offerings. Through our renovation services offering, we are able to leverage our existing logistics, operations, technology and skill-sets to provide renovation services to other businesses, allowing other companies and homeowners to utilize our renovations team to update their portfolio of homes for rent or to sell. When providing renovation services, we receive a renovation project fee, and are also typically compensated with a service fee that is based on a percentage of the overall renovation project fee. Although our renovation services offering is in the early stages, representing approximately 2% of our total consolidated revenue during each of the three and six months ended June 30, 2024, we believe these services could be a more significant component of our business over time.

Current wording

Our renovation services represent an important component of our asset-light platform offerings. Through our renovation services offering, we are able to leverage our existing logistics, operations, technology and skill-sets to provide renovation services to other businesses, allowing other companies and homeowners to utilize our renovations team to update their portfolio of homes for rent or to sell. When providing renovation services, we receive a renovation project fee, and are also typically compensated with a service fee that is based on a percentage of the overall renovation project fee. Although our renovation services offering is in the early stages, representing approximately 2% of our total consolidated revenue during each of the three and nine months ended September 30, 2024, we believe these services could be a more significant component of our business over time.

Previous wording

Another component of our asset-light platform offerings includes our program that allows investors and single-family rental companies an opportunity to purchase homes from homeowners, matching investors with sellers. These transactions occur in several forms, including assigning the original purchase contract to the end buyer and collecting a fee at closing. We expect this program will allow us to help more homeowners sell their home and expand our ability to reach more customers, while also providing customers with the benefit of receiving an optimized offer for their home. This offering represented less than 1% of our total consolidated revenue during each of the three and six months ended June 30, 2024.

Current wording

Another component of our asset-light platform offerings includes our program that allows investors and single-family rental companies an opportunity to purchase homes from homeowners, matching investors with sellers. These transactions occur in several forms, including assigning the original purchase contract to the end buyer and collecting a fee at closing. We expect this program will allow us to help more homeowners sell their home and expand our ability to reach more customers, while also providing customers with the benefit of receiving an optimized offer for their home. This offering represented less than 1% of our total consolidated revenue during each of the three and nine months ended September 30, 2024.

Previous wording

We aim to deliver other additional products and services to customers in a smooth, efficient, digital driven platform, focused on transparency and ease of use. The primary goal is to be able to offer multiple services tied to the core real estate transaction, allowing customers to bundle and save. Although further developing these products and services will require significant investment, growing our current offerings and offering additional ancillary products and services, potentially including energy efficiency solutions, smart home technology, insurance, and home warranty services, we believe will strengthen our unit economics and allow us to better optimize pricing. Generally, the revenue and margin profiles of our ancillary products and services are different from our cash offering service that accounts for the vast majority of our revenue, with most ancillary products and services having a smaller average revenue per transaction than our cash offering service, but a higher margin.

Current wording

We aim to deliver other additional products and services tied to the core real estate transaction in a smooth, efficient, digital driven platform, focused on transparency and ease of use. Although further developing these products and services will require significant investment, growing our current offerings and offering additional ancillary products and services, potentially including energy efficiency solutions, smart home technology, insurance, and home warranty services, we believe will strengthen our unit economics and allow us to better optimize pricing. Generally, the revenue and margin profiles of our ancillary products and services are different from our cash offering service that accounts for the vast majority of our revenue, with most ancillary products and services having a smaller average revenue per transaction than our cash offering service, but a higher margin.

Previous wording

Our ancillary products and services represented less than 1% of our total consolidated revenue during each of the three and six months ended June 30, 2024.

Current wording

Our ancillary products and services represented less than 1% of our total consolidated revenue during each of the three and nine months ended September 30, 2024.

Previous wording

Historically, we have been able to manage our portfolio risk in part by our ability to manage holding periods for our real estate inventory. Traditionally, resale housing pricing moves gradually through cycles; therefore, shorter real estate inventory holding periods limit pricing exposure. As we increased our scale and improved our workflow optimization in prior years, our average real estate inventory holding period of homes sold improved from 138 days in 2016 to 97 days during the fourth quarter of 2023, which is consistent with our expected average real estate inventory holding period and our historical norm. The average holding period of homes sold increased to 113 days during the first quarter of 2024, reflecting the anticipated, normal seasonal increase.

