A day after letting go of nearly 550 workers, or 18% of the company’s workforce, real estate technology company Opendoor on Thursday Nov. 3 announced staggering losses, with a net loss of $928 million compared to $57 million in Q3 2021.
In its latest earnings report, the California-based tech company earned $3.4 billion in the third quarter, marking a 48% uptick from the same period last year. That marks a slight silver lining as Opendoor—like other iBuyers—is trying to weather the storm of the shifting housing market.
In a blog post Wednesday, Nov. 2, Co-Founder and CEO Eric Wu lamented having to try to get through “one of the most challenging real estate markets in 40 years.
“Prior to today, we scaled back our capacity by over 830 positions—primarily by reducing third-party resourcing—and we eliminated millions of fixed expenses,” he wrote. “We did not make the decision to downsize the team lightly, but did so to ensure we can accomplish our mission for years to come.
“Navigating a once-in-40-years market transition has required us to operate with urgency and discipline to manage risk and overall inventory health,” said Wu in a statement.
According to a shareholder letter, Opendoor attributed its losses primarily to “inventory valuation adjustments” of $573 million on the homes in its inventory.
Put another way, the company acknowledged a reduction of value in the homes that it had on hand.
The letter points out that the adjustment was based on forecasts about future market conditions including “additional downside to continued home price depreciation, transaction volume declines and lower clearance rates.
“We believe that we have taken a conservative forward view to reset expectations on our existing book,” Opendoor said in the letter. “As homes with losses are sold, this valuation adjustment will unwind in future quarters alongside homes that we expect will generate realized gains.”
In his Q3 statement, Wu indicated that the iBuyer accelerated the resale pace of its existing inventory while also increasing spreads on new acquisitions.
The company sold 8,520 total homes in Q3—up 42% from the same period last year—while also purchasing 8,380 homes, which dipped 45% from Q3 2021.
“These actions ensure we are prioritizing sell-through to improve the health of our inventory on a resale basis, and that our post Q2 acquisition cohorts are positioned to perform inline with our contribution margin targets,” Wu said. “Importantly, we are well-capitalized with the balance sheet to weather this rapid market transition and emerge even stronger.”
Results for the quarter include:
- Gross (loss) profit of $425 million, which reflects an inventory valuation adjustment of $573 million versus $202 million YoY; gross margin of 12.6%, versus 8.9% YoY
- Net loss of $928 million versus $57 million in Q3 2021
- Adjusted Net Loss of $328 million versus $18 million in Q3 2021
- Contribution (Loss) Profit of $22 million versus $169 million in Q3 2021; Contribution Margin of 0.7% versus 7.5% in Q3 2021
- Adjusted EBITDA of $211 million versus $35 million in Q3 2021; Adjusted EBITDA Margin of 6.3% versus 1.5% in Q3 2021
- Ended the quarter with 2,259 homes under contract for purchase, down 64% versus Q3 2021
- Inventory balance of 16,873 homes, representing $6.1 billion in value, down 3% versus Q3 2021
Eight-year-old Opendoor, headquartered in San Francisco, has seen its stock price plummet from $31.25 on its first day on the NASDAQ stock exchange to $2.38 on Thursday. The company is valued at $1.56 billion, down from a valuation of $8 billion in 2021.