Opendoor Technologies Inc
For the period ended Jun 30, 2024. Filed Aug 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 1, 2024
OPEN$1.40-21.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0001801169-24-000085
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0001801169-24-000139
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 166 previous paragraphs and 181 current paragraphs.
122 unchanged; 39 reworded; 12 added; 5 removed; 0 previous and 8 current paragraphs rearranged.
Tables are not compared: 10 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
The housing market remains challenging as mortgage rates continue to be elevated and volatile, keeping new listing volumes around decade lows and straining housing affordability for buyers. In the second quarter, overall volumes in the U.S. housing market remained depressed with seasonally adjusted annual existing home sales of just over four million, slightly below last year’s levels and well below the 10-year average of over five million annual transactions. Additionally, resale clearance rates, meaning the percent of homes listed on the multiple listing services (“MLS”) that enter into a sales contract per day, have slowed more quickly than is typical for this time of year and are down nearly 30% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. During the three months ended June 30, 2024 month-over-month home price appreciation made a meaningful departure to the downside, underperforming 2023 levels and crossing into slightly negative territory by mid-June, which is earlier in the summer selling season that we typically see. Further, in the back half of the second quarter, we saw an uptick in delisting rates, which are now at decade highs for this time of year. These increased delisting rates suggest that reported home price appreciation numbers are inflated relative to historical levels with many sellers failing to find an attractive clearing price.
Current report
The U.S. economy overall continues to show signs of resilience despite elevated interest rates. Inflation has been trending downward, which has increased the probability and quantum of expected rate cuts meaningfully since May. This could provide a boost to various sectors, including housing market activity. We remain flexible in setting spreads dynamically with the goal of optimizing our performance against the vectors of growth, margin, and risk. We believe this decision-making framework will allow us to act nimbly and respond to a range of macroeconomic outcomes.
Current report
(6)Restructuring costs consist primarily of severance and employee termination benefits and bonuses incurred in connection with employees’ roles being eliminated.
Current report
Restructuring Expense
Current report
Restructuring expense consists primarily of severance and other termination benefits for employees whose roles have been eliminated.
Current report
(Loss) Gain on Extinguishment of Debt
Current report
N/M - Not meaningful.
Current report
Sales, Marketing and Operations. Sales, marketing and operations decreased by $8 million, or 6%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily attributable to a $15 million decrease in resale transaction costs and broker commissions, consistent with the 24% decrease in revenue during the same period. The decrease was partially offset by a $6 million increase in advertising expense, which increased from $15 million for the three months ended June 30, 2023 to $21 million for the three months ended June 30, 2024.
Current report
Restructuring. Restructuring decreased by $10 million, for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023. Restructuring expense for the three and six months ended June 30, 2023 was attributable to the Company’s April 2023 workforce reduction of approximately 22% of our workforce or 560 employees.
Current report
(Loss) Gain on Extinguishment of Debt
Current report
In May 2024, the Company entered into an at-the-market equity offering sales agreement (the “ATM Agreement”) with Barclays Capital Inc. and Virtu Americas LLC, as sales agents (the "Agents"), pursuant to which the Company may offer and sell, from time to time, through the Agents, shares of the Company’s common stock having an aggregate offering price of up to $200 million. Under the ATM Agreement, the Agents may sell shares by any method deemed to be an “at-the-market offering.” During the three and six months ended June 30, 2024, there was no activity pursuant to the ATM Agreement.
Current report
(1)Represents the principal amounts outstanding as of June 30, 2024. Includes estimated interest payments, calculated using the variable rate in existence at period end over an assumed holding period of 90 days. Borrowings under the senior revolving credit facilities are payable as the related inventory is sold. The payment is expected to be within one year of June 30, 2024.
Removed paragraphs (5)
Previous report
The U.S. economy continues to show steady growth, unemployment remains low and, while inflation has slowed from its peak, it remains above the Federal Reserve’s targeted 2% inflation rate. Since the start of the year, 30-year fixed mortgage rates have climbed by approximately 50 basis points as recent economic data suggests that interest rate decreases are less imminent than previously expected.
Previous report
In the first quarter of 2024, housing market transactions were at an annual rate of approximately 4 million, below the 10 year average of over 5 million annual transactions. This is due to a combination of many homeowners locked into existing low-rate mortgages and home buyer affordability constraints. Against that backdrop, we have continued to observe balanced supply and demand, which has translated through to stable short-term home prices.
Previous report
We expect transaction volumes to gradually increase as mortgage rates eventually decline and demographic factors contribute to natural home turnover. In the interim, we look to drive growth by gaining market share through increased brand awareness and expansions across our partnership channels. We will continue to preserve flexibility in setting spreads to operate against a range of macroeconomic outcomes in 2024.