Current wording

Historically, we have been able to manage our portfolio risk in part by our ability to manage holding periods for our real estate inventory. Traditionally, resale housing pricing moves gradually through cycles; therefore, shorter real estate inventory holding periods limit pricing exposure. As we increased our scale and improved our workflow optimization in prior years, our average real estate inventory holding period of homes sold improved from 138 days in 2016 to 97 days during the fourth quarter of 2023, which is consistent with our expected average real estate inventory holding period and our historical norm.

Previous wording

During the second quarter of 2024, the average holding period of homes sold decreased to 106 days, as we increased our home acquisition pace for the second consecutive quarter and our overall real estate inventory mix shifted to include a greater composition of newer acquired homes. Based on current residential real estate market conditions, we anticipate our average real estate inventory holding period in the third quarter of 2024 will remain consistent at around 110 days.

Current wording

During 2024, the average holding period of homes sold has remained consistent at around 110 days. Based on the current residential real estate market conditions, we anticipate our average real estate inventory holding period in the fourth quarter of 2024 will increase to around 140 days. This anticipated increase reflects our reduction in home acquisition pace during the third quarter of 2024, causing our overall real estate inventory mix to shift and include a lower composition of newer acquired homes, combined with the longer average time of homes on the market and the normal seasonal increase that occurs in the fall and winter.

Previous wording

The following details our consolidated results of operations and includes a discussion of our operating results and significant items explaining the material changes in our operating results during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

Current wording

The following details our consolidated results of operations and includes a discussion of our operating results and significant items explaining the material changes in our operating results during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

Previous wording

Revenue increased by $21.0 million, or 9.1%, to $251.1 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily attributable to higher sales volumes. We sold 742 homes during the three months ended June 30, 2024 compared to 650 homes during the three months ended June 30, 2023, representing an increase of 14.2%. This increase was primarily due to the impact of the considerable softening in consumer demand for residential real estate during the early stages of 2023, causing a significant reduction in home acquisition pace to allow us to manage overall real estate inventory levels. This, in turn, resulted in a lower number of homes sold in the second quarter of 2023 as compared to the second quarter of 2024. The increase in homes sold was partially offset by a decrease in the average resale home price from $357,000 in the three months ended June 30, 2023 to $335,000 in the three months ended June 30, 2024. This decrease was primarily due to our continued increased focus on geographic markets that tend to share relatively lower median price points as higher mortgage interest rates and sustained elevated levels of inflation in the broader economy have continued to negatively impact the residential real estate market conditions. We have also continued to refine our target home purchase price range to focus on acquiring homes with the greatest price stability within each market.

Current wording

Revenue decreased by $26.2 million, or 11.2%, to $208.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily due to lower sales volumes. We sold 615 homes during the three months ended September 30, 2024 compared to 703 homes during the three months ended September 30, 2023, representing a decrease of 12.5%. This decrease was primarily due to our intentional reduction in home acquisition pace as we adjusted our home purchase criteria through more conservative acquisition underwriting, resulting in higher expected internal rates of return based on current residential real estate market conditions. This reduction in home acquisition pace has allowed us to manage overall inventory growth in light of the ongoing elevated and volatile mortgage interest rate environment, which continues to negatively impact housing affordability and velocity, and create uncertainty for home buyers, challenging consumer demand for residential real estate. The decrease in homes sold was partially offset by a modest increase in the average resale home price from $327,000 in the three months ended September 30, 2023 to $335,000 in the three months ended September 30, 2024. This increase was primarily due to a shift in the mix of homes sold in the respective periods, with a greater percentage of homes sold in geographic markets that tend to share relatively higher median price points during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous wording

Cost of revenue increased by $21.3 million, or 10.3%, to $229.3 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was primarily attributable to higher sales volumes, which was partially offset by a lower average home acquisition price.