Previous report
Gain on Extinguishment of Debt
Previous report
Gain on Extinguishment of Debt
Reworded paragraphs (39)
Previous wording
This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Forward-Looking Statements,” “Risk Factors,” or in other parts of this Quarterly Report on Form 10-Q, and in “Part I - Item 1A. Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”).
Current wording
This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Forward-Looking Statements,” “Risk Factors,” or in other parts of this Quarterly Report on Form 10-Q, and in “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”).
Previous wording
Opendoor’s mission is to power life’s progress, one move at a time. Residential real estate is a trillion-dollar industry underpinned by a process that is complicated, time-consuming, stressful, and offline. We believe all consumers deserve to buy, sell, and move between homes with simplicity and confidence, and we have dedicated almost a decade to delivering on this vision. We have built unique pricing and operations capabilities to become one of the largest buyers and sellers of homes in the United States. Since our founding, we have helped customers to buy or sell homes in over 253,000 transactions and have expanded our footprint to 50 markets across the country.
Current wording
Opendoor’s mission is to power life’s progress, one move at a time. Residential real estate is a trillion-dollar industry underpinned by a process that is complicated, time-consuming, stressful, and offline. We believe all consumers deserve to buy, sell, and move between homes with simplicity and confidence, and we have dedicated almost a decade to delivering on this vision. We have built unique pricing and operations capabilities to become one of the largest buyers and sellers of homes in the United States. Since our founding, we have helped customers to buy or sell homes in over 261,000 transactions and have expanded our footprint to 50 markets across the country.
Previous wording
We are steadily growing our reach via our partnership channels with homebuilders, agents, and online real estate platforms. We have relationships with the three largest online real estate platforms, Zillow, Redfin and Realtor.com, which collectively reach millions of unique monthly visitors. We launched our partnership agreement with Zillow, Inc. in early 2023, allowing home sellers on the Zillow, Inc. platform to request an offer directly from Opendoor, and creating an additional channel for us to drive brand awareness and acquire customers. As of March 31, 2024, our partnership was live in 45 markets. In the fourth quarter of 2023, we announced a new partnership agreement with eXp Realty, the largest independent real estate company in the world. At the end of February 2024, our eXp Realty partnership went live, enabling eXp Realty’s agents to easily request an Opendoor cash offer on qualifying properties directly within their eXp dashboard to present alongside the option of a market listing for their client’s home. In addition to driving incremental acquisitions, we expect this partnership to build our brand awareness within the agent community and serve as another avenue for sellers to learn about the benefits of our flagship cash offer.
Current wording
We are steadily growing our reach via our partnership channels with homebuilders, agents, and online real estate platforms. We have relationships with two of the largest online real estate platforms, Zillow and Redfin, which together reach millions of unique monthly visitors. We launched our partnership agreement with Zillow, Inc. in early 2023, allowing home sellers on the Zillow, Inc. platform to request an offer directly from Opendoor. We also have a partnership with eXp Realty, the largest independent real estate company in the world, which enables eXp Realty’s agents to easily request an Opendoor cash offer on qualifying properties to present alongside the option of a market listing for their client’s home. In addition to driving incremental acquisitions, we expect these partnerships to build our brand awareness and serve as additional avenues for sellers to learn about the benefits of our flagship cash offer.
Previous wording
Real estate inventory is reviewed for valuation adjustments on a quarterly basis. If the carrying amount for a given home is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the home’s carrying value is adjusted to its net realizable value. Inventory valuation adjustments are not offset by any expected gains and are not reversed or adjusted should the expected net realizable value subsequently increase. We recorded inventory valuation adjustments of $7 million and $23 million during the three months ended March 31, 2024 and March 31, 2023, respectively. See “Part II – Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Real Estate Inventory” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
Real estate inventory is reviewed for valuation adjustments on a quarterly basis. If the carrying amount for a given home is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the home’s carrying value is adjusted to its net realizable value. Inventory valuation adjustments are not offset by any expected gains and are not reversed or adjusted should the expected net realizable value subsequently increase. We recorded inventory valuation adjustments of $34 million and $41 million during the three and six months ended June 30, 2024, respectively, and $14 million and $37 million during the three and six months ended June 30, 2023, respectively. See “Part II – Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Real Estate Inventory” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
As one key measure of inventory management performance, we evaluate our portfolio metrics relative to the broader market (as observed on the multiple listing services (“MLS”)). One such metric is our percentage of homes “on the market” for greater than 120 days as measured from initial listing date. As of March 31, 2024, such homes represented 15% of our portfolio, compared to 19% for the broader market when filtered for the types of homes we are able to underwrite and acquire in a given market based on characteristics such as price range, home type, home location, year built and lot size (which we refer to as our “buybox”).