Current wording

Cost of revenue decreased by $19.3 million, or 9.2%, to $190.9 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This decrease was primarily attributable to lower sales volumes, which was partially offset by a higher average home acquisition price.

Previous wording

Gross profit margin was 8.7% for the three months ended June 30, 2024 compared to 9.7% for the three months ended June 30, 2023. The decrease in gross profit margin was primarily due to the wider than normal underwritten spreads associated with real estate inventory acquired towards the end of 2022 and in the early stages of 2023 in response to the considerable softening in consumer demand for residential real estate. This decrease in gross profit margin was partially offset by an increase in the difference between the average home resale price and the average home acquisition price during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Gross profit margin was 8.2% for the three months ended September 30, 2024 compared to 10.2% for the three months ended September 30, 2023. The decrease in gross profit margin was primarily due to the wider than normal underwritten spreads associated with real estate inventory acquired towards the end of 2022 and in the early stages of 2023 in response to the considerable softening in consumer demand for residential real estate. This decrease in gross profit margin was also due to our increased use of pricing adjustments and other incentives in recent periods in response to the ongoing challenging residential real estate market conditions.

Previous wording

Sales, marketing and operating expense decreased by $8.8 million, or 30.3%, to $20.2 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in expense was primarily attributable to a $7.4 million decrease in advertising expense as we repositioned and optimized our marketing efforts in response to the ongoing challenging residential real estate market conditions, and decreased average employee headcount. These decreases were partially offset by an increase in variable costs associated with the increase in homes sold.

Current wording

Sales, marketing and operating expense decreased by $10.4 million, or 38.1%, to $16.9 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily attributable to a $6.4 million decrease in advertising expense as we repositioned and optimized our marketing efforts in response to the ongoing challenging residential real estate market conditions, and decreased average employee headcount.

Previous wording

General and administrative expense decreased by $2.2 million, or 17.1%, to $10.5 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in expense was primarily attributable to a decrease in fees associated with our credit facilities and decreased average employee headcount.

Current wording

General and administrative expense decreased by $5.9 million, or 41.6%, to $8.3 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily attributable to decreased average employee headcount and a decrease in fees associated with our credit facilities.

Previous wording

Technology and development expense decreased by $1.3 million, or 58.3%, to $1.0 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in expense was primarily attributable to decreased average employee headcount.

Current wording

Technology and development expense decreased by $1.2 million, or 56.1%, to $0.9 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily attributable to decreased average employee headcount.

Previous wording

Change in fair value of warrant liabilities for the six months ended June 30, 2024 and 2023 represents gains of $0.3 and less than $0.1 million, respectively, as a result of the fair value adjustment of our warrant liabilities.

Current wording

Change in fair value of warrant liabilities for the three months ended September 30, 2024 and 2023 represents gains of less than $0.1 million, and $0.1 million, respectively, as a result of the fair value adjustment of our warrant liabilities.

Previous wording

Interest expense increased by $2.7 million, or 145.4%, to $4.6 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in expense was primarily attributable to an increase of $127.8 million in the average outstanding balance of our senior and mezzanine secured credit facilities, from $152.6 million during the three months ended June 30, 2023 to $280.4 million during the three months ended June 30, 2024. The increase was also due to a 0.6% increase in the weighted average variable interest rates associated with these senior and mezzanine secured credit facilities.

Current wording

Interest expense increased by $0.7 million, or 16.1%, to $5.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in expense was primarily attributable to a $43.4 million increase in the average outstanding balance of our senior and mezzanine secured credit facilities, from $234.9 million during the three months ended September 30, 2023 to $278.3 million during the three months ended September 30, 2024. The increase was also due to a 0.5% increase in the weighted average variable interest rates associated with our senior and mezzanine secured credit facilities.

Previous wording

Other income, net during the three months ended June 30, 2024 principally represents interest income earned on our cash and cash equivalents. Other income, net during the three months ended June 30, 2023 principally represents interest income earned on our cash and cash equivalents, which was partially offset by the loss that was recorded as a result of the fair value adjustment of the derivative financial instruments that were entered into to manage risks that were principally associated with interest rate fluctuations.

Current wording

Other income, net during the three months ended September 30, 2024 principally represents interest income earned on our cash and cash equivalents. Other income, net during the three months ended September 30, 2023 represents the gain that was recorded as a result of the fair value adjustment of the derivative financial instruments that were entered into to manage risks that were principally associated with interest rate fluctuations, and interest income earned on our cash and cash equivalents.

Previous wording

We recorded an income tax benefit of $0.1 million and income tax expense of less than $0.1 million during the three months ended June 30, 2024 and 2023, respectively, and our effective tax rate was a benefit of 0.4% and an expense of 0.2% for the respective periods. Our effective tax rate during the three months ended June 30, 2024 differed from the federal statutory rate of 21% primarily due to net operating loss carryforwards and state taxes.

Current wording

We recorded income tax expense of less than $0.1 million during each of the three months ended September 30, 2024 and 2023, and our effective tax rate was an expense of 0.2% and less than 0.1% for the respective periods. Our effective tax rate during the three months ended September 30, 2024 differed from the federal statutory rate of 21% primarily due to net operating loss carryforwards and state taxes.

Previous wording

Revenue decreased by $303.2 million, or 36.1%, to $536.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily attributable to lower sales volumes and a lower average sales price per home. We sold 1,589 homes during the six months ended June 30, 2024 compared to 2,259 during the six months ended June 30, 2023, representing a decrease of 29.7%. Additionally, the average resale home price decreased from $374,000 in the six months ended June 30, 2023 to $333,000 in the six months ended June 30, 2024. During the early stages of 2023, we focused on selling our existing inventory of homes acquired prior to the significant market transition that occurred in the middle of 2022, resulting in a higher number of homes sold during the first half of 2023 as compared to the first half of 2024. This was partially offset by the increase in homes sold in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in average sales price per home during the six months ended June 30, 2024 was primarily due to our increased focus on geographic markets that tend to share relatively lower median price points as higher mortgage interest rates and sustained elevated levels of inflation in the broader economy have continued to negatively impact the residential real estate market conditions. We have also continued to refine our target home purchase price range to focus on acquiring homes with the greatest price stability within each market.

Current wording

Revenue decreased by $329.4 million, or 30.7%, to $744.5 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily attributable to lower sales volumes and a lower average sales price per home. We sold 2,204 homes during the nine months ended September 30, 2024 compared to 2,962 during the nine months ended September 30, 2023, representing a decrease of 25.6%. Additionally, the average resale home price decreased from $360,000 in the nine months ended September 30, 2023 to $334,000 in the nine months ended September 30, 2024. During the early stages of 2023, we focused on selling our existing inventory of homes acquired prior to the significant market transition that occurred in the middle of 2022, resulting in a higher number of homes sold during the first half of 2023 as compared to the first half of 2024. The decrease in average sales price per home during the nine months ended September 30, 2024 was primarily due to our increased focus on geographic markets that tend to share relatively lower median price points, as well as homes closer to or below the median price in a given market as higher mortgage interest rates and sustained elevated levels of inflation in the broader economy have continued to negatively impact the residential real estate market conditions. We have also continued to refine our target home purchase price range to focus on acquiring homes with the greatest price stability within each market.

Previous wording

Cost of revenue decreased by $318.2 million, or 39.3%, to $492.0 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease was primarily attributable to lower sales volumes, a lower average home acquisition price, and a decrease in the real estate inventory valuation adjustment.

Current wording

Cost of revenue decreased by $337.5 million, or 33.1%, to $682.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This decrease was primarily attributable to lower sales volumes, a lower average home acquisition price, and a decrease in the real estate inventory valuation adjustment.

Previous wording

Gross profit margin was 8.3% for the six months ended June 30, 2024 compared to 3.5% for the six months ended June 30, 2023. The increase in gross profit margin was primarily due to an increase in the difference between the average home resale price and the average home acquisition price during the six months ended June 30, 2024 compared to the six months ended June 30, 2023, and a $6.3 million decrease in the real estate inventory valuation adjustment during the six months ended

Current wording

Gross profit margin was 8.3% for the nine months ended September 30, 2024 compared to 5.0% for the nine months ended September 30, 2023. The increase in gross profit margin was primarily due to an increase in the difference between the average home resale price and the average home acquisition price during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, and a $6.4 million decrease in the real estate inventory valuation adjustment during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. These changes were primarily due to our focus on selling our existing inventory of homes acquired prior to the significant market transition that occurred in the middle of 2022 during the early stages of 2023, resulting in a lower gross profit margin during the first half of 2023 as compared to the first half of 2024.

Previous wording

Sales, marketing and operating expense decreased by $28.7 million, or 40.2%, to $42.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in expense was primarily attributable an $11.0 million decrease in advertising expense as we repositioned and optimized our marketing efforts in response to the ongoing challenging residential real estate market conditions, a decrease in variable costs associated with the decrease in homes sold and decreased average employee headcount.

Current wording

Sales, marketing and operating expense decreased by $39.1 million, or 39.6%, to $59.5 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease in expense was primarily attributable to an $17.4 million decrease in advertising expense as we repositioned and optimized our marketing efforts in response to the ongoing challenging residential real estate market conditions, decreased average employee headcount and a decrease in variable costs associated with the decrease in homes sold.

Previous wording

General and administrative expense decreased by $4.7 million, or 17.3%, to $22.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in expense was primarily attributable to a decrease in fees associated with our credit facilities and decreased average employee headcount.

Current wording

General and administrative expense decreased by $10.6 million, or 25.6%, to $30.7 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease in expense was primarily attributable to a decrease in fees associated with our credit facilities, decreased average employee headcount, lower insurance costs, and decreased legal, accounting and professional fees.

Previous wording

Technology and development expense decreased by $1.8 million, or 39.9%, to $2.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in expense was primarily attributable to decreased average employee headcount.

Current wording

Technology and development expense decreased by $3.0 million, or 45.1%, to $3.7 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease in expense was primarily attributable to decreased average employee headcount.

Previous wording

Change in fair value of warrant liabilities represents a loss of less than $0.1 million for the three months ended June 30, 2024 and a gain of $0.4 million for the three months ended June 30, 2023, as a result of the fair value adjustment of our warrant liabilities.

Current wording

Change in fair value of warrant liabilities for the nine months ended September 30, 2024 and 2023 represents gains of $0.3 million and $0.2 million, respectively, as a result of the fair value adjustment of our warrant liabilities.

Previous wording

Interest expense decreased by $0.2 million, or 2.0%, to $9.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in expense was primarily attributable to a $104.8 million decrease in the average outstanding balance of our senior and mezzanine secured credit facilities, from $386.9 million during the six months ended June 30, 2023 to $282.1 million during the six months ended June 30, 2024. This decrease was partially offset by a 0.8% increase in the weighted average variable interest rates associated with these senior and mezzanine secured credit facilities.

Current wording

Interest expense increased by $0.9 million, or 6.5%, to $14.6 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in expense was primarily attributable to a 0.7% increase in the weighted average variable interest rates associated with our senior and mezzanine secured credit facilities. This increase was partially offset by a $174.1 million decrease in the average outstanding balance of our senior and mezzanine secured credit facilities, from $429.6 million during the nine months ended September 30, 2023 to $255.5 million during the nine months ended September 30, 2024.

Previous wording

Other income, net during the six months ended June 30, 2024 principally represents interest income earned on our cash and cash equivalents. Other income, net during the six months ended June 30, 2023 principally represents interest income earned on our cash and cash equivalents, which was partially offset by the loss that was recorded as a result of the fair value adjustment of the derivative financial instruments that were entered into to manage risks that were principally associated with interest rate fluctuations.

Current wording

Other income, net during the nine months ended September 30, 2024 principally represents interest income earned on our cash and cash equivalents. Other income, net during the nine months ended September 30, 2023 represents interest income earned on our cash and cash equivalents, and the gain that was recorded as a result of the fair value adjustment of the derivative financial instruments that were entered into to manage risks that were principally associated with interest rate fluctuations.

Previous wording

We recorded income tax expense of $0.1 million and $0.2 million during the six months ended June 30, 2024 and 2023, respectively, and our effective tax rate was an expense of 0.2% for each of the respective periods. Our effective tax rate during the six months ended June 30, 2024 differed from the federal statutory rate of 21% primarily due to net operating loss carryforwards and state taxes.

Current wording

We recorded income tax expense of $0.1 million and $0.2 million during the nine months ended September 30, 2024 and 2023, respectively, and our effective tax rate was an expense of 0.2% and less than 0.1% for the respective periods. Our effective tax rate during the nine months ended September 30, 2024 differed from the federal statutory rate of 21% primarily due to net operating loss carryforwards and state taxes.

Previous wording

Cash and cash equivalents balances consist of operating cash on deposit with financial institutions. Our principal sources of liquidity have historically consisted of cash generated from our operations and financing activities. As of June 30, 2024, we had cash and cash equivalents of $56.9 million and had a total undrawn borrowing capacity under our senior and mezzanine secured credit facilities of $747.1 million, $207.3 million of which is committed and $539.8 million uncommitted.

Current wording

Cash and cash equivalents balances consist of operating cash on deposit with financial institutions. Our principal sources of liquidity have historically consisted of cash generated from our operations and financing activities. As of September 30, 2024, we had cash and cash equivalents of $48.5 million and had a total undrawn borrowing capacity under our senior and mezzanine secured credit facilities of $755.3 million, $239.2 million of which is committed and $516.1 million uncommitted.

Previous wording

With the exception of the year ended December 31, 2021, during which we generated net income, we have incurred losses each year from inception and during the three and six months ended June 30, 2024, and may incur additional losses in the future. Since our launch in 2015, we have invested in the development and expansion of our operations. These investments include improvements in infrastructure and a continual improvement to our software and technology platform. We have also invested in sales and marketing as we have increased our market penetration in existing markets, and grown our business through new market expansion and the increased offering of asset-light platform services.

Current wording

With the exception of the year ended December 31, 2021, during which we generated net income, we have incurred losses each year from inception and during the three and nine months ended September 30, 2024, and may incur additional losses in the future. Since our launch in 2015, we have invested in the development and expansion of our operations. These investments include improvements in infrastructure and a continual improvement to our software and technology platform. We have also invested in sales and marketing as we have increased our market penetration in existing markets, and grown our business through new market expansion and the increased offering of asset-light platform services.

Previous wording

The following summarizes our cash flows for the six months ended June 30, 2024 and 2023:

Current wording

The following summarizes our cash flows for the nine months ended September 30, 2024 and 2023:

Previous wording

Net cash (used in) provided by operating activities was ($52.0) million and $371.5 million for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, net cash used in operating activities primarily resulted from a $32.4 million increase in real estate inventory as a result of home acquisitions increasing at a higher rate compared to sales volumes. Net cash used in operating activities during the six months ended June 30, 2024 was also impacted by the $31.3 million net loss during the period, which included $7.1 million of non-cash stock-based compensation expense.

Current wording

Net cash (used in) provided by operating activities was ($12.4) million and $277.0 million for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, net cash used in operating activities primarily resulted from a $44.8 million net loss during the period, which included $7.8 million of non-cash stock-based compensation expense and a $2.0 million non-cash real estate inventory valuation adjustment. This was partially offset by an $18.0 million decrease in real estate inventory as a result of sales volumes increasing at a higher rate compared to home acquisitions.