Current wording
As one key measure of inventory management performance, we evaluate our portfolio metrics relative to the broader market (as observed on the MLS). One such metric is our percentage of homes “on the market” for greater than 120 days as measured from initial listing date. As of June 30, 2024, such homes represented 14% of our portfolio, compared to 15% for the broader market when filtered for the types of homes we are able to underwrite and acquire in a given market based on characteristics such as price range, home type, home location, year built and lot size (which we refer to as our “buybox”).
Previous wording
We calculate Adjusted Gross Profit (Loss) as gross profit under GAAP adjusted for (1) inventory valuation adjustment in the current period, and (2) inventory valuation adjustment in prior periods. Inventory valuation adjustment in the current period is calculated by adding back the inventory valuation adjustments recorded during the period on homes that remain in inventory at period end. Inventory valuation adjustment in prior periods is calculated by subtracting the inventory valuation adjustments recorded in prior periods on homes sold in the current period. We define Adjusted Gross Margin as Adjusted Gross Profit (Loss) as a percentage of revenue.
Current wording
We calculate Adjusted Gross Profit (Loss) as gross profit under GAAP adjusted for (1) inventory valuation adjustment in the current period, and (2) inventory valuation adjustment in prior periods. Inventory valuation adjustment in the current period is calculated by adding back the inventory valuation adjustments recorded during the period on homes that remain in inventory at period end. Inventory valuation adjustment in prior periods is calculated by subtracting the inventory valuation adjustments recorded in prior periods on homes sold in the current period. Adjusted Gross Margin is Adjusted Gross Profit (Loss) as a percentage of revenue.
Previous wording
Adjusted Net Loss and Adjusted EBITDA are supplemental measures of our operating performance and have important limitations. For example, these measures exclude the impact of certain costs required to be recorded under GAAP. These measures also include inventory valuation adjustments that were recorded in prior periods under GAAP and exclude, in connection with homes held in inventory at the end of the period, inventory valuation adjustments required to be recorded under GAAP in the same period. These measures could differ substantially from similarly titled measures presented by other companies in our industry or companies in other industries. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is net loss.
Current wording
Adjusted Net Loss and Adjusted EBITDA are supplemental measures of our operating performance and have important limitations. For example, these measures exclude the impact of certain costs required to be recorded under GAAP. These measures also include inventory valuation adjustments that were recorded in prior periods under GAAP and exclude, in connection with homes held in inventory at the end of the period, inventory valuation adjustments required to be recorded under GAAP in the same period. These measures could differ substantially from similarly titled measures presented by other companies in our industry or companies in other industries. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is net (loss) income.
Previous wording
We calculate Adjusted Net Loss as GAAP net loss adjusted to exclude non-cash expenses of stock-based compensation, equity securities fair value adjustment, and intangibles amortization expense. It excludes (gain) loss on extinguishment of debt as these expenses or gains were incurred as a result of decisions made by management to repay portions of our outstanding credit facilities and the 0.25% convertible senior notes due in 2026 (the "2026 Notes") early; these expenses are not reflective of ongoing operating results and vary in frequency and amount. Adjusted Net Loss also aligns the timing of inventory valuation adjustments recorded under GAAP to the period in which the related revenue is recorded in order to improve the comparability of this measure to our non-GAAP financial measures of unit economics, as described above. Our calculation of Adjusted Net Loss does not currently include the tax effects of the non-GAAP adjustments because our taxes and such tax effects have not been material to date.
Current wording
We calculate Adjusted Net Loss as GAAP net (loss) income adjusted to exclude non-cash expenses of stock-based compensation, equity securities fair value adjustment, and intangibles amortization expense. It excludes expenses that are not directly related to our revenue-generating operations such as restructuring. It excludes loss (gain) on extinguishment of debt as these expenses or gains were incurred as a result of decisions made by management to repay portions of our outstanding credit facilities and the 0.25% convertible senior notes due in 2026 (the "2026 Notes") early; these expenses are not reflective of ongoing operating results and vary in frequency and amount. Adjusted Net Loss also aligns the timing of inventory valuation adjustments recorded under GAAP to the period in which the related revenue is recorded in order to improve the comparability of this measure to our non-GAAP financial measures of unit economics, as described above. Our calculation of Adjusted Net Loss does not currently include the tax effects of the non-GAAP adjustments because our taxes and such tax effects have not been material to date.
Previous wording
The following table presents a reconciliation of our Adjusted Net Loss and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure, for the periods indicated:
Current wording
The following table presents a reconciliation of our Adjusted Net Loss and Adjusted EBITDA to our net (loss) income, which is the most directly comparable GAAP measure, for the periods indicated:
Previous wording
(6)Includes primarily gain or loss on the sale of available for sale securities, sublease income, gain or loss on the disposal of property and equipment, and income from equity method investments.
Current wording
(7)Includes primarily gain or loss on the sale of available for sale securities, sublease income, gain or loss on the disposal of property and equipment, income from equity method investments, and gain on lease termination.
Previous wording
(7)Includes interest expense on our non-recourse asset-backed debt facilities.
Current wording
(8)Includes interest expense on our non-recourse asset-backed debt facilities.
Previous wording
(8)Includes amortization of debt issuance costs and loan origination fees, commitment fees, unused fees, other interest related costs on our asset-backed debt facilities, and interest expense related to the 2026 Notes outstanding.
Current wording
(9)Includes amortization of debt issuance costs and loan origination fees, commitment fees, unused fees, other interest related costs on our asset-backed debt facilities, and interest expense related to the 2026 Notes outstanding.
Previous wording
(9)Consists mainly of interest earned on cash, cash equivalents, restricted cash and marketable securities.
Current wording
(10)Consists mainly of interest earned on cash, cash equivalents, restricted cash and marketable securities.
Previous wording
Gain on extinguishment of debt is primarily related to the Company’s partial repurchase of the 2026 Notes at a discount net of unamortized deferred costs associated with the 2026 Notes. Gain on extinguishment of debt also includes any gains or losses recognized in conjunction with the termination of debt facilities, partial debt extinguishments, and unamortized deferred costs associated with these facilities. See Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 5. Credit Facilities and Long-Term Debt—Convertible Senior Notes for additional information regarding the 2026 Notes.
Current wording
(Loss) gain on extinguishment of debt is primarily related to the Company’s partial repurchase of the 2026 Notes at a discount net of unamortized deferred costs associated with the 2026 Notes. (Loss) gain on extinguishment of debt also includes any gains or losses recognized in conjunction with the termination of debt facilities, partial debt extinguishments, and unamortized deferred costs associated with these facilities. See Part I – Item 1. Financial Statements – Notes to Condensed
Previous wording
Revenue decreased by $1.9 billion, or 62%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in revenue was primarily attributable to lower sales volumes in the first quarter of 2024. We sold 3,078 homes during the three months ended March 31, 2024, compared to 8,274 homes during the three months ended March 31, 2023, representing a decrease of 63%. Revenue per home sold increased 2% between the same periods. The decrease in sales volumes was a result of the proactive reduction of our inventory acquisition pace beginning in the third quarter of 2022 via higher spreads embedded in our offers and lower marketing investment in reaction to volatility in the U.S. housing market. The Company entered 2024 with 5,326 homes in inventory as compared to 12,788 homes in inventory at the start of 2023, representing a 58% decrease of homes available for resale.
Current wording
Revenue decreased by $465 million, or 24%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in revenue was primarily attributable to lower sales volumes in the second quarter of 2024. We sold 4,078 homes during the three months ended June 30, 2024, compared to 5,383 homes during the three months ended June 30, 2023, representing a decrease of 24%. Revenue per home sold increased 1% between the same periods. The decrease in sales volumes was primarily a result of lower resale clearance rates during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. In addition the Company entered the second quarter of 2024 with 5,706 homes in inventory as compared to 6,261 homes in inventory at the start of the second quarter of 2023, representing a 9% decrease of homes available for resale. This reduction was the result of proactively slowing our inventory acquisition pace beginning in the third quarter of 2022 via higher spreads embedded in our offers and lower marketing investment in reaction to volatility in the U.S. housing market.
Previous wording
Cost of revenue decreased by $1.9 billion, or 64%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in cost of revenue was primarily attributable to lower sales volumes and a 3% decrease in cost of revenue per home, excluding valuation adjustments on homes in inventory at period end, due to the slowdown in inventory acquisition pacing as discussed above. In addition, the decrease in cost of revenue is attributable to a decrease in inventory valuation adjustments on homes in inventory at period end, which were $7 million for the three months ended March 31, 2024 compared to $23 million for the three months ended March 31, 2023. The decrease in inventory valuation adjustments reflects relative home price stabilization as well as higher spreads embedded in our home acquisition offers.
Current wording
Cost of revenue decreased by $445 million, or 24%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in cost of revenue was primarily attributable to lower sales volumes and a 2% decrease in cost of revenue per home, excluding valuation adjustments on homes in inventory at period end, due to the slowdown in resale clearance and inventory acquisition pacing as discussed above.
Previous wording
Gross profit decreased from $170 million to $114 million and gross margin increased from 5.4% to 9.7% for the three months ended March 31, 2023 and March 31, 2024, respectively. For the same periods, Adjusted Gross Margin increased from (3.3)% to 8.8% and Contribution Margin increased from (7.7)% to 4.8%. The increase in gross margin, Adjusted Gross Margin and Contribution Margin reflects relative home price stabilization as well as higher spreads embedded in our acquisition offers beginning in the third quarter of 2022. The increase in gross profit is also attributable to a decrease in inventory valuation adjustments on homes in inventory at period end, which were $7 million for the three months ended March 31, 2024 compared to $23 million for the three months ended March 31, 2023. Contribution Margin and Adjusted Gross Margin are non-GAAP financial measures. See “—Non-GAAP Financial Measures” for further details and a reconciliation of such non-GAAP measures to their nearest comparable GAAP measures.
Current wording
Gross profit decreased from $149 million to $129 million and gross margin increased from 7.5% to 8.5% for the three months ended June 30, 2023 and June 30, 2024, respectively. For the same periods, Adjusted Gross Margin increased from 0.4% to 10.2% and Contribution Margin increased from (4.6)% to 6.3%. The increase in gross margin, Adjusted Gross Margin and Contribution Margin reflects relative home price stabilization as well as higher spreads embedded in our acquisition offers beginning in the third quarter of 2022. Adjusted Gross Margin and Contribution Margin for the three months ended June 30, 2023 were impacted by the $156 million of inventory valuation adjustments recorded in prior periods on homes sold in the current period in order to reduce the carrying value of these homes to their net realizable value. Adjusted Gross Margin and Contribution Margin are non-GAAP financial measures. See “—Non-GAAP Financial Measures” for further details and a reconciliation of such non-GAAP measures to their nearest comparable GAAP measures.
Previous wording
Sales, Marketing and Operations. Sales, marketing and operations decreased by $75 million, or 40%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily attributable to a $51 million decrease in resale transaction costs and broker commissions, consistent with the 62% decrease in revenue during the same period. Property holding costs decreased by $13 million, consistent with decreased inventory levels compared to the three months ended March 31, 2023. In addition, for the same period, headcount expenses, including salaries and benefits, and contingent labor expenses decreased $11 million, which was largely attributable to workforce reductions and a reduction in contingent labor in 2023. Advertising expense remained consistent at $27 million for the three months ended March 31, 2023 and March 31, 2024.
Current wording
Sales, marketing and operations decreased by $83 million, or 27%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily attributable to a $66 million decrease in resale transaction costs and broker commissions, consistent with the 47% decrease in revenue during the same period. Property holding costs decreased by $7 million, consistent with decreased inventory levels compared to the six months ended June 30, 2023. In addition, for the same period, headcount expenses, including salaries and benefits, and contingent labor expenses decreased by $14 million, which was largely attributable to workforce reductions and a reduction in contingent labor in 2023. Advertising expense increased $6 million, from $42 million for the six months ended June 30, 2023 to $48 million for the six months ended June 30, 2024.
Previous wording
General and Administrative. General and administrative decreased by $19 million, or 29%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was mainly attributable to an $11 million decrease in stock-based compensation, which was primarily related to the forfeiture of certain executive restricted stock units (“RSUs”), including performance-based awards. Headcount expenses, including salaries and benefits, decreased $2 million, which was primarily attributable to workforce reductions in 2023. In addition, depreciation expense decreased $2 million due to a decrease in fixed asset additions and an increase in fully depreciated assets during 2023.
Current wording
General and administrative decreased by $15 million, or 14%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was mainly attributable to a $5 million decrease in depreciation expense as more assets become fully depreciated and we slow our pace of fixed asset additions. In addition, headcount expenses, including salaries and benefits, decreased $4 million primarily due to workforce reductions in 2023 and rent expense decreased by $2 million.
Previous wording
Technology and Development. Technology and development changed by a nominal amount for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
Technology and Development. Technology and development changed by a nominal amount for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.
Previous wording
Gain on extinguishment of debt decreased by $78 million, or 100%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The gain on extinguishment of debt during the three months ended March 31, 2023 resulted from the Company’s partial repurchase of its 2026 Notes in March 2023 at a discount net of unamortized deferred costs associated with the 2026 Notes, partially offset by expenses related to partial debt extinguishments.
Current wording
(Loss) gain on extinguishment of debt decreased by $183 million, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The gain on extinguishment of debt during the six months ended June 30, 2023 resulted from the Company’s partial repurchase of its 2026 Notes in March and May 2023 at a discount net of unamortized deferred costs associated with the 2026 Notes, partially offset by expenses related to partial debt extinguishments.
Previous wording
Interest expense decreased by $37 million, or 50%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily attributable to a significant decrease in average balances in our non-recourse asset-backed debt as well as a reduction in our weighted average interest rate as a result of a partial repayment of our outstanding mezzanine debt and repayment of all floating-rate senior revolving credit facilities.
Current wording
Interest expense decreased by $23 million, or 43%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily attributable to a significant decrease in average balances in our non-recourse asset-backed debt as well as a reduction in our weighted average interest rate as a result of a partial repayment of our outstanding mezzanine debt and repayment of all floating-rate senior revolving credit facilities.
Previous wording
Other income – net decreased by $4 million, or 21%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily attributable to a change in fair value adjustments on marketable securities and to lower interest income due to a reduction in the average cash, cash equivalents and restricted cash balances.
Current wording
Other income— net decreased by $29 million, or 71%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily attributable to a change in fair value adjustments on marketable securities and to lower interest income due to a reduction in the average cash, cash equivalents and restricted cash balances.
Previous wording
Income tax expense changed by a nominal amount for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
Income tax expense changed by a nominal amount for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.
Previous wording
Our principal sources of liquidity have historically consisted of cash generated from our operations and from financing activities. As of March 31, 2024, we had cash and cash equivalents of $953 million, restricted cash of $333 million, and marketable securities of $37 million. The decline in our cash, cash equivalents and marketable securities balance of $78 million as compared to December 31, 2023 resulted primarily from operating losses. The decrease in our restricted cash balance of $208 million as compared to December 31, 2023 was primarily a result of the $114 million increase in real estate inventory and $100 million principal payments on non-recourse asset-backed debt.
Current wording
Our principal sources of liquidity have historically consisted of cash generated from our operations and from financing activities. As of June 30, 2024, we had cash and cash equivalents of $790 million, restricted cash of $121 million, and marketable securities of $19 million. The decrease in our cash, cash equivalents and marketable securities balance of $259 million as compared to December 31, 2023 resulted primarily from operating losses and an increase in real estate inventory. The decrease in our restricted cash balance of $420 million as compared to December 31, 2023 was primarily a result of the increase in real estate inventory and $85 million net principal payments on non-recourse asset-backed debt.
Previous wording
As of March 31, 2024, the Company had total outstanding balances on our asset-backed debt of $2.1 billion and aggregate principal outstanding from convertible senior notes of $381 million. In addition, we had undrawn borrowing capacity of $6.0 billion under our non-recourse asset-backed debt facilities (as described further below), of which $400 million was committed.
Current wording
As of June 30, 2024, the Company had total outstanding balances on our asset-backed debt of $2.1 billion and aggregate principal outstanding from convertible senior notes of $381 million. In addition, we had undrawn borrowing capacity of $4.9 billion under our non-recourse asset-backed debt facilities (as described further below), of which $238 million was committed.
Previous wording
The revolving period end dates and final maturity dates reflected in the table above are inclusive of any extensions that are at the sole discretion of the Company. Certain of our asset-backed senior revolving credit facilities also have additional extension options that are subject to lender approval that are not reflected in the table above. On April 4, 2024, the Company entered into an amendment to Revolving Facility 2019-3, providing for $100 million of borrowing capacity with a revolving period end date of April 4, 2025 and a final maturity date of April 3, 2026, which is inclusive of any extensions that are at the sole discretion of the Company.
Current wording
The revolving period end dates and final maturity dates reflected in the table above are inclusive of any extensions that are at the sole discretion of the Company. Certain of our asset-backed senior revolving credit facilities also have additional extension options that are subject to lender approval that are not reflected in the table above.
Previous wording
We classify our senior term debt facilities as non-current liabilities in our condensed consolidated balance sheets. The carrying value of the non-current liabilities is reduced by issuance costs of $11 million. In some cases, the borrowing capacity amounts under the asset-backed senior term debt facilities as reflected in the table are not fully committed and any borrowings above the committed amounts are subject to the applicable lender’s discretion. As of March 31, 2024, we had committed borrowing capacity with respect to asset-backed senior term debt facilities of $1.4 billion.
Current wording
We classify our senior term debt facilities as current or non-current liabilities in our condensed consolidated balance sheets based on the applicable final maturity date. The carrying value of the non-current liabilities is reduced by issuance costs of $9 million. In some cases, the borrowing capacity amounts under the asset-backed senior term debt facilities as reflected in the table are not fully committed and any borrowings above the committed amounts are subject to the applicable lender’s discretion. As of June 30, 2024, we had committed borrowing capacity with respect to asset-backed senior term debt facilities of $1.4 billion.
Previous wording
In addition to the asset-backed senior revolving credit facilities and asset-backed senior term debt facilities, we have issued asset-backed mezzanine term debt facilities which are subordinated to the related senior facilities. The borrowing capacity amounts under the asset-backed mezzanine term debt facilities as reflected in the table are not fully committed and any borrowing above the committed amounts are subject to the applicable lender’s discretion. As of March 31, 2024, we had committed borrowing capacity with respect to asset-backed mezzanine term debt facilities of $650 million.
Current wording
In addition to the asset-backed senior revolving credit facilities and asset-backed senior term debt facilities, we have issued asset-backed mezzanine term debt facilities which are subordinated to the related senior facilities. The borrowing capacity amounts under the asset-backed mezzanine term debt facilities as reflected in the table are not fully committed and any borrowing above the committed amounts are subject to the applicable lender’s discretion. As of June 30, 2024, we had committed borrowing capacity with respect to asset-backed mezzanine term debt facilities of $450 million.
Previous wording
(1)The Company’s consolidated Other Assets include the following assets as shown in the Condensed Consolidated Balance Sheets: Property and Equipment - Net, $66 million; Right of Use Assets, $23 million; Goodwill, $4 million; Intangibles - Net, $4 million; and Other Assets, $23 million.
Current wording
(1)The Company’s consolidated Other Assets include the following assets as shown in the Condensed Consolidated Balance Sheets: Property and Equipment - Net, $71 million; Right of Use Assets, $23 million; Goodwill, $4 million; Intangibles - Net, $2 million; and Other Assets, $23 million.
Previous wording
(2)The Company’s consolidated Other Current Liabilities include the following liabilities as shown in the Condensed Consolidated Balance Sheets: Accounts Payable and Other Accrued Liabilities, $69 million; Interest Payable, $1 million; and Lease Liabilities - Current, $4 million.
Current wording
(2)The Company’s consolidated Other Current Liabilities include the following liabilities as shown in the Condensed Consolidated Balance Sheets: Accounts Payable and Other Accrued Liabilities, $73 million; Interest Payable, $1 million; and Lease Liabilities– Current, $4 million.
Previous wording
Net cash (used in) provided by operating activities was $(178) million and $2.2 billion for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, cash used in operating activities was primarily driven by the $114 million increase in real estate inventory and our net loss, net of non-cash items, of $49 million. For the three months ended March 31, 2023, cash provided by operating activities was primarily driven by the $2.3 billion decrease in real estate inventory.
Current wording
Net cash (used in) provided by operating activities was $(577) million and $3.1 billion for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, cash used in operating activities was primarily driven by the $498 million increase in real estate inventory and our net loss, net of non-cash items, of $57 million. For the six months ended June 30, 2023, cash provided by operating activities was primarily driven by the $3.3 billion decrease in real estate inventory, partially offset by our net loss, net of non-cash items, of $125 million.
Previous wording
Net cash provided by investing activities was $22 million and $30 million for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, cash provided by investing activities primarily consisted of a net decrease in marketable securities of $30 million, partially offset by an $8 million increase in property and equipment principally related to the capitalization of internally developed software. For the three months ended March 31, 2023, cash provided by investing activities primarily consisted of a decrease in marketable securities of $38 million, partially offset by an $8 million increase in property and equipment.
Current wording
Net cash provided by investing activities was $31 million and $45 million for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, cash provided by investing activities primarily consisted of a decrease in marketable securities of $47 million, partially offset by an $16 million increase in property and equipment principally related to the capitalization of internally developed software. For the six months ended June 30, 2023, cash provided by investing activities primarily consisted of a decrease in marketable securities of $61 million, partially offset by an $17 million increase in property and equipment principally related to the capitalization of internally developed software.
Previous wording
Net cash used in financing activities was $98 million and $1.3 billion for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, cash used in financing activities was primarily attributable to $100 million principal payments on non-recourse asset-backed debt. For the three months ended March 31, 2023, cash provided by financing activities was primarily attributable to $1.2 billion net principal payments on non-recourse asset-backed debt.
Current wording
Net cash used in financing activities was $83 million and $2.1 billion for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, cash used in financing activities was primarily attributable to $85 million net principal payments on non-recourse asset-backed debt. For the six months ended June 30, 2023, cash used in financing activities was primarily attributable to $1.9 billion net principal payments on non-recourse asset-backed debt as well as $270 million related to the partial repurchase of the 2026 Notes.
Previous wording
(1)Represents the principal amounts outstanding as of March 31, 2024 and estimated interest payments assuming the principal balances remain outstanding until maturity. The final maturity dates of the senior and mezzanine term debt facilities vary, as discussed above.
Current wording
(2)Represents the principal amounts outstanding as of June 30, 2024 and estimated interest payments assuming the principal balances remain outstanding until maturity. The final maturity dates of the senior and mezzanine term debt facilities vary, as discussed above.
Previous wording
(2)Represents the principal amounts outstanding as of March 31, 2024 and interest payments assuming the principal balances remain outstanding until maturity.
Current wording
(3)Represents the principal amounts outstanding as of June 30, 2024 and interest payments assuming the principal balances remain outstanding until maturity.
Previous wording
(3)Represents future payments for long-term operating leases that have commenced, or have been executed but not yet commenced, as of March 31, 2024.
Current wording
(4)Represents future payments for long-term operating leases that have commenced, or have been executed but not yet commenced, as of June 30, 2024.
Previous wording
(4)As of March 31, 2024, we were under contract to purchase 2,611 homes for an aggregate purchase price of $906 million.
Current wording
(5)As of June 30, 2024, we were under contract to purchase 1,793 homes for an aggregate purchase price of $607 million.
Previous wording
We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the condensed consolidated financial statements. Based on this definition, critical accounting policies and estimates are discussed in “Part II – Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in the Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to these critical accounting estimates during the first three months of 2024. In addition, we have other key accounting policies and estimates that are described in “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 1. Description of Business and Accounting Policies” in this Quarterly Report on Form 10-Q.
Current wording
We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the condensed consolidated financial statements. Based on this definition, critical accounting policies and estimates are discussed in “Part II – Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in the Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to these critical accounting estimates during the first six months of 2024. In addition, we have other key accounting policies and estimates that are described in “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 1. Description of Business and Accounting Policies” in this Quarterly Report on Form 10-Q.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
Consolidated Financial Statements – Note 5. Credit Facilities and Long-Term Debt—Convertible Senior Notes for additional information regarding the 2026 Notes.
Current report — wording carried from elsewhere
Revenue decreased by $2.4 billion, or 47%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in revenue was primarily attributable to lower sales volumes in the first half of 2024. We sold 7,156 homes during the six months ended June 30, 2024, compared to 13,657 homes during the six months ended June 30, 2023, representing a decrease of 48%. Revenue per home sold increased 1% between the same periods. The decrease in sales volumes was primarily attributable to the slowdown in inventory acquisition pacing discussed above. The Company entered 2024 with 5,326 homes in inventory as compared to 12,788 homes in inventory at the start of 2023, representing a 58% decrease of homes available for resale.
Current report — wording carried from elsewhere
Cost of revenue decreased by $2.3 billion, or 49%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in cost of revenue was primarily attributable to lower sales volumes and a 3% decrease in cost of revenue per home, excluding valuation adjustments on homes in inventory at period end, due to the slowdown in inventory acquisition pacing as discussed above.
Current report — wording carried from elsewhere
Gross profit decreased from $319 million to $243 million and gross margin increased from 6.3% to 9.0% for the six months ended June 30, 2023 and June 30, 2024, respectively. For the same periods, Adjusted Gross Margin increased from (1.9)% to 9.6% and Contribution Margin increased from (6.5)% to 5.6%. The increase in gross margin, Adjusted Gross Margin and Contribution Margin reflects relative home price stabilization as well as higher spreads embedded in our acquisition offers beginning in the third quarter of 2022. Adjusted Gross Margin and Contribution Margin for the six months ended June 30, 2023 were impacted by the $432 million of inventory valuation adjustments recorded in prior periods on homes sold in the current period in order to reduce the carrying value of these homes to their net realizable value. Adjusted Gross Margin and Contribution Margin are non-GAAP financial measures. See “—Non-GAAP Financial Measures” for further details and a reconciliation of such non-GAAP measures to their nearest comparable GAAP measures.
Current report — wording carried from elsewhere
General and Administrative. General and administrative increased by $4 million, or 9%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was mainly attributable to a decrease in stock based compensation during the three months ended June 30, 2023 due to the forfeiture of certain executive restricted stock units.
Current report — wording carried from elsewhere
(Loss) gain on extinguishment of debt decreased by $105 million, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The gain on extinguishment of debt during the three months ended June 30, 2023 resulted from the Company’s partial repurchase of its 2026 Notes in May 2023 at a discount net of unamortized deferred costs associated with the 2026 Notes, partially offset by expenses related to partial debt extinguishments. There were no repurchases during the three months ended June 30, 2024, therefore there was no corresponding gain or loss.
Current report — wording carried from elsewhere
Interest expense decreased by $60 million, or 47%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily attributable to a significant decrease in average balances in our non-recourse asset-backed debt as well as a reduction in our weighted average interest rate as a result of a partial repayment of our outstanding mezzanine debt and repayment of all floating-rate senior revolving credit facilities.
Current report — wording carried from elsewhere
Other income— net decreased by $33 million, or 55%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily attributable to a change in fair value adjustments on marketable securities and to lower interest income due to a reduction in the average cash, cash equivalents and restricted cash balances